Silverjet: Lawrence Hunt
The AIM-listed business flyer on his airline with a difference
Aviation = serious carbon emissions. So what’s a guy like Lawrence Hunt doing launching yet another airline?
Hunt’s not your average entrepreneur and doesn’t do anything by halves. To create his exclusively business class offering, he gutted a Boeing 767 and gave it a complete refit, removing standard issue seating for 300 passengers and replacing it with 100 custom-made seats, which transform into luxury 6’3′ fl at beds. It’s an irony not lost on him.
With the world seemingly waking up to the consequences of its wasteful, disposable ways, is this not the airborne equivalent of the ‘Chelsea Tractor’? Well no, Hunt insists. Here’s the rub: Silverjet is the world’s fi rst carbon neutral fl yer. At a time when the industry has glare equal to that from the ozone-deprived sun beating down on it you’ve got to admit it looks a PR masterstroke. But does the business have all the answers – and will it take off?
Carving a niche
Hunt engaged with the Carbon Neutral Company, which calculates the amount of CO2 produced by a business. It then enables the business to ‘offset’ its carbon footprint by investing in projects that will reduce this form of pollution, such as renewable energy generation. The assessment of Silverjet found that it will cost roughly 90p for every hour that each passenger flies, offsetting their emissions, and this price has been built into the fare.
Silverjet has pledged to invest the money into global projects to counteract the carbon it releases into the environment, including a scheme to provide villagers in Jamaica with expensive, low-carbon light bulbs.
But with all the media hype surrounding the impact of air travel on climate change, one might expect an airline’s fi nancial obligation to be steeper, when it comes to wiping out its carbon footprint? “That’s what the lentil-eating, sandal-wearing, green brigade would have us believe, that airlines are destroying the planet,” says Hunt, who concedes that air travel plays its part, but that it’s not right or feasible to expect people to stop flying, particularly if you’re running a business.
This is all starting to sound strangely familiar, but what Hunt can offer that other champions of this argument have not, is a practical solution, and he is hopeful that other airlines will follow suit.
“Instead of saying ‘oh, people should stop fl ying and taking holidays, they should just stay at home and eat lentils all day’, what people like Friends of the Earth should be doing is saying, actually, it only costs 90p an hour per passenger, so please go and visit this website and offset your emissions.”
Determined to encourage others to follow in his carbon offsetting footsteps, instead of a frequent flyer scheme Hunt is rewarding his customers with carbon points when they book a flight. These can be used as currency to invest in projects around the world to help lower global emissions.
Silverjet’s carbon neutral status is just the beginning in a long line of ‘firsts’ achieved by the business. Launched in January, the company has also become the UK’s fi rst low-cost business class airline. But, unlike its economy class counterparts such as easyJet and Ryanair, this is anything but a ‘no frills’ affair. On the contrary, Hunt is promising a ‘private jet’ experience, where passengers go straight into a private lounge on arrival, a concierge takes their luggage away and they are checked in by laptop as they relax.
The airline is offering return fl ights between London Luton Airport and New York Newark for an average fare price of £999, compared to an industry average price of between £2,000 and £3,000. So how has he managed to keep the fare price so low while offering so many extras? First, he says, he had to fi nd a feasible business model to fi t with his ideas, which was no easy feat. “The airline business typically competes on one thing: price. So it was very important for us to have a competitive price point, and I felt that the price point we needed to achieve was so low that other airlines wouldn’t even attempt to compete with it.”
To figure out the economics Hunt called on Air Foyle, the airline business that his family has been running for more than 20 years. Air Foyle operates predominantly in the cargo business, but has also worked with the commercial sector, providing airline start-ups such as easyJet with the licences, aircraft and crew it needs to operate. “With a lot of analysis, we were able to come up with a model that allowed us to produce a flat bed, thirty-minute check-in, real business class premium service, for £999, whereas traditional airlines are charging £3,000 – £4,000.”
One of the chief ways that Hunt has managed to offer such a competitive fare is by focusing on one type of aircraft, one type of route, in one configuration, which is the same model as other low-cost carriers. This dramatically reduces the cost of operating, he insists. “BA has more than 20 different types of aircraft in its fleet, and every aircraft needs the whole infrastructure around it: engineering, safety, parts and so on, so you replicate all of those costs in your business every time you bring a new type of aircraft in.”
Hunt admits to being quite ruthless with costs in order to keep the fare price low, foregoing flashy offices and the extravagances that other chief executives might splash out on. “We don’t even have a stationery cupboard, we steal all our stationery from our ad agency,” he says with a smile, but a quick glance at his pen pot suggests this might just be true.
Stationery cutbacks aside, however, the price that Hunt is offering is still outrageously competitive considering the number of extras he has thrown in. Fuelled by dissatisfaction with existing business class standards, which he felt weren’t offering value for money, he talked to customers at airports during the planning stages. “We didn’t say, ‘were you: highly satisfied, satisfied, quite satisfied or dissatisfied’. We just said, ‘tell us about your perfect airline experience’.”
Using this market research, he and his management team were able to come up with a list of 20 key differentiators to work on, which now feature as part of the Silverjet package. These include ladies-only toilets, no overhead lights waking people up on night flights and no food trolleys that bang into seats.
“We have much more freedom to make these changes because we don’t have unions strangling our business in the way that most other airlines do. This is why airlines like ours have a huge advantage.”
Beating the compertition
Understandably then, his competitors, namely Maxjet and Eos, which also fly the London-New York route, have been getting twitchy. Around 4.2 million people make the Atlantic traverse each year, making it three times bigger than any other route in the world. However, although it appears the journey is crowded enough already, Hunt is certain there is room for another player. He also feels confident that most others will struggle to match him on price, since this route is such an important producer of profits for other airlines.
According to Hunt, one rival airline felt so threatened by the new boy’s potential to poach its customers that it petitioned to block Silverjet’s licence applications in the US three times. Needless to say, the attempt failed.
Not only were the airline’s licences approved, but the silver-tongued entrepreneur also managed to negotiate private facilities at both Newark and Luton, to achieve his target of a thirty-minute check-in. He pursued these airports because he was impressed with the efficiency at both. “There’s a reason why two thirds of private jet owners come to Luton. They tend to be quite discerning about where they fly to.”
Such primed negotiating skills have also landed him a contract with advertising giant M&C Saatchi, which launched its above-the-line campaign in January featuring a billboard on the M4 route to Heathrow, reading ‘You’re going to the wrong airport’.
“Now how can a small start-up like us afford a massive advertising agency like M&C Saatchi?” asks Hunt, pre-empting the question. The answer, he explains, is down to the approach. There is a knack to getting suppliers on board, he insists, and it involves investing the time in going to see them in person.
“We went to see M&C Saatchi and got them very excited about the proposition, and we ended up with a very attractive deal. They’re not charging us vast amounts of money during our start-up period, but if we’re successful they’ll do really well as well.”
Listing on aim
It doesn’t come as a complete surprise that someone who can launch an airline so quickly is a deft negotiator. The company was set up when it fl oated on AIM on May 12 2006, and the first flight took off eight months later, on January 25 2007.
In 2005, Silverjet’s founder went into the City and set about rounding up investors, with “a very comprehensive business plan, a very strong management team and a number of deals on the table.”
However, Hunt concedes that convincing investors to stump up the cash was one of the most diffi cult aspects of the start-up process. “You don’t have to be a rocket-scientist to raise money, but you’ve got to have real persistence and really believe in your idea.”
Among the many lessons learned during the fundraising process was, “always raise twice as much as you think you need, because it’s never enough”.
He also maintains that it’s vital to strike while the iron’s hot when it comes to securing investment. Silverjet floated on the day the markets started going south last summer, according to Hunt. In fact, he reveals the IPO date was brought forward because the team was nervous about market turbulence.
“The markets can turn in a day. You can have a conversation with an investor on a Monday and he says yeah, tomorrow I’ll give you the money, but then he wakes up on Tuesday and all the screens are red and he says, no, actually, I’ve got cold feet now.”
He modestly insists that his management team was what sold the idea to investors, helping him to raise £26m in equity. The handpicked team, including former head of in-flight services for BA, Martin Bridger, has been involved with 18 start-up airlines.
However, Hunt’s long-standing career as a successful entrepreneur must also have been somewhat reassuring to investors. The serial entrepreneur has been involved in six start-ups, and his first solo project, a technology firm called Rapid, developed the first internet booking engine for travel.
With investment secured, Silverjet made three prompt acquisitions, of sister companies Flyjet, Skylease and Skypeople, costing between £4m and £5.5m, depending on how the business performs over three years.
The acquisition of Flyjet, a charter airline, gave Silverjet a full set of airline licences, which typically take between 18 months and two years to build from scratch, so this was vital for ensuring the quick launch. “Basically, Flyjet was an airline in a box.”
Skylease offered Silverjet its fi rst Boeing 767, at an attractive lease rate that will save the airline $12m over the life of the loan. Skypeople offered Hunt a talented set of people to help fly Silverjet.
Opportunities for expansion are almost endless, says Hunt, who is looking to offer routes to places like Dubai, India and South Africa. What he offers business travellers, he says, is value for money. “Most small businesses can’t afford £4,000 for a fl ight, but they also need a flat bed and fast check-in.”
The company is 250% ahead of forecasts for bookings, and expects to be profitable within 18 to 20 months of launch.
With two more planes being delivered in 2007, and a further two for a new route in March 2008, the future looks bright for Silverjet. Opportunities for expanding out of Luton are being explored, and 30 possible routes have been identified. “So, if you then think about the whole network around the world, excuse the pun but the sky’s the limit.”
Proposition: Low-cost business flyer
Founder: Lawrence Hunt
Turnover: Stockbroker projects ?16m