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As an air taxi start-up, Linear Air was established in time with the emergence of Very Light Jets. The latter incorporated new technology which saves on the operating costs by more or less 40%. On the other hand, Air Taxi revolutionizes air travel. However, the air taxi industry is at its conception yet. The founder of Air Taxi must come up with an evaluation of its business plan so as to identify the potential customer segments, the appropriate business model to adapt, and how to go about this type of industry so that it would not evolve into a highly competitive structure.
Mary Tripsas; Davin Chow; Adam Prewett; Kevin Yttre
Harvard Business Review (808107-PDF-ENG)
January 31, 2008
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Make a set of recommendations to the CEO of Linear Air.
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Case answers for Linear Air: Creating the Air Taxi Industry
Linear Air: Creating the Air Taxi Industry – case study problem:
Linear Air, founded in 2004 by Bill Herp, is an air taxi start-up. It was launched at a moment when the demand was rapidly increasing, in an industry that awoke in 2001. It ought to take advantage of the emergence of VLJ, very light jets, which incorporate new technology that cut jet operating costs by a significant 40%.
Customers, in the U.S., live at an average commute time of 20 minutes from a regional airport; however, when they need to fly somewhere, they have to commute all the way to the main airport incurring extra costs, such as money, time, car depreciation, parking at the airport, etc. This is where the air taxi service, like that provided by Linear Air, could be highly valuable.
Linear Air’s value proposition was focused on flexibility (customers were able to fly from point A to point B whenever they saw fit), comfort (leg space, drinks, and snacks finally), productivity (say goodbye to wasting time before, during, or after a flight), and, of course, time savings. While demand for air taxi services is there, the industry did not exist as such just yet.
Linear Air was about to become one of the players that would design the air taxi market. In fact, based on this particular situation, Bill Herp had to make a few key decisions regarding the customer segment Linear Air should target, the best business model to implement, and a healthy growth plan that would contribute to the shaping of the air taxi service industry.
The air taxi service industry, to which Linear Air belongs, was as attractive as challenging. As per the 2005 US Today poll, 50% of the respondent would be interested in this service, and according to SATS’ project manager, the market would grow exponentially in the next decade reaching $17.6 billion. While demand kept going up, the industry came with important entry barriers, risks, regulations, and competitors.
First of all, the uncertainty that came with the production of VLJs. Linear Air forecasted use of 237 Eclipse aircrafts by…
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