Certain Habits

Name an industry with high barriers to entry, an unattractive risk profile, and a reputation for losing money hand over fist, relentlessly. I’ll bet “the airline industry” leapt to mind.

There are examples of companies in the last twenty years that have found ways to innovate and turn a profit. Southwest and JetBlue in the United States, and Virgin and JetBlue in the UK are two examples.

But those examples help prove the point. It was difficult, and very capital intensive to launch these innovative airlines. High fixed costs plus relentless competition drive prices down. As long as you’re covering the cost of landing fees and fuel, you’re at least helping to pay those massive plane loans and pilots, mechanics and flight attendants contracts.

Some have tried to fly small planes and democratize private plane ownership. But even NetJets has struggled with fixed costs and operational expenses. (Read Warren Buffett’s annual letters to get a sense of how difficult it has been to make NetJets profitable.)

But a creative idea can overcome capital requirements and market barriers. Enter Seaport.

It’s founder, Kent Conrad, noticed several problems facing business traveler in the Northwest and set out to fix them.

• TSA Regulations: Onerous and unpopular, security checks are required for all planes flying more than 30 passengers. The solution? Fly planes smaller than 30 passengers.
• Seattle Airports: Commercial planes coming into Seattle land at SeaTac, which can accommodate large planes. But SeaTac is located 45 minutes from Downtown Seattle. Solution? Land smaller planes at Boeing Field, which is within minutes of Downtown Seattle.
• Capital Cost: Smaller planes and limited routes permit Seaport to operate with a lean operation, and limited seating lowers the time to operating at full capacity.

The best result? These advantages have created brand evangelists and a run away success. According to The Stump:

“Not only do we have regulars,” he said, “we have evangelists. We have one person with retail operations in both Seattle and Portland who said that SeaPort air has been a ‘game-changer’ for them. I suppose if we’d had an aviation background, we’d have never tried this. But a political hack like me and two real estate guys didn’t know any better. What’s interesting is free enterprise is like water flowing downhill. You can’t stop it and it seeks its own level. If there’s a need, it gets filled, and a business succeeds as a result.”

Portland Mayor Sam Adams has an economic development task force that has promised to bring “green” jobs to Portland to solve our unemployment problem. The group has developed elaborate timelines for nurturing certain industries. Unfortunately the timeline continues to be revised to extend the research phase and delay the implementation. The reason is simple. Rather than letting the waters of free enterprise seek their own level, they are trying to dig canals to channel those waters. And the more they dig, the more stagnant the waters become.