But as the nation’s major airlines–all of whom have filed for bankruptcy one or more times–have sliced perks and eliminated flight routes to small cities, a fresh fleet of tech-enabled private aviation companies has emerged for travelers willing to pay.Now, one such startup, membership-based Wheels Up Partners LLC. has captured the attention of deep-pocketed investors who believe the same model that works for Amazon Prime and Costco members can be applied to air travel and accessed via a smartphone app.
“Private air travel has been the domain of the ultrawealthy. This is attractive to that consumer base and the one right below that which is much bigger,” said T. Rowe Price portfolio Henry Ellenbogen, who led a $115 million investment in Wheels Up on behalf of T. Rowe at a $540 million post-money valuation.
Wheels Up and its competitors are targeting an opportunity in non-hub markets that commercial airlines have largely abandoned, said Frost & Sullivan aerospace and defense analyst Wayne Plucker. While route optimization software, geolocation of customers via smartphones and other innovations make the new fleet of startups better positioned to succeed where others have failed, he cautioned that building a private airline is a pricey proposition and is vulnerable to market downturns when clients cut back on luxury items.
That hasn’t stopped startups from entering the sector and seeking to unseat longtime private travel companies such as Berkshire Hathaway’s NetJets and Magellan Jets Inc. From Stellar Labs and JET. ME to SurfAir, Jet Smarter, Beacon and JetSuite, startups are using GPS feeds, flight schedules, real-time availability updates and other data to better connect customers seeking a seat on a private plane, the entire plane or in some cases both.
With the exception of SurfAir, which has raised $83.8 million in venture capital and debt, none of these newcomers owns the planes.
T. Rowe’s Mr. Ellenbogen said he respects founder and Chief Executive Kenny Dichter’s experience in the sector and his skill at locking down exclusive rights to the company’s fleet plane: The Beechcraft King Air 350i.
Mr. Dichter said he decided to build a fleet of Beechcraft KingAir 350s, because they seat nine and are ideal for one-to-two hour flights. It also has short field performance, which means it can service airfields inaccessible to many other crafts that require longer runways, is 30% larger than a light jet and has greater baggage capacity. The startup flies to 5,000 airports, 3,500 of which are in North America.
“It’s the Eddie Bauer edition of the Ford Explorer,” said Mr. Dichter.