Another tech startup seeking to transform aviation has closed its doors. Beacon sought to bring an all-you-can-fly option to business and leisure travelers starting on the East coast.
The company’s approach was to charge membership fees, handle customers at the gate with a white-glove service and partner with regional aviation businesses to get passengers to their destinations.
The company was co-founded by Wade Eyerly, Cory Cozzens and Reed Farnsworth, who previously started the California-based all-you-can-fly airline Surf Air. Ryan Morley was their other co-founder.
Customers paid Beacon a $1,000 deposit and $2,000 per month for unlimited travel between Boston’s Logan Airport and the Westchester County Airport outside of New York City.
Pre-sales were key in the company’s plan, and revenue from these would enable Beacon to get started. The startup had to cover payroll while also renting planes from partners, planes that use a lot of fuel and required skilled pilots.
Eyerly said, “We built the business on the premise that once we launched we would never have to lose money on operations. We thought pre-selling would let us do that.”
He believes the business model behind Beacon would still work, but here’s where the former CEO says he made critical mistakes.
“Beacon launched in September and I believed we had sold enough to cover our expenses but learned that we had not because three-fourths of our sales were to people who didn’t want to start flying until a future date. Most of them wanted to wait until the summer to start flying.”
About $4 million of its Series A money was earmarked to support Beacon’s growth, once it became operational and profitable, not to get Beacon flying in the first place.
Founders were subsidizing operations from day one, but could no longer do so by the turn of 2015, Eyerly says.
Beacon employed 20 in March when it closed shop. Its website is still up.
Most, if not all, employees have since found other work, according to Eyerly. Beacon co-founders have gone to lengths to help them find that work, he said.
The startup realized half a million in revenue. It could not return capital to investors — all of its funds and assets were assumed by senior creditors.
The company planned, but was not able, to launch a service between its hubs in Boston and Westchester, and summer vacation destinations in Nantucket and the Hamptons. Customers who made a deposit and intended to fly that circuit will get, or already have gotten, their money back. Others flew and got what they paid for.
The highly regulated industry of aviation proves a consistent challenge for upstarts.
Regulation and high overhead costs are reasons why we don’t see new airlines launching very often, or terrestrial trends like on-demand rides, subscription commerce and the collaborative economy transforming the industry as quickly as they have ground-based travel.
Eyerly himself has joined Wheels Up as the Managing Director of New Ventures. Wheels Up is a private aviation startup that sells memberships and on-demand flights. It charges customers $17,500 to become members, and $3,950 an hour to fly anywhere within the U.S. on short notice.
Correction: This post has been updated to reflect that BlackJet is still in business. The company launched in a bid to become like “Uber for private jets,” but now offers private jet seat booking to members who pay an annual fee for access to their network.