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Tue, May 06, 2008

DayJet Scales Back Operations Citing 'Current State Of Capital Markets'

Says Funding Hasn't Come Through For Expansion

ANN REALTIME REPORTING 05.06.08 1555 EDT: Citing difficult times within US investment markets -- and resulting issues with securing new investment capital -- DayJet announced Tuesday the Florida-based air taxi service plans to drastically scale back operations.

ANN has confirmed with DayJet executives 100 people were laid off, reducing the company's workforce to 160 employees.

"Effective this week, we have made the difficult decision to scale back DayJet’s 2008 growth plan," DayJet CEO Ed Iacobucci told ANN. "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."

Iacobucci stressed the first phase of DayJet's operations "has gone exceptionally well... Yes, customers will fly in a small jet; Yes, customers will embrace the per-seat model; Yes, customers will pay a premium for tangible value; Yes, the technology works as planned; and most importantly, Yes, we can find these customers."

DayJet claims over 1,500 members, of which more than 550 are active DayJet users and close to 200 are frequent flyers, according to the company. Despite what would appear to be respectable numbers for a company that launched full operations in October 2007, however, Iacobucci said more cash was needed before DayJet could grow its network... and those funds have proven hard to come by.

"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," Iacobucci said. "More importantly, this required a $40M infusion of operating capital in the first quarter of 2008. I won't dwell on this point, but suffice it to say that given the current state of the US capital markets, the timing of our planned financing could not have been worse.

"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," Iacobucci said. "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."

DayJet stresses it does not plan to shrink its existing service region -- though the company is scaling back plans to expand that area -- nor will Tuesday's developments "impact our quality of service to our customers, and most importantly, it will not impact our commitment to safety, which is the heart of our service.

"And when the capital markets recover, then we would expect to resume the growth forecast in our original plan," Iacobucci concluded.

DayJet operates a fleet of 28 Eclipse 500 very light jets. The air taxi provider is by far that planemaker's largest customer, with reportedly some 1,400 planes on firm order or option. Despite the ominous tone of Tuesday's announcement, however, Eclipse CEO Vern Raburn told ANN he is not overly concerned about DayJet's future and expressed great confidence that they will prevail.

"The last company I'm losing any sleep over is DayJet," Raburn said.



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