We spoke with Wade Eyerly, CEO of Los Angeles’ hottest company, Surf Air, an all-you-can-fly private airline. He shared with us the inspiration for the business, the market potential, the business model, and what the future holds for the company. Surf Air can be followed at @isurftheskies.
What is Surf Air?
We are an all-you-can-fly private airline for members.
What inspired you to start the company?
I was the press advance representative for VP Cheney. That meant that I was flying up to 27 days a month. Flying last minute, flying one-way, etc, and going through TSA’s “random” screening on every flight. Here I was, I could walk up and talk to the Vice President of the US, but I couldn’t get on a plane without two screenings. It didn’t make any sense. At the same time, my brother was starting out his career as a commercial pilot. He was worried that there weren’t enough good jobs for pilots. He called me up and said, ‘I love flying, but there are no jobs. Should I do something else?’ I asked what it would take to keep him in the air. Sarcastically, he responded, “I dunno. Buy a plane. Start an airline.” I took him a bit more seriously than he thought and said, “I’ll look into it.” 6 or 7 years later…here we are.
What market are you chasing and how big is it?
Frequent, short-haul domestic US travel. Massive. The FAA estimates that domestic demand for air travel will double in the next 20 years. We literally have to add the capacity of an entire new JetBlue airline every 10 months. Airfares are up 15% year over year, and the price of oil is down! The thing driving the cost is demand, pure and simple.
Couple that demand with an industry (air travel) that ranks 47th out of 47 for customer satisfaction, and you have a market desperate for disruption. The market is literally growing despite itself.
You’ve been part of of Muckerlab in Santa Monica. What was that experience like?
Amazing. Best thing we could have done. It professionalized us, helped us get the advice and counsel we needed and put us on the path to raise the right the money that lets us succeed. The guys who run Mucker, (Will Hsu, Eric Rannala, Yanda Erlich, and Greg Bettinelli) are incredible. Need help setting pricing strategies? Eric did that at eBay. Choosing between building a business or attending Stanford for an MBA? Yanda faced the same choice. On and on. From professional counsel, to making leaders out of you Mucker Lab was incredible. They opened every door for us. Like all incubators, they helped us hone our pitch. But the pitch is not the business. The biggest value add from Mucker is that they really dug in and helped us build our business; hire the right people, refine the model, and execute. They gave us mentors who have done, and are doing just the things we’re looking for.
One example? Adam Nash from Greylock Partners. Since he helped run social sharing at LinkedIn he came in and gave us a great presentation on building, tracking, and improving your viral coefficient. Then, he took another hour or two with us in particular. We’re not a technology company, we’re an airline. So how does a viral coefficient apply to a company that doesn’t scale with server boxes? His advice helped change the direction of some of our most critical community building efforts. And we had that sort of experience every day.
How does your business model work?
It’s a flat fee subscription for all-you-can-fly access to a private airline. Airlines have historically operated like short-term flying time-shares. They’re selling real estate over time. So, they’re goal is to keep you on the plane and get you to fly as far and as long as possible. A passenger’s goal is the opposite. Unlike traditional commercial carriers, our revenue isn’t tied to keeping you on the plane as long as possible. It’s directly tied to keeping you happy. Every month you’re going to ask yourself, “Am I happy with my experience?” That means, “Did I fly enough”, “Was my life made easier enough,” and “Am I happy enough to continue flying with Surf Air?” So our goal is more in-line with providing you a top notch experience, and that’s what makes our business model work.
How many subscribers do you need?
Luckily we’ve got 4 applications now for every spot we’ll start with. We’re opening with 500 members, and we now have more than 2,000 applicants. Subscribers isn’t our challenge. Keeping them satisfied is. That’s why we spend every day working to make the experience something that each one of those members will be proud to tell their friends about.
How many flights are you estimating the average subscriber would take during a month?
A frequent flier today flies an average of 2.5 round trips, or 5 flights. A super traveler…think of a Bain Consultant, or other true “road warrior”…flies 4 roundtrips a month. They’re usually out on Monday and back on Thursday. So, that’s a good range for you to look at. 5-8 flights a month.
How do you manage variables, such as oil prices?
Oil gets too much credit for airline price fluctuations. Demand plays a much greater role. (An example: Oil prices are down from last year. Prices are up 15%.) But in our case, since we can predict pretty accurately how much fuel we will use, we’ll contract for future fuel delivery at today’s price.
What additional routes are you considering?
There are 25 routes in the country that we’ve identified where we think this model will work. A good shortcut to see what would work is the Obama administration’s high speed rail map. Anywhere high speed rail could be justified – we work, and the infrastructure is already in place.
Are temporary shuttle services on the cards? Such as, Los Angeles to Park City during Sundance.
We’ve talked a lot about this. There’s nothing to announce here, but we certainly have an opportunity to be responsive to our community in ways that a traditional airline (that sells one-off tickets) can’t be. I can imagine polling our 500 founding members and discovering that 50 of them are all going to Coachella or Burning Man one weekend. It’s possible we could put a plan in service to meet that demand, therefor responding to our community of members in a unique way. It’s exciting to examine the possibilities.
How much have you raised?
We’ve raised enough to get us through our proving period and into profitability. We ended up turning down an awful lot of money, and there were some potential investors who we felt had a lot to offer. We may revisit fundraising at some point to see if we can’t bring some of those talented opinions into the fold, so to speak, but for now we’re happy with what we’ve raised.
What round and who invested?
Series A. We’ve got some great partners. Anthem Venture Partners and NEA both stood up very quickly to invest, and we’ve been thrilled with both of them. Siemer Ventures, Baroda Ventures, Jared Leto, and others have signed on and been very supportive.
How big is your team?
We’ve got 12-15 in the office most days, and a handful of folks working remotely.
When do you launch the first flights?
We believe we’ll be operating by the end of the year.