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As an industry outsider, it wasn't obvious to me that their business plan was viable, even if the technology panned out. They want to charge $5,000 for a round

by colah3 11y ago

As an industry outsider, it wasn't obvious to me that their business plan was viable, even if the technology panned out. They want to charge $5,000 for a round trip between NYC and London. That's at least 5x the cost of getting a normal economy trip, if you buy early. Certainly, there are people who would pay that much to save time (~$600 per hour saved), but is the market big enough for many planes, running 24 hours a day? Most people aren't willing to pay a couple hundred extra dollars for first class, let alone a few thousand. The LoI means investors don't have to trust their market judgements. An airline is going to buy the planes and bear the risks regarding how much customers will pay. The remaining questions are technical. I'm sure the technical side is the vast majority of the risk, but it seems like a nice simplification for them.

timr 11y ago
"The LoI means investors don't have to trust their market judgements. An airline is going to buy the planes and bear the risks regarding how much customers will pay." You're dramatically overstating the power of a letter of intent. It's fairly routine for purchase options to fall through in the world of big jet purchases. The Concorde program itself had over a hundred options after announcement, from a bunch of big airlines, but ultimately sold only 14 jets. These are just options, after all. This announcement is probably most useful in that it gets them some press on demo day, indicates that there's still customer demand (however tentative) and that these guys aren't total chumps, and last but not least, makes a bunch of credulous investors think about the big-B number and see dollar signs blinking in front of their eyes.
vidarh 11y ago
I don't think it generally is just a couple hundred extra dollars for first class for NYC <-> London... I checked some BA flights in April, and the same flights went from down to <$400 for economy, $2500-$3600 for business, and up to $7700 for first. Some of those flights don't even have economy seats so your choice of fights is actually greater for business (BA flies some 32 seat business-only flights out of London City Airport using the old Concorde BA001 flight code with extra short checkin time, and immigrations pre-screening at Shannon) $5k doesn't seem given the amount of business and first class seats currently available on NYC <-> London. Consider that they're by no means the only airline doing that stretch either.

by colah3 11y ago

timr 11y ago

"The LoI means investors don't have to trust their market judgements. An airline is going to buy the planes and bear the risks regarding how much customers will pay." You're dramatically overstating the power of a letter of intent. It's fairly routine for purchase options to fall through in the world of big jet purchases. The Concorde program itself had over a hundred options after announcement, from a bunch of big airlines, but ultimately sold only 14 jets. These are just options, after all. This announcement is probably most useful in that it gets them some press on demo day, indicates that there's still customer demand (however tentative) and that these guys aren't total chumps, and last but not least, makes a bunch of credulous investors think about the big-B number and see dollar signs blinking in front of their eyes.

vidarh 11y ago

I don't think it generally is just a couple hundred extra dollars for first class for NYC <-> London... I checked some BA flights in April, and the same flights went from down to <$400 for economy, $2500-$3600 for business, and up to $7700 for first. Some of those flights don't even have economy seats so your choice of fights is actually greater for business (BA flies some 32 seat business-only flights out of London City Airport using the old Concorde BA001 flight code with extra short checkin time, and immigrations pre-screening at Shannon) $5k doesn't seem given the amount of business and first class seats currently available on NYC <-> London. Consider that they're by no means the only airline doing that stretch either.