ffI

How can you generate unlimited AA points at less than 0.9c?
I understand that there are many options for low cost points, but IME, they are not infinitely scalable. Please PM me if you do not want to reply openly.

After a few years of generating points, when I looked at my overall cost, after factoring in lost cash back etc, I am at 1.5-1.6c each. That also includes points I have that have not been used (and potentially could lose from inactivity, so real cost may still be 2c each)

macabus

Actually, you can get the cost down to .75c per mile.

Simply use a SPG Amex to charge major business expenses and then transfer the points to AA with a 25% bonus for every 20,000 miles.

The only limit is 70,000 points transferred every 24 hours.

AA_EXP09

1) opportunity cost of those miles is a 2% cashback credit card
2) even if it were only 1%, it would be $0.008/mile (1/1.25=0.8)

macabus

Since I only use miles for international F awards, the opportunity cost for me is closer to 15 cents per mile.

oenophilist

My background is business development in high tech, and as part of my job I would look at the economic viability of startups.

From my perspective, there are three areas that I think would need further investigation. First is the cost per flight. You calculated a cost per flight that didn't consider volume and also focused on the most expensive flight possible. I don't think this is a reasonable approach. There are many different shuttles at different prices. The models need to look across the services.

Second, there is an assumption that the customer would become a regular user of a route as a primary means of transportation. I don't think this is what JetSmarter is targeting. For a commercial customer, JetSmarter is a secondary form of transportation. For a typical private customer, they are willing to pay the extra to initiate flights, which has variable pricing.

Third is the focus on the individual user. When I would put this into a spreadsheet, I would look at a) what the load is of the regular flights and how that cost is distributed over the entire population that would use it; b) what the cost would need to be in order to initiate a flight and still maintain profitability; and c) where the market is for users.

Finally, I also see this as an enterprise play, where a company can purchase a substantial amount of "reservations", pay to initiate a flight, and fly employees and executives when needed.

In summary, I believe that it is possible to build a business model based on the JetShuttle service.

However, the are two rather huge caveats. a) the cost of fuel is keeping costs low for now, but that may not last; b) the more "sharing" that happens, the more likely that JetSmarter will be at risk of being regulated as a commercial carrier.

AA_EXP09

I was referencing your earning miles using a credit card-you forgo cashback for the miles.
I am not referencing the value you receive from the mileage that you accrue upon redemption (which, as you stated, is far above the 2% rebate level.)

mrfussion

The way to manufacturer AA points at .9 is not to simply charge business expenses. There is absolutely no strategic thought in that. Rather it is based on tax avoidance. The idea initially came to me as completely unrelated to miles But if you’re living in California and in the top tax bracket you have a 39.6% federal tax and 13.3% state tax. So you’re getting a little less than half of every dollar you earn. And keep in mind most private businesses have profits flow to the owner. The cheapest interchange rate I could find on Amex was 2.2%. Our partners who even if they don’t normally accept credit card I would tell them build the 2.2% into our charges. So for every $1 MM transitioned I’d be creating $22,000 in new costs for the company from our vendors. Had that $22,000 flowed out of the company as executive bonuses it’d have resulted in approximately $10,000 in cash in pocket. Rebates from credit cards are not taxed. So that $1 MM credit card rebate puts $15,000 in pocket on a 1.5% cash back card. So you’re up $5,000 cash in pocket for every $1 MM you move over. Do it on 20, 30, or 40 million dollars and it adds up to a nice tax savings. At the end of the day, however, I think it’s going to create attention you probably don’t want when the government tax collectors see a materially change in your tax payments. So it was never anything more than an idea on my end on that front.

So there’s the background. Now flip from cash and do it with SPG. Tell a vendor he’s accepting credit and we’ll pay his interchange. We pay 2.2% that would have otherwise been profit. Again for every $1 MM it’s $10,000 or so cash out of pocket (because again the company can sink it into the product cost, legitimizing the expense, and no one can argue otherwise against you doing that as a business). So you’re buying SPG points for 1 cent per and from there you know the rest … Changes a little but based on state, income level, etc. but that’s the basis of the comment/theory. Nothing more than a tax game but at the end of the day produces AA miles under a penny each. If I needed AA miles, or any miles, I'd do this. But the freebies from vendors who already accept credit cards is more than I can spend now.

mrfussion

oenophilist – I can’t summarize it any differently than there is a competitive alternative in the market. I don’t think people will pay a premium for JetSmarter’s shuttle product as no one I’ve heard from sees it as a superior product. JetSmarter’s cost to deliver their shuttle product is far higher than their competitors. Therefore, JetSmarter does not have a viable product. If it was cheaper to shuttle 13 passengers on G-IV LAX-JFK that’s what American, Delta, Untied, etc. would be flying. It’s not. This holds true for New York - Chicago, New York - Florida, Los Angele - San Francisco, etc. Pick any one and their per seat economics lose. The beauty of the empty legs is they have an underutilized asset. A scheduled service they do not. And it’s really that simple and they’d be wise to save their $20 MM and do something more productive with it. But for everyone who wants to go nuts on cramming into a fully-loaded G-IV at JetSmarters expense while it last have at it …

SFO777

Since I've already paid the membership fee, my incremental cost on all of my flights is $0.

Thank you peasant. Suspect that it works because JetSmarter isn't the operator and just a "broker".

Now that's the way to do it. The Challenger is a better experience than a full or arguably empty old G-IV. Yeah, our G-IV Wifi was useless. I would still fly the G-IV vs. AA First. Avoiding JFK and LAX is a major plus. And that's before the $2K price differential. Although if I had to seat in the rear Y seats, it'd be a closer call.

Hey, what's wrong with frat parties, especially at my age.
Yes, after all of my F flights, I'd still fly "private". While the HPN-VNY was a full flight, it was comfortable and enjoyable.
All of other JetSmarter flights have been just the two of us, or just me like my APA-SNA Challenger 604 a few months ago.

Gabrca

Great report SFO777!

I'm tagging along with a friend on a NY-LA shuttle next week .... Couple of quick questions

1. Can you arrange to have a car pick you up on the tarmac in Van Nuys?
2. What sort of alcohol do they have onboard?

I noticed they switched to Jet Edge and promised transatlantic jetshuttles in the future. Will see if that pans out!

SFO777

Thank you Acrbag. Enjoy your flight. Hopefully, you don't get the Y seats at the back of the plane.

1. Yes, you can arrange tarmac pick-up. JetSmarter claims they can do it but they are not the most responsive. I always just call the arriving FBO and they arrange limo or rent-a-car meet and greet on arrival.
2. They have a variety of reasonably high end liquors. I drink G&Ts and they had Bombay. I was surprised that they only catered one type of wine, a Cab. Even though it was reasonably good, I would have thought they would also have a Chard.

Also, except for the desserts, the food was basic. If I did this again, I would consider ordering something more substantial from a local FBO-suggested caterer.

salanki

Interesting thread. I signed up for a membership two days ago. I have been following the company for a while and should have done it earlier before the initiation fee, but at least I got $2k in credits.

I live on Manhattan, frequently fly to LA and Miami on a flexible schedule. As a pilot myself (helicopter) I very well appreciate the time saving of getting to the airport from the heliport instead of sitting in traffic. I also strongly prefer FBOs over commercial airports, it saves me time and having to deal with annoying people. I am less worried about sharing the planes with others. I'm in it for saving time and staying out of JFK/LAX/MIA. For demo purposes: I'm 29.

If I get 10 flights or so in (probably mostly to Florida) + maybe some heli-trips to the Hamtpons this summer (when I don't want to fly there myself) I will be very happy with the value.

There are two things that worry me, without having tried my new membership yet:
1) Wifi availability. I like to be productive on planes. I can be productive without wifi, and the wifi on Delta is mostly a joke any way. Someone did mention that the wifi on the newest G4 operator they use is decent. Would like to hear more inputs on this one.
2) Shuttle availability. If members increase without them adding more shuttles and shuttles becoming impossible to book unless you plan a month out I don't see myself getting good enough use out of it.

As for the viability of the company: If it works out as well as I hope, it's a good deal for me. Hopefully they'll figure out the business on their side, otherwise I'll enjoy it while it lasts and hopefully they won't go bankrupt after I renew.

I'll be able to give you a different perspective after my first flight (which I haven't scheduled yet, been hoping for availability on FLL-LAX to open up tomorrow).

Stay tuned!

SFO777

Thanks very much for your post and thoughts salanki. And welcome to JS.
Given that you live in Manhattan and travel to LA and Miami, JS sounds perfect for you.
Couldn't agree more about hoping that they figure out the business model and don't go BK before the year is up.

I've been following the shuttle loads quite closely as I'm thinking off getting Mrs. SFO777 a membership (2nd shuttle seat, better shuttle seats and ability to book the entire plane on repo legs). Those NY-Florida flights are the ones that seem to really sell out quickly. All the others (even HPN-VNY) seem pretty readily available even at the last minute.

Wifi is fine on the repo flights as I usually the only one using it. On my HPN-VNY G-IV flight, it was completely useless. Don't know if it was a one off or a recurring issue.

Enjoy your membership!

Townshend

salanki, suggest you also check out this thread: http://www.flyertalk.com/forum/trave...periences.html

SFO777

Thanks Townshend for the link to the separate JetSmarter thread. ^