Interest in private planes surge, Americans step away from public airlines

Bill Herp - Linear Air CEO joins Yahoo Finance's On The Move panel to discuss why more American's are looking to travel on private planes as well as break down the outlook for the travel industry.

Video Transcript

JULIE HYMAN: We here "On the Move" have talked a lot about the future of the airline industry, and we're mostly talking about the large airlines that do commercial travel around the United States. Let's talk about some of the smaller players as well. Bill Herp is joining us now, and he is the CEO of Linear Air, which does private air travel on smaller planes. Bill, thank you so much for joining us, so what have you been seeing in terms of demand for your services?

BILL HERP: Well, it's been a, you know, a tale of two years so far. You know, in the first quarter, we were basically flat after having been up 25% in January and February year over year, and then the pandemic, lockdowns began in March. And in April and May, we were off 80%. But in June, you know, the lockdowns began to end, and people started looking at private air travel, both those people that had flown privately before and new people coming into the market who had previously flown just the airlines. And in Q3, we actually were up in total about 10% over Q3 of last year.

And we operate a marketplace, so we've got 1,000, you know, commercially certified charter air carriers with over 4,000 aircraft ranging from 3C piston propeller driven aircraft up to 15 passenger long range business jets, and people are finding us through internet travel search and choosing us because they can see all the options up and down the size and price range and are looking at, you know, seriously at private air travel now that, you know, the concerns about, you know, COVID are keeping them away from traveling through the public airline airports on public airlines.

ADAM SHAPIRO: I am curious why you're optimistic, perhaps, about business travel, because the legacy carriers, they're telling us that's going to be the last thing to come back, it won't hit till 2024.

BILL HERP: Yeah, well, you know, I'm optimistic for the same reasons that we've seen personal and leisure travel bounce back quickly over the course of the late second and throughout the third quarter much more so than the airlines have seen. You know, they're down still 70, 80%, but we've seen, you know, our business bounce back, as mentioned. So I'm optimistic that the same, you know, sort of motivations will be there for business travelers as we go through the rest of the year and that, you know, unlike traveling on the airlines, for those of your viewers who have traveled privately before, you know, you operate out of very small airports with small private terminals and really, the only people you come in contact with are the people you're traveling with and the flight crew.

RICK NEWMAN: Hey, Bill. Rick Newman here. I'd love to travel this way, so I just checked out pricing on the website, so I checked out the cost of flying from New York, where I am, to Chicago, and it was around $13,000 for a plane. That was the cheapest that fit three people. So if I filled it, that'd be like $4,300 apiece. Is that typical?

BILL HERP: It's typical for a trip of that length, but, you know, our average for the smaller planes like that, the average transaction size is really about $3,000. So those smaller planes are really better suited for shorter range trips of 500 miles or so, and really, the better option for that would be the larger cabin aircraft and with larger numbers of people onboard. So the larger aircraft do average about, you know, 12 to $15,000 for a jet that can make that trip with, you know, with nine to 15 people onboard. So our average on a per person basis is less than $2,000, and there are many instances where people have flown with us who, you know, with a average per person rate of less than $1,000.

JULIA LA ROCHE: Bill, when you were talking earlier, it sounds like there's certainly been an uptick for you all. Do you expect some of these customers to be a bit more sticky going forward and maybe opt for going with Linear versus a commercial carrier? And then on top of that, are you looking to bring on more routes? Are you looking to maybe hire some of the folks who've been let go or about to be let go from the bigger airlines?

BILL HERP: Well, again, our business, Julia, is a marketplace, so we're really a technology company, and our focus is on, you know, the private air travel market, which is very different from the public airline market. In terms of the stickiness of customers, what we have seen is that, you know, once people experience the benefits of flying privately, you know, using the smaller airports, you know, arriving just a few minutes before the flight leaves, being personally greeted by the crew, you know, having their car be valeted in many instances, that the benefits of that do make people want to come back and fly again and again. So I'm optimistic that the folks, the new folks that are coming in will be like the old new folks that have come in and will want to fly with us more than once.

ADAM SHAPIRO: You know, the larger carriers have a bit of an advantage, and this is not a judgment call, but the CARES Act and the payroll support program helped them for a period. It expired last week. Were you able in any way for your, you know, airline to get assistance that helps you get through this period?

BILL HERP: Yeah, in fact, Charter Air Carriers qualified for the same assistance as the major airlines through the CARES Act, and so many of the operators, many of the thousand companies that we work with to place travelers in were able to receive those funds and help them through the downturn in business, you know, as I mentioned in March, April and May. And many of them are still optimistic that there will be another version of the CARES Act that will benefit the aviation industry, because even though our business, our marketplace business is up 10% year over year, among the broader private air travel industry, we're still operating at around 75% of last year's levels.

ADAM SHAPIRO: Hey, Rick, you're muted.

JULIE HYMAN: Rick, it's your turn to be muted today.

RICK NEWMAN: I'm sorry about.

JULIE HYMAN: We're all taking a turn today.

BILL HERP: I was reading your lips, so I'm good, you know.

RICK NEWMAN: Hey, Bill, just to talk, I want to ask you a little bit more about those carriers. I mean, I think the big carriers are off way more than 75%. Are they mostly doing better than the big carriers, and have you lost any? Have any of the smaller carriers had to go out of business?

BILL HERP: You know, knock wood, we have not lost any of the carriers that we regularly work with. We've worked with maybe 600 of the 1,000 companies that are in the marketplace, and I think, you know, the reason that many of them are doing better than the airlines in general is because of their prior private air travel customers, you know, continuing to see the need to fly and seeing the value proposition of flying privately. And then, of course, there's the new customers that we're bringing in, again, you know, based upon the much lower level of contact in the pandemic era when one flies privately versus flying through the big airline airports and then getting on an airliner that, you know, seats 100 people or more.

JULIE HYMAN: Bill, thank you so much. Bill Herp is Linear Airline CEO. Appreciate your time.