Linear Air Taxi operates an online platform that lets travelers book private planes for regional U.S. flights, but that wasn't its first business model. When Bill Herp founded the company in 2004, Linear owned and chartered its own aircraft. Then, its biggest supplier of planes--Eclipse, a budding manufacturer in Albuquerque, New Mexico, which had raised more than $1 billion in funding--hit the skids, forcing Linear to make a critical pivot. That move helped the company land at No. 364 on the 2018 Inc. 5000. -- As told to Kevin J. Ryan
I live in Lexington, Massachusetts, right next to Hanscom airfield. In the mid-1990s, I had some time off in between gigs. I had just taken Geerlings & Wade, a direct mail wine company, public. One day I said to my wife, "You know, I've been watching these airplanes fly overhead every day, and I've always wanted to get my pilot's license. Is that OK with you?" And she said, "Go for it."
So I did. I took lessons and became a pilot. I started getting all the trade magazines and becoming aware of innovations that were taking place in aviation. Around 2000, "very light jets"--small passenger planes that cost much less than what was already out there--were getting a lot of press and investments. And the progenitor of that class was the Eclipse 500, a four-passenger, two-pilot twin jet with LCD screens for its instrument displays. Eclipse said it was going to sell the jets for $700,000 or $800,000 using high-volume production and economies of scale. I was very intrigued.
I started Linear Air in 2004 with the hopes of making private flight less expensive. We raised $10 million and bought six Cessna planes that would cost about the same per mile as what we anticipated the Eclipse 500 would cost when it was ready. That way we could begin building a customer base and an operating model: Linear Air and its investors owned the planes and would lease them. In 2005, we placed an order for 30 Eclipse jets. We received our first two Eclipse jets in 2007. We got two more in 2008. Then in the summer of 2008, Eclipse entered this turbulent period where it was unable to raise more money. The company ultimately shut down production and went bankrupt. We were kind of scratching our heads, like, "Uh oh."
We had already built a reservation system for our clients. And from the beginning, we had assigned the planes we'd bought to individual investors. So we went to those investors and said, "We have an idea: You can have the airplane and the keys--or, if you'd like, we can continue to manage it for you, and hopefully you can get some value out of it." We told them we could spin out the platform we'd built into a new entity in which they'd all own common stock.
All of them agreed. We pivoted away from chartering planes and into a marketplace business in which we take a percentage of each transaction. We essentially transitioned the investors from individual lessors into managed-aircraft clients. We told our pilots they were no longer full-time employees and were now independent contractors. We outsourced our airplane maintenance. We transitioned our internal computer reservation system into a marketplace platform.
We handled more than 1,100 bookings on our platform in 2018. We've focused on technically advanced small prop planes that now are even less expensive per mile than the Eclipse would have been. Our average transaction is about $2,700, which is many thousands of dollars less than the industry's average private jet charter. We've made it less costly to fly regional trips in a private plane.