{"id":6303,"date":"2015-12-09T21:37:47","date_gmt":"2015-12-10T02:37:47","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/beacon-air-making-private-jets-accessible-for-everyone\/"},"modified":"2015-12-09T21:37:47","modified_gmt":"2015-12-10T02:37:47","slug":"beacon-air-making-private-jets-accessible-for-everyone","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/beacon-air-making-private-jets-accessible-for-everyone\/","title":{"rendered":"Beacon Air: Making Private Jets Accessible for Everyone"},"content":{"rendered":"

Paul Stamm, VP of Sales at Beacon describes it as \u201ca membership based, private air service for the super commuter traveling through the Northeastern Corridor.\u201d[1] Yet, despite what the name and marketing may suggest, Beacon is not an airline. Rather, it is a “broker that aims to transform regional travel by offering subscribers unlimited access to mid-size executive private flights and it does it by arranging flights and related services on its members\u2019 behalf. All flights arranged by Beacon are operated by air carriers possessing appropriate FAA and DOT authority to conduct such services.”[2]
\nI believe Beacon is highly effective at driving alignment between its operating and business models because it first maps how it wants create value for customers and capture value from them and then makes only operating choices that efficiently allow it do so.
\n
\nBusiness Model<\/strong>
\nBeacon creates value by matching unused flight capacity to a predictable market demand. It selects routes with high commuter traffic and this combined with a membership based model ensures predictability and consistency of demand. For example, the flagship BOS\/NY route \u201cwas chosen based on market research that suggested that the route was the best product\/market fit given the synergies between the financial community in NYC and the biotech\/medical\/consulting industries in Boston\u201d. [1] Beacon prices its membership so that the time savings it offers over other transportation options like driving, taking the train and commercial air travel are commensurate with the price premium. The membership also includes unlimited flights. The unlimited flights are a marketing tool as most of Beacon\u2019s target customers will fly no more than twice a week. However they still find the unlimited option attractive as it offers them the flexibility to accommodate unexpected travel needs. The subscription model also allows it to reliably and predictably capture value from its customers.<\/p>\n

Operating Model<\/strong>
\nBusiness people and lovebirds want to spend as little time as possible in getting to their destination and they are willing to pay a premium for that. Beacon clearly makes operating choices that fully support a hassle free travel experience. It owns no aircraft and employs no pilots or flight attendants. All nuts and bolts aviation operations are handled entirely by its operator, Dynamic Aviation who is licensed to perform such services. This allows Beacon to focus on the parts of its operating model that create value that the customer cares about. Such operating model features include:<\/p>\n

A dynamic aircraft scheduling system<\/em> which allows it to operate multiple flights a day profitably. Beacon only uses aircraft with a 6-10 person seating capacity which allows a flight to fill up more quickly, ensuring it will operate as scheduled. Also, if a customer misses a flight, they don\u2019t have to wait hours for the next one. Lastly, at the beginning of every month, Beacon reserves flights with Dynamic Aviation. The number of reservations is based on the number of subscribers and their reservation history and patterns. This allows Beacon to significantly reduce the cost to the subscriber as they do not have to pay for unused capacity either in the form of less than full flights or idle aircraft.<\/p>\n

Smaller planes<\/em> which help Beacon better create a hassle free travel experience. Smaller planes can only accommodate the carry-on luggage used by most commuters, saving significant time in baggage handling and screening procedures.<\/p>\n

Background checks<\/em> are completed on all members beforehand so that there is no time wasted with TSA checks. You simply \u201cshow up and walk onto the plane\u201d and if you\u2019re a little late, Beacon will wait for you.<\/p>\n

A payment platform<\/em> which uses price tiers in addition to the subscription method of collecting revenues to create additional value for its customers. Customers who commute more frequently and more predictably pay a higher fee for increased access to flight capacity.<\/p>\n

A concierge level of customer service<\/em> that makes booking and changing flights free and extremely easy, allowing Beacon to deliver on the promise of flexibility. It also provides other concierge services like “car rentals, drinks, flowers” [3] and guest passes (presumably for commuters in relationships. It is currently working on a booking platform that will make end to end travel between its destinations and their transportation options seamless. This will take its hassle free customer experience to the next level.<\/p>\n

Alignment between Business & Operating Models <\/strong>
\nBeacon\u2019s business model would not be successful without its operating model and vice versa. For example, it would not easily know how much flight capacity to reserve at the beginning of the month if did not have a subscription model. Likewise, if Beacon was not selective in its target market and point-to-point route selection, it may not have been able to use its current operating model as there would be too many combinations of trips and routes. This would make it harder to deliver on its hassle-free travel experience.
\nLastly, implementing an operating model that makes use of existing infrastructure lets Beacon focuses all its resources on developing its key competitive advantage which is its concierge level customer service. Beacon can now exclusively hire talent that focuses on how to create a better experience and better value proposition for clients and leave the work of aircraft operations to those who have the expertise to do so.<\/p>\n

Implications for Future Performance<\/strong>
\nUltimately, planes don\u2019t create value for the customer, frequent flexible flights do. Beacon has realized this and is poised for significant growth in the commuter travel market. Furthermore I believe this tight alignment between operating and business models can be successfully replicated wherever there is high commuter traffic globally.<\/p>\n

 <\/p>\n

Sources<\/strong><\/p>\n

[1] Interview with Paul Stamm, VP Sales, Beacon 21\/09\/2015<\/p>\n

[2] https:\/\/flybeacon.com\/press<\/p>\n

[3]http:\/\/techcrunch.com\/2015\/02\/10\/surf-air-founders-jet-to-the-east-coast-with-new-private-flight-service-beacon\/<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Despite what the name and marketing may suggest, Beacon is not an airline. 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