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Optimization Could Reduce Backlog at West Coast Ports – a BoldIQ byline in Material Handling & Logistics

Earlier this month it was leaked that the ports of Seattle and Tacoma are discussing merging to try to create efficiencies to combat the growing ports of Vancouver (Canada) and those in California. This comes right after nine long months of dispute that finally ended with West Coast port employers and union members reaching a tentative five-year agreement on a new contract. The two sides were praised for their compromise, and the ports were slated to resume full operations the following day. However, the need for increased efficiency and throughput—both in times of calm and times of disruption—is still very much there.

According to Peter Friedmann, executive director of the Agriculture Transportation Coalition in Washington, D.C., this specific port backup is projected to continue for two months or more, which will affect countless American workers, businesses and consumers. And, that’s not even taking into consideration the daily disruptions and slowdowns that occur in a normal operating week.

So what can the ports do to be more competitive and more resilient to disruptions? The answer is implementing technology to dynamically optimize their operations—in other words, use data already available to the ports to find the most efficient solution possible in the same way that they operate: in real-time, all the time.

The aviation industry is a perfect example of how companies are utilizing technology to plan ahead and then react in real-time to changes. In fact, some retailers and manufacturers turned to the air to move goods during the port shutdown. The aviation industry—similar to the ports—must function within an environment that is not only highly regulated, but also prone to ongoing changes and disruptions like changing customer demand, mechanical failures, employee illness and weather.

The aviation industry has turned to dynamic optimization that provides real-time optimal plans for both planning ahead and reacting to ongoing changes. While ports crawl through backlog trying to recover, and discuss potential mergers to gain some competitive advantages, the aviation industry can react to disruptions, like unexpected sick time and weather, all while using minimal resources to meet demand and reduce fuel burn and emissions. The result? A 16% reduction in operating costs and 20% increase in capacity using their existing resources. Time and money saved—two things the ports could benefit from.

To clarify, this is not about reducing equipment or staff. That would be the ‘easy’ obvious answer because while it might cut costs for a port, it will not do much for the economy or employees. This is about addressing better planning and reacting to change, in real-time, of the use of the equipment and staff, so that increased throughput is enabled in the port. In fact, when applied correctly, this will lead to top-line growth in any given port and thus probably to hiring of more staff.

Optimizing operations could make a difference of millions, if not billions, of dollars. Beyond the pure dollar impact, harnessing this type of technology will help ensure the longevity of importers and exporters, employers and employees, and the economy as a whole.

Until the ports have implemented a system to optimize their operations, they will continue to be held hostage by inefficiency and inertia. The model for this new streamlined operation is out there, and it’s working. The question is whether or not the ports will follow the trend and get on board.

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Is The Private Jet Charter Market Ready To Be Disrupted?

A story by Doug Gollan in Forbes

Today booking a private air charter is still something akin to Abbott & Costello’s epic comedy routine, “Who’s On First?” Multiple companies are claiming they are ready to make it easier, faster and more transparent. But, what is fast? And how close is the private jet charter segment to real-time booking as opposed to just quotes and estimates?

When I was Editor-in-Chief of Elite Traveler, I always attended the big annual conference for business aviation referred to as NBAA, short for the industry’s trade association, National Business Aviation Association. Every year we would have numerous people approach our stand pitching us to cover a new product or service that was going to revolutionize the industry, from in-flight entertainment and air filtration systems to innovative ways of selling individual seats, real-time booking and the proverbial holy grail, finding a way to effectively fill or reduce empty legs. I still joke if I had a dollar for everyone who was going to change the private jet industry, I would be rich enough to fly by privately.

With that in mind, I took note of some of the breathless coverage surrounding the recent launch of a new booking app by private aviation provider Victor, focusing on how technology was going to correct a broken and inefficient market. The company’s literature states, “Victor’s unique business model disrupts and brings transparency to a largely unregulated industry. It offers private jet operators and owners with a channel to market and consumers with a trusted brand, transparency and value for money.”

Many of the articles compared the Victor app to Uber, yet it is hardly the first private aviation company to be paralleled to the rideshare phenomenon, or in some way claim a seat in the temple of disruption. Look up Jet Smarter, Jump Jet, Jump Seat, Black Jet, Charterscanner, PrivateFly or Ubair. You may remember DayJet and Pogo, both of which joined the anticipated revolution of Very Light Jets that was predicted to be Uber-like before Uber.

Here is a quote from Clive Jackson, the CEO and co-founder of Victor, in a story by Digital Trends that was largely reflective of the reasons he gave me for launching the app when I spoke with him: “It’s predominantly a telephony-based old world economy where email plays a part, but there’s no transparency and no regulation. Although the U.S. Department of Transport is pushing for regulation, it hasn’t yet come through.

“Traditionally, it’s a very labor-intensive process: (flight) operator to broker, broker to personal assistant (PA), PA to boss. Using the phone and email to talk to multiple brokers is grossly inefficient, and typically brokers don’t tell you who their sources are. Customers know they’re sort of getting ripped off along the way, so they’re going through three brokers. So you have three brokers going to three operators, that’s nine quote requests from one guy. It’ll be 13 phone calls before the PA even gets the quote.”

Granger Whitelaw, a serial entrepreneur, who regularly charters and in the past has bought jet cards from MarquisJet and FlexJet, says there is an opportunity for one stop shopping in the on-demand segment if somebody can create a real-time platform, enabling operators to directly bid the lowest price for his business. “I get two to three offers a day from brokers. I play them off against each other,” he says.

In commercial aviation, the pathway from rotating file cards to real-time booking for consumers across a broad spectrum of airlines was a journey that took nearly half a century. I covered this part of the industry in the late Eighties, and many of the enhancements that the computer reservations systems vendors would announce at their annual conferences for travel agency users never made it to market, or were severely delayed. I am not sure that the term vaporware had been coined back then. Jackson believes the launch of the iPhone in 2007 has set the table to make the transition for private aviation much faster. Yet the question remains, how close are we to private jet nirvana of real-time booking on a scalable basis? Scott Liston, Executive Vice President of Argus International, an aviation service company that also provides ratings of operators and data remembers, “When I started 30 years ago we used a floor to ceiling magnet board” to track airplane and crew scheduling. He says, the industry has made great strides but has a ways to go.

Jackson hopes if he can convince you his app is the only place you need to go, it will lead to less shopping and high close rates on leads – meaning he will be bugging operators less to quote trips that never materialize, and operators will view him as a more important and buttoned up customer. That, he thinks, will translate into better pricing and service from operators for his company and his consumer audience. Others believe the same about their technology.

A former airline and digital advertising executive with a tech bent, Jackson champions that he is marking up the price an operator charges Victor by a fixed 10 percent, whereas currently brokers don’t disclose their margin. Ricky Sitomer, co-founder and CEO of Blue Star Jets, a large player in the charter market, dismisses the idea that disclosing the mark up is meaningful. He says Blue Star has greater buying power with operators than smaller players. “Wal-Mart is going to get a different price buying Levis than the corner store. If my price to the customer is lower than Victor’s price, what does it matter what my mark up is,” he asks. Jackson’s response is “the majority of (his) bookings made are not based on the lowest price quoted price,” and within a short window, he will have a similarly large volume. By being transparent on margin, he thinks he can win the hearts and minds of his affluent consumer target.

The other news appears to be Victor is providing consumers with more information at an earlier stage, when it returns the quote, revealing the operator and tail number of the plane that mightactually be flying you. This means you can now go to the operator to get a competitive bid. Jackson believes the service he is providing to members (membership is free) through ease of use and having your profile and preferences will make you stick with Victor. He is willingly taking the risk of bypass, providing users a direct line to potentially save 10 percent, which on a $25,000 transaction is not small change.

Sitomer and others debate the transparency provides much benefit because, they say, the first jet or even operator you see isn’t necessarily the one you are going to get. Another executive called the Victor app “a useful directory but nothing to do with real-time availability or real-time transactions.” Jackson counters that regular air charter customers have operators they like and avoid based on past experience, so for these folks disclosure is a strong feature.

If you are a private charter veteran, you probably know that many brokers don’t operate the jets you fly on. Brokers are intermediaries reaching out to a network of operators, who actually fly the planes. The operators quote a price back to the broker who marks it up and sells it to you. In this sense, Victor is no different.

What you also may know is that the operator (who also will broker as well) often doesn’t own the plane they are operating, so there is another step in the process. Charter operators’ fleets, with several exceptions, such as XOJETTMC or JetSuite(about 150 aircraft combined), are made up mainly of planes they manage on behalf of an owner. The owner, who wants to gain some income to offset his or her expenses, allows the operator to offer it for charter. Part 135 is the Federal Aviation Regulation that allows the operator to charter the plane, and you will sometimes hear referenced. Industry executives I spoke with estimate as much as 90 percent of typical operator fleets are not owned by the operator, but are simply managed for third party owners. While nobody could put a percentage on it, executives say most times the operator has to get owner approval for the trip, which can be rejected for any of a number of reasons. These include needing the plane for their own use to not wanting children, or not wanting their plane loaded to the gills, or even who’s flying. Jackson and others try to minimize this by focusing sourcing on operators they know have jets where owners are “charter friendly,” and in fact Jackson says the quotes he provides within 60 minutes are all owner-approved unless noted.

Back to the Victor app: It is quick and slick, however, as a newly registered user I wasn’t able to request a quote online. I had previously made a request from Flyvictor.com on my laptop, had already received a follow-up call and within a bit more than an hour had an email offer of three prices from New York to Los Angeles, two of which provided a tail number. The third was from XOJET, which operates a floating fleet of essentially interchangeable aircraft. For these type of operators that own and control their aircraft, tail numbers are assigned closer to the flight, but in essence you know what you are getting, most of the time. I say that because even operators such as XOJET and NetJets (which sells fractional and jet cards, not charter) go on to the charter market when their own fleets can’t handle demand. The parallel would be when your American Airlines flight is cancelled or oversold, and they rebook you on United. You get where you are going. The experience for better or worse, is at least slightly different.

The quotes I had previously requested were already loaded on the Victor app when I downloaded it to my iPad. I tried to use the app on my iPad for another request. You enter your trip requirements and within seconds you get back a selection of aircraft types that fit your criteria that could be available with estimated pricing. At this point I wasn’t provided the names of the operators or tail numbers, but as a new member was prompted to call and complete a “know your customer process.” Later on, after I was approved, I again tried its search function leading to a request for a quote, which comes back within an hour. It’s at this point Victor gives three options with operator names and tail numbers (Jackson says, they will give up to six, but after that members feel like they are being overloaded unless there is something “attractive.”). I also filled in a request form on the Blue Star website and received a callback 30 seconds later. After an awkward transfer from the person who called me to the broker (she didn’t have any of the information I had just submitted on the Blue Star website, and I had to give it again) I was in business. Within another couple minutes the broker gave me a confirmed price and two types of potential aircraft and sent a confirmation email, subject to owner approval. The next day he called to follow-up and told me he had found a similar jet for $2,000 less. I reached out directly to one of the provider’s Victor gave me in their response, Priester Aviation, requesting a quote via an online form and about eight hours later, at 9 a.m., received a call. I confirmed I was looking for the same type of plane that Victor had offered up on the same date and same route and was told it would take 15 minutes to two hours to confirm availability, which I was told meant getting in contact with a plane owner. Nearly five hours later I got a quote that offered two plane types, no tail numbers and stated it was “subject to owner approval.” Victor had quoted me $60,518 from Priester for a Challenger 300 with a specific tail number to fly from Teterboro the Van Nuys one-way so I was surprised to get a direct quote of $31,568 from the operator for a like Challenger 300. Calling to the operator, it turns out their quote wasn’t for a plane they managed, but for an XOJET Challenger 300, which Victor had also given me at $31,238. I then queried the agent at Priester about the tail number Victor had offered up and was told it might be available for around $55,000, but he would need to check as there was a “note” indicating a possible hold. Why the price difference? The Priester managed plane would have to fly back to New York empty after dropping me off in Los Angeles, so in essence I was paying for the roundtrip (empty leg) flight. For what it’s worth, when I researched the tail number, according to FlightAware it is owned by QuadAir, LLC, a subsidiary of QuadGraphics, a leading printer of magazines.

Jackson says the estimated pricing one sees instantly before they request a quote on his app is based on what operators actually charged for previous trips so the idea is when you get the offer back with confirmed price, it is going to be very close if not exactly in line with the estimate.

Carol Cork, co-founder and marketing director for PrivateFly, a broker that has been on the forefront of promoting technology in the charter arena says, “We welcome them. It validates the role of technology in the market.”

Jackson is already on record as saying his approach is not making any friends, so perhaps Sitomer’s comments should not be surprising. But I guess my question is will the technology, Victor’s or others, tear apart a market, or in MBA speak, “Is it disruptive?”

Another executive I spoke with who didn’t want to be named, put it this way: “To have a true marketplace (where technology can be a disruptor), you have to have a healthy supply of willing buyers and a healthy supply of willing sellers and active, accurate information. In private aviation you are missing the last part,” he says. This is where the technology driven brokers, marketplaces or whatever they want to be called seem to fail the disruptor test. Or maybe they just haven’t connected all the dots yet?

Part of the problem is unless an operator owns the plane, which most do not, the contracts with owners to manage their planes vary widely and generally requires owner approval for each flight, although this too varies. An executive from one company that provides operations support systems adds, “Each contract is different. If an operator is managing 10 planes, each of the 10 contracts with owners is different in some way.” This means even once the broker is in contact with the operator, by phone or electronically, the owner much of the time still has to sign off on the trip, adding a layer of complexity that technology has yet to automate. David Hackett, President & Chief Executive Officer of Coastal Aviation Technologies, a software company that also offers a fleet schedule optimization system for operators, says he has identified 30 typical variables in owner contracts with operators, many of which can impact signing off on a charter or availability of aircraft. These can include, who provides the pilots? Who pays for maintenance? How many people are allowed aboard for charters regardless of seat capacity? What is the minimum stage length the owner will accept? He points out landings and takeoffs, cycles in aviation speak, are the measurement which triggers expensive maintenance requirements, so while an owner might be happy to charter his jet for six hour Boston to Los Angeles runs, he won’t let his management company offer it for short hops. He says the bigger, newer and more expensive the plane type, the more likely there are to be a barrage of owner-imposed restrictions.

Now think that the typical charter customer does so for convenience, to save time, to go when he or she wants to. This means the consumer ends up making multiple changes before they fly (I am told anywhere from two to five), including things like departure time, arrival or departure airport and even type of plane. You know, we invited a couple more people, now I need a bigger jet or fewer people. Can we save some money by downsizing?

Complicating things, operators use multiple, non-compatible platforms to manage their fleets, and their information isn’t always up to date. “A lot of these operators are small companies, where sometimes the person who is flying you is also responsible for (updating) the information (in their systems). They are professionals, but they are stretched,” says another person who works with operators. Owners sometimes have the rights to pull their planes back even after contracted. Hackett says it is not unusual for operators and brokers to have to scramble to find replacement planes because of weather, when an airplane goes mechanical or another user upstream showed up late perhaps putting the crew for your flight over federally imposed duty limits. Yes, pilots can only fly so many hours per day, so if they had delays today, they may not be able to fly for you tomorrow morning. The scramble to find a replacement crew or plane begins.

Multiple executives say all of the above underscores the complexity of the empty leg market, an industry problem that has launched any number of companies trying to come up with solutions. Since the empty leg is based on repositioning a plane, when the originator of the trip changes their flight or any one of the other mentioned factors comes into play, the availability of the empty leg changes. This can happen within a day or even hours of your scheduled empty leg departure. And you were pissed off last time Airline X cancelled your flight. Hmmm.

One person I spoke with who tried to offer empty leg solutions said, “The prices that most people offered were below what the owner of the plane was willing to accept, and each operator has a minimum they can sell that is set by the owner.” Why wouldn’t the owner want to put $3,000 in his pocket? “You’re talking about a $30 million plane, and you break a handle, it costs $13,000 to replace. It’s not worth the trouble,” he says. If you can’t sell them, get rid of them! Richard Kane, Chief Technology Officer and founder of Coastal thinks his company is on the verge of solving “the holy grail” by aggregating the scheduling function, including crewing and scheduled maintenance between multiple operators, something that will cut down on the massive percentage of empty legs, estimated at between 30 and 40 percent of flights.

On its website, Victor claims, “We are the only provider to offer an end-to-end charter booking on both web and mobile” though Victor nor any provider so far seems to have automated the owner-operator relationship into real-time. Without that, can there be real-time bookings and disruption? Jackson says yes, by focusing on planes that are owner-approved for charter and integrating his technology with those operators. Roei Ganzarski, President and CEO of BoldIQ, a company that offers dynamic real-time optimization software for operators (including JetSuite), says the technology for some operators he works with is there today and just hasn’t been turned on. He wouldn’t disclose the number of operators or aircraft that use his system or how many planes they control. Still, out of the over 2,500 charter operators in the U.S., according to NBAA, and 7,311 active Part 135 aircraft (fixed wing and helicopters) that the Federal Aviation Administration classified in the air taxi segment, how many need to be online to fulfill the needs of a real-time charter market?

Victor and other brokers typically tout access to between 5,000 and 10,000 aircraft in their marketing materials, but the truth is many of these planes are seldom used, and to enable an efficient, real-time solution will take aggregating a far smaller portion. According to statistics provided from Argus there were 1,233,819 Part 135 hours flown in 2014. The top 25 operators using 835 aircraft accounted for 353,828 of those hours, or 28.7 percent of the total. Making the math fuzzy, those hours include hours flown by owners of the planes. Nobody I spoke with could determine what percent of the hours are represented by owner activity. Where availability runs into a problem is during peak periods, peak times or bad weather where more of the fleet is needed. Alex Wilcox, the CEO of JetSuite says there are 35 high demand days but private jet travelers favor the 10 a.m. to 2 p.m. period to fly, meaning on a daily basis, if you want to fly, it is easier to find availability early or late, again, assuming that you can find pilots with duty time available.

Virtually everyone I spoke with questioned how up to date smaller operators keep information regarding availability of aircraft. Ganzarski drew the parallel to Kayak where you get a list of prices, but sometimes when you click on the rate and go through to the vendor site that rate is no longer available. Examples here would be finding a plane that fits the criteria of your flight, but it turns out the pilots don’t have the necessary legal duty hours available to fly or it is sidelined for some minor maintenance, yet this wasn’t updated in the operator’s system. We see the human factor in commercial aviation marketing technology when somebody forgets a couple zeroes loading fares, and all of a sudden that $9,500 first class ticket to Hong Kong is selling for $95 until somebody catches it.

The Coastal executives say to create an effective marketplace system won’t need all the planes out there. They say most charter activity is north to south on the east and west coasts and transcontinental, so the key is to aggregate fleets which are positioned to serve this market, something they are trying to do under their platform. Ganzarski believes that through the efficiencies of the technology he is offering, operators will be able to serve the same demand with 50 percent of their current fleet. That would be meaningful as there would be less need to source planes from owners who are picky about approvals. He predicts operationally driven scheduling alliances where operators using his platform will be able to integrate requests and offer more cost efficient solutions to brokers and consumers. He likens it as the business aviation version of Star Alliance, SkyTeam or oneworld.

Still, if part of the benefit of private aviation is access to 5,000 airports instead of several hundred served commercially, widespread real time booking from any place to any place looks like it’s a ways off. Sitomer, Ganzarski and Coastal executives all say the key is to focus sourcing on operators who have planes they can charter without case-by-case owner approval or own their planes. The Coastal executives believe once they release their product with major operators signed up, they can gain critical mass to pull off a real time solution within a year. Ganzarski sees the horizon as much longer in terms of reaching critical mass, but agrees that when owners see they are losing revenue they will be more likely to give their operators broader freedom chartering their planes. Think back to the emergence of frequent flier programs in the Eighties. Eventually all airlines fell in line because they had to.

I also caught up to Scott Duffy, who was CEO of Virgin Charter, an attempt to use technology to create a marketplace and disrupt the charter market launched in 2008 and badly timed to first the spike in fuel prices and then the recession. He believes like travel agents in the luxury arena, traditional brokers are not endangered. He says, “The question is do you have a good broker? There are thousands of Gulfstreams on the charter market, and each of them is a little bit different, so you want a broker who is knowledgeable.” Sitomer says, the fragmented and deconstructed structure of the market means that experienced brokers, who know where to source various planes from thousands of potential suppliers, have a powerful advantage, particularly when there are problems. “You have to know the operators. Each has strengths and weaknesses. If you are putting a multi-leg trip together, there are ways to do it to save money. There are lots of variables, including where the fleet is based, ferrying, floating fleets and other aspects. These are things (so far) an app can’t do,” he says. Asked for more detail, Sitomer provides the veil of mystery that Jackson says he is trying he trying to remove telling me, “That’s my secret sauce.”

Victor and other Uber wannabes, as well as traditional brokers, seem to understand that this is a high touch market. Most offer concierge type services and keep detailed profiles of customer preferences to provide a higher level of service. They all provide human interaction when needed. PrivateFly’s Cork says consumers like the customer facing technology to do preliminary research on aircraft types and pricing, but want to speak with a human to confirm details and payments that can range in the tens of thousands of dollars. Much of the logistics of trips for High Net Worth and C-Suite private jet travelers fall to personal assistants who can’t say, “It wasn’t my fault, the app gave me bad information.” From that point, Ganzarski questioned how valuable real-time booking is in that many times the first stage is merely information gathering by the assistant for the boss. On the other hand Liston says the industry has to move with the customer. “It is not about today, it is about how the customer will want to book in 2020 or 2025,” he says.

Coastal’s Hackett says when his company unveils its product later this year both consumers and brokers will be able to use it. “It will enable brokers to focus on the service aspect of the business, instead of the technical side,” he says. Ganzarski says the reason operators that have the capability to take real-time, online bookings have not done so varies, but is driven by wanting to ensure they have planes to serve regular customers and VIPs as well as making sure they manage their inventory around high demand peaks such as the NCAA Final Four basketball championship, holiday weekends and such. JetSuite’s Wilcox, who uses the BoldIQ technology, says when he implements the next software update he will be months away from offering real-time booking. Of course, owning his fleet, he doesn’t need to seek owner approval.

oth technology led brokers I looked at, PrivateFly and Victor, are enjoying success. “The proof is in over 1,000 bookings in 12 months last year and we will have over 3,000 this year,” Jackson told me from Mallorca, the place he first got the idea after now-defunct British Midland Airways cancelled its route from London. Victor boasts over 16,000 registered members on its website and PrivateFly over 30,000, according to Cork. She is a former Conde Nast executive whose husband is CEO and an active private aviation pilot who I first met at an NBAA conference. The two companies have each seen triple digit revenue growth over multiple years and have had success raising multiple millions of dollars to fuel expansion. Both are on solid enough footing they are now expanding into the world’s largest private aviation market, the United States.

Duffy, who has moved away from private aviation since Virgin Charter ceased, believes the place technology can make a big impact is the corporate market, where big companies already have a limited number of contracted operators, but want to integrate the booking process into their existing corporate travel reservations platforms. “There is a lot of money out there for somebody who can do that,” he says.

And while traditional brokers like Sitomer evangelize human knowledge and interaction, he is planning to launch to launch an app of his own called “Jets on the Fly,” he says, will provide a guaranteed price within 15 seconds. He is not planning to reveal his margins or the providers up front. Right now, the various apps being presented as breakthrough technology seem more like tarpaulins, covering the anthill of activity beyond the scenes. Wilcox believes the real benefit of having real-time availability in booking will be “demand aggregation” that will enable consumers to easily buy single seats, another concept that has yet to take hold. While he is a fan of what Victor is doing and plans to work with the company, he says in response to all the press releases about disruptive technology “caveat emptor.” In terms of who the power players will be when the private jet charter market does see seismic change, chances are it will be names you are not familiar with, companies currently in the background that are providing the flight management solutions for operators.

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