VLJ Air Taxi Operator DayJet Downsizes

By Blair Watson, Special to Aviation.com

posted: 07 May 2008 05:57 pm ET

: A DayJet Eclipse 500 very light jet is shown on June 13, 2007 before taking off at Boca Raton Airport, Fla. The Eclipse 500, which carries three passengers at speeds up to 425 mph, is the centerpiece of DayJet, a startup airline with a business model aimed at popularizing on demand\" business air travel. On May 6, 2008, DayJet said its inability in a tight credit market to obtain $40 million of new financing forced the company to lay off some 100 of its 260 employees because DayJet could not now expand as fast as originally planned to a 'critical scale' where its operations could become profitable. Credit: AP Photo/Wilfredo Lee

Florida-based air taxi operator DayJet has significantly reduced its workforce and is having trouble obtaining $40 million in operating capital needed to continue the company’s expansion.

“Effective this week, we have made the difficult decision to scale back DayJet’s 2008 growth plan,” wrote DayJet President and CEO Ed Iacobucci in an e-mail.

“Because of this change in strategy, the company has reduced its employee base across most areas of its business. As I will explain, these changes were caused by external economic factors and are not a reflection of a weakness in the underlying DayJet business model,” said Iacobucci.

“Without the growth capital required to open new markets, the company must scale back to a size that is consistent with the demand of our existing customers and service region,” he continued. “DayJet’s business model is based on operating at a critical mass, requiring investment ahead of growth. We hired and trained a number of employees in anticipation of future growth and always planned for additional capital investment at this stage.”

Iacobucci explained that DayJet hoped to raise $40 million in the first quarter of this year, “but suffice it to say that given the current state of the U.S. capital markets, the timing of our planned financing could not have been worse.”

Since receiving its first Eclipse EA-500 very light jet in July 2006, the DayJet fleet has grown to 28 EA-500s. In an interview on Wednesday, John Staten, DayJet’s Chief Financial Officer, explained that the company “would not be adding additional aircraft to the fleet at this time.”

DayJet’s 5-year contract with Eclipse Aviation Corp. for up to 1,400 EA-500s — 700 on firm order and 700 optioned — remained in effect, according to Staten. The contract came into effect in late 2007. With an estimated 2,500 aircraft on Eclipse’s order book, DayJet is the aircraft manufacturer’s largest customer.

Staten explained that the relationship between Eclipse and DayJet “is like an ecosystem” and Eclipse has been “very accommodating” in regard to the air taxi operator’s latest business decision.

Iacobucci’s e-mail stated, “Our projections have always indicated a network of 30-50 ’line’ aircraft serving 20-30 fully developed DayPort markets was needed to reach critical scale.”

DayJet needs to expand to its envisioned “critical scale” to be profitable, according to Staten.

The company will continue to service 45 cities in the southeast U.S., including eight “DayPorts” in Florida and two each in Georgia and Alabama. The company has “approximately 1,500 members;” most are business travelers. Staten said that monthly business growth has been 40 percent and third-party surveys have shown overall customer satisfaction to be “9 to 10 on a scale of 10.”

In terms of the lay-offs, Staten explained that 100 employees have been let go, including 20 pilots; DayJet’s workforce numbered 260 people. The company hopes to rehire staff members once its planned expansion resumes, a step that is at least partly dependent on it obtaining a cash infusion.

“DayJet can continue its operations for a period of time,” said Staten. He declined to say how long that period would be if the company failed to get the financing it seeks.