Sent to Port O Call by a reader:
A high school friend, Mark Pembrooke, operates a small airline on the other side of the Sound, and sent this in response to my inquiry about whether he’d be interested in servicing this market:
The grand Caravan EX is actually less costly to operate based upon the greater number of seats and useful load. Even at full retail, $1,450 per hour, with 8 people on board, the retail cost per person on a trip from Seattle to Port Angeles is $90.63 per person generating a 50+% margin for the owner with over 3,000 pounds net useful load (= 375 pounds person). With external cargo pods we transport fresh fish to Walla Walla on the flight over and can carry up to 4 cases of wine per person on the return flight along with 8 passengers to produce total revenues in excess of $1,700 per hour.
The barrier to entry for the Grand Caravan is $1.7 million price for a late model standard 10 seat version and the $2.0 million price for the EX version or $2.5 million for a new one, plus all first year fixed costs including certifications, insurance, hangar costs and pilot training (about $400k). The EX is faster and more fuel efficient which matters to us flying over the mountains but for Puget Sound flights the standard Grand Caravan flying at 162 knots is more than adequate (the EX cruises at 182 knots). To optimize trips we really need 2 EX aircraft but can start with one, and afford a second aircraft out of profits generated in less than three years (less than half that time in your case with a standard GC).
We have solved the barrier to entry for our winery partners in Walla Walla by selling shared ownerships to all 150+ wineries since everyone is going in the same direction. We are willing to finance up to half of the aircraft cost with at least 30 winery partners contributing and at last count have over 40 pledged thus far. We become the managing partners and share profits with every winery with over 10% per year ROI. The profits generated eliminate annual fixed costs to owners and result in flight discounts and annual ROI. Profits are much higher for a level-8 owner than a level-1 which includes depreciation, and the real benefit to every shared winery owner are the increases in wine sales and wine club memberships.
It might be possible for you to do the same. If you have 50 businesses or more that may profit from having a share of their own airline, the ante to own a newer model Grand Caravan (2012-2015), would be about $40k per business with no debt and adequate working capital, or $12k down and less than $200 per month for 5 years, with limited shared debt, for each owner.
The shared operating cost for our winery partners at Level-8 is about $1,000 per hour with 20+% going to the managing partners. Your operating cost for 8 passengers in Grand Caravan to Port Angeles at that same hourly rate is about $62.50 per person, anything over that is profit assuming that you have no empty legs on any run; which I expect would be rare if ever. Our extra profits are generated by transporting wine one way and food another so that we never have an empty leg, even without passengers!
I am focused on our Walla Walla wine tours and don’t have the time to manage another program but it sounds like you have an excellent nucleus of partners and businesses already that can do that for you. I do have the time to explain to you and your partners how a shared ownership program might work for you, and then let you run with it, if you wish.
I hope that this helps and wish you every success!