Surf Air, The Members-Only Airline, Is Poised For A Growth Spurt

By Andrea Chang
Los Angeles Times.

Pay $1,750 a month. Fly as much as you want. Arrive a few minutes before takeoff. Park for free. Forget TSA security; you don’t even need an ID to board. And then get comfortable — on this fast-rising California airline, every seat is both a window and an aisle.

Since its inaugural flight two years ago, Surf Air has grown to 1,400 members, with plenty more eager to sign up: The waiting list numbers 600.

The original business plan targeted businesspeople traveling between Southern California and Silicon Valley. Now the Santa Monica company is gearing up for a major expansion to four other California markets by October: Santa Rosa, Monterey, Sacramento and Palm Springs.

Surf Air hopes that with its entry into those cities, chosen because they are gateways or popular as weekend getaways, it will evolve from a business airline into one that includes personal lifestyle travel.

At a time when commercial air travel is universally loathed, Surf Air has become a game-changer among entrepreneurs and venture capitalists. About a third of its passengers work in the tech sector; others include lawyers, consultants, real estate agents, sales and advertising reps, entertainment types and retirees.

“I work between Palo Alto and L.A. and it’s awesome. It’s convenient, fast and allows me to be sporadic: I can fly back down tomorrow if I want,” venture capitalist Will Agramonte, 25, said during his weekly Surf Air flight from Hawthorne to San Carlos recently. “I’ve never flown first-class before. I went from coach to this, which is like private.”

The cost isn’t cheap: There’s the monthly cost plus a one-time $1,000 sign-up fee (early subscribers were grandfathered in at lower rates). Members say it’s a fair price to avoid the hassles of commercial airlines and major airports; Surf Air operates 44 flights a day and currently flies into seven small, private airports in locations including Burbank, Santa Barbara, Carlsbad, Oakland and Truckee and does weekend flights to Las Vegas with a partner airline.

Not surprisingly, its member base — which includes venture capitalist Dennis Phelps, former Lady Gaga manager Troy Carter and actor Jared Leto, who is also an investor — is affluent. The average customer is 44 and has an annual income of $411,000. About half own at least two homes.

The four-city expansion is part of an aggressive business plan set forth by Surf Air’s new management team, which was brought in a year ago after the company hit a rough patch.

After a much-hyped launch, the airline by early 2014 was struggling and had signed on just 225 people. Members complained that the flights they wanted were always booked, while prospective customers languished on the wait list for months. Flight delays and cancellations were also a problem.

“We didn’t have a lot of confidence in the model at that point in time,” said William Woodward, managing partner at Anthem Venture Partners, which led Surf Air’s seed and Series A rounds.

Those growing pains led to a shake-up that saw the exit of co-founder and Chief Executive Wade Eyerly and other executives. Eyerly recently announced that he would be launching a similar all-you-can-fly private membership airline serving the Northeast.

At Surf Air, the controls were handed over to longtime membership and aviation executive Jeff Potter, who was brought in because of his experience running a major airline as the former chief executive of Frontier Airlines. Potter, who is CEO, and Executive Chairman Sudhin Shahani have spent the last year bolstering the fledgling airline and laying out a multiyear growth plan.

Besides flying to new cities, the start-up is offering more frequent flights and new routes between existing destinations. It is also eyeing markets outside California in need of convenient short-hop flights; Florida and Texas are among the possible contenders. Within the state, it is working to bring service to Santa Ana, San Diego, Mammoth Lakes, Bakersfield and San Luis Obispo.

To accommodate the anticipated increase, Surf Air is adding to its fleet of eight Swiss-made Pilatus PC-12 planes, placing a large order for dozens of new planes. It will have 15 by the end of this year and, by 2020, will have at least 65 planes in operation.
“We foresee ourselves on an hourly basis in a couple years,” Potter said.

Surf Air took on a $65-million debt facility last year to fund the planes. It also raised $8 million for operational costs from investors, including L.A. shopping center magnate Rick Caruso.

As a membership club, Surf Air touts an upscale, exclusive community and is gradually introducing member perks to keep customers on board.

Last year, Surf Air offered members flights to and from the Coachella Valley Music and Arts Festival, which was such a success that the company is planning to run more limited-time routes for special events and weekend trips. It has held member-only parties and will soon roll out a new tier of membership that will provide expanded services such as one guest pass a month for a higher monthly membership fee of $2,250.

The business model, executives say, is to keep the price closer to commercial flights but the experience on par with private jets.

“Everything is the same as if you have a G5 until you go into the G5,” Woodward said, referring to Gulfstream private jets.

“What we’ve done is created a private-style experience that really is geared toward the commercial traveler,” said Surf Air’s Shahani.

“It’s for everybody who flies more than two or three times a month. What’s two hours of your life each time worth to you?”

For the recent flight to San Carlos, travelers — who undergo background checks before they become members — were greeted at the Hawthorne airport by a concierge who checked them in on an iPad and promptly whisked away their bags. There were free snacks and drinks in the waiting area, and more on the plane.

Once in the air, passengers — all male, most of them young — largely kept to themselves, either napping in their leather swivel seats or tooling around on their mobile devices. There were no announcer interruptions, save for a safety briefing from one of the pilots before takeoff that ended with a note of caution to avoid the tiny, chest-high, refrigerator-like bathroom if at all possible.

“Someone used it once,” one passenger, a private equity investor, said with a grimace. “You could smell it.”

Customers had a few gripes: Surf Air planes don’t have Wi-Fi, although the company is installing it. Some said they would like movies or other entertainment options. Because the planes are small propeller aircraft, they are louder and slower than the Boeing or Airbus jetliners most people are used to; a typical Surf Air flight takes about 15% to 20% longer.

Despite the longer flight time, once the wheels touched down at 7:43 p.m., it took just two minutes for the plane to taxi, park and for all passengers to exit the aircraft.

“It’s kind of a no-brainer,” said Marcelo Rodriguez, a marketing director from San Francisco who uses Surf Air weekly. “If you do this with any kind of regularity, even three times a month, it makes sense financially.”

A big part of the appeal, he said, is the insider feel that Surf Air has cultivated. The airport concierges have gotten to know him and will have a rental car waiting when he arrives, even remembering the kind of car he likes.

It’s that kind of value that has Surf Air’s executives and investors excited that they may have built the rare breakout Southland start-up.

“It’s a completely new way of looking at a big problem, and that’s what attracted me right off the bat,” Woodward said. “Surf Air’s an important company in L.A. It’s one of the companies that changes the game down here.”

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