A Visit With California Pacific Airlines

Two long years ago I wrote about a proposed startup called California Pacific Airlines. At the time, I said that it was different from other startups for two reasons. “First of all, [CPAir] actually has some money and has a shot at getting off the ground. Second of all, the idea isn’t a bad one.” Here we are two years later and the airline is still plugging along, now with its own shiny new airplane. I went down to Carlsbad for a visit to see what’s been happening.

Current Headquarters

I found the airline in a small office in a business park off the eastern end of the Carlsbad Airport. The sign on the door shows the name of a previous venture. It’s certainly nothing fancy, and it shouldn’t be. Right now, the airline is in the middle of Phase 2 of the startup process with the feds. The first phase is getting all the manuals together and having those signed off. That’s done. Phase 2 is where the airline gets into much greater detail on the manuals and the feds poke and prod until they’re satisfied. The airline is in the thick of this right now.

The first submission was completed and a response was received with a mere 10 pages of notes. Apparently that’s a fairly encouraging first response. They expect to have their second round submitted by the end of this month and then it takes 30 to 45 days to hear back from the feds. That goes back and forth until they’re satisfied, so you can imagine that it’s hard to know an exact time when the airline could be in the air. If all goes well, however, we’d be in the middle of September when they get approval for Phase 2 at the latest. Then they’d move on to Phase 3.

Phase 3 starts with “tabletops” – that’s where the feds grill everyone responsible for each manual to make sure they know where to find everything and that they have adequate knowledge. This can take a few days. Then it’s time to get in the air. California Pacific will have to do up to 50 proving flights. The airline expects that it can run 2 to 3 roundtrips up to Oakland a day and be done in a couple of weeks. This process is actually pretty interesting, because the feds make the airline run as if it really had passengers. They’ll test every piece of the operation, even getting down to sending people up to the counter in order to make sure that the airline catches them if they’re on the no-fly list, for example. They’ll observe everything and make sure that CPAir knows what it’s doing.

California Pacific Shows Off Its Airplane

The airline already has its first airplane. It has leased an Embraer 170 with 76 seats from Embraer directly. The airplane was previously with now-dead Cirrus Airlines in Germany. It sat in London waiting for a new home until CPAir picked it up for what I can only assume was a bargain. The aircraft has been painted and was at the event held this week in Carlsbad. It expects to have 2 airplanes by launch and 4 by spring of next year. Launch routes are Oakland, San Jose, Sacramento, Vegas, and Phoenix. These cities should see 3 to 4 roundtrips a day. Apparently the exact order of launch will depend upon what kinds of deals the airline gets from each airport.

The aircraft interior is fairly nondescript since it looks just as it did with Cirrus. Other than a deep cleaning, it doesn’t look like the airplane needs much, but it will be getting a little makeover. One row of seats will be removed to allow for 24 premium economy seats at 36 inches of pitch and 48 coach seats at 31 inches. The original plan called for First Class as well, and that is still in the plan, but it won’t be happening right up front. (I still think that First Class is a waste for such short flights. Stick with premium economy.)

Once all the testing is done, then the FAA signs off on the operational capability while the DOT signs off on the economic fitness. The airline will need to have at least 90 days worth of funds in the bank to operate. And that would be a pretty bare minimum.

The airline then needs to decide when to start operations. The FAA apparently lets a new airline sell tickets up to 60 days before first flight, even when that’s before certification. That means the airline has to bet on getting through the process and that sounds risky. As of now, the airline is talking about flying in 2013. While it could be at the beginning of the year, there is some consideration being given to the fact that January/February in southern California is not exactly a peak travel time. It might make sense to push it further into a higher demand season.

A Little PSA

So will this airline make it? It has a shot. Carlsbad is a unique spot in that it has an insanely short runway. It’s not even 5,000 feet long so not many airplanes can get in there. United Express is the only airline currently in the market with a bunch of Brasilia turboprops up to LAX every day. None of the CRJ family aircraft can fly in there and neither can the ERJ-145 or larger E-Jets. The 737 and A320 families can’t get in here either. That means it would be very tough for any airline to have a competitive response.

It sounds like many of the airline’s target travelers now fly Southwest out of San Diego on these routes. Southwest certainly can’t go into Carlsbad but it could drop fares in San Diego to hurt the little airline (a tactic that was used against it back in Southwest’s early days in Texas). More importantly, many of the local companies that are being targeted by CPAir don’t seem to have corporate deals in place with other airlines. Southwest isn’t big on those, so there isn’t much tying the hands of the local businesses.

Sounds like it should be flying soon, right? Eh, I’m not entirely sure about that yet. On funds, the airline has about 80 percent of what it needs to get its certificate but it still needs to raise $30 to $50 million to fund the operation. The airline seems to be very confident that the funds will come in, but until that actually happens, this could all be for naught.

Still, it seems to me that we’ll probably see these guys flying next year. Now, we’ll see how long they can actually keep going. But I’m more bullish on these guys than most startups. They have an interesting niche that’s somewhat protected. Of course, that still requires flawless execution and it means the airline has to understand its limits as a boutique carrier. There are a lot of things that could go wrong, but they could also go right.

[Update: I put a slideshow up of my visit to the airline on the Conde Nast website]

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