There is more revenue in choice: The business case for Transpose
Since Transpose kicked off in July 2016, we've learned so much as a team. From evolving our engineering and manufacturing process with 3 generations of prototypes in our headquarters (8 total modules plus 1 branded gym prototype in the San Jose Airport) to collecting feedback from the airlines and passengers who have toured our facility, it's been great to hear the genuine excitement people have for Transpose. But as we prepare to get modules in the air, there are three questions that constantly come up:
- How would airlines make money off this concept?
- Who are we working with to make Transpose a reality?
- Can these modules actually fly?
On the business model
We've worked with numerous partners to investigate and refine the business model, and we've found compelling data with the help of Bob Dana, a former Virgin America CFO and current partner at Griffin Aviation, and Nielsen Consumer Neuroscience:
Transpose's flexibility increases airline margins by over 5% without assuming any fare increases. This data was from a rigorous analysis of over 1.5 million lines of historical data surrounding passenger capacity, premium cabin patterns and airline ticket sales.
And, further research has indicated that passengers are willing to pay more for more choice over on-the-ground prices-as much as 23%. Though our aim is to make sure that more people of all price points can get a more varied experience, people are willing to pay more for experiences in the air.
In a second study, we found customers are willing to pay a 35% premium atop premium economy fares to take a Transpose flight with various activities. This was determined through an EEG study conducted by Nielsen Consumer Neuroscience, where the Transpose product offer was tested against a major U.S. carrier's product offer at varying price points.
- Final results from a behavioral economics study we conducted with the help of a Harvard Business School professor are still pending, but in this experiment, we gave participants the option to spend real money in order to be a part of a Transpose experience, and a majority elected to do so.
This data serves as proof that Transpose helps airlines optimize existing business models, while creating valuable new revenue streams-which means we're closer to Transpose's debut as a product. There's also a great Aviation Week piece on the research here.
Transpose has received written interest from multiple major brands about sponsoring modules on future Transpose-enabled flights, supporting the idea that modularity enables valuable new brand partnership opportunities. And we're so proud to have partnered with Reebok and Peloton on that first branded prototype. In fact, we found that passengers were genuinely interested and intrigued by the Transpose concept and willingly took the onsite survey, with the majority of the 5,000+ passengers that passed through sharing positive feedback on the in-flight fitness experience and expressing they could not wait to see it become a reality.
Airlines are also integral to the process. In fact, we just hosted 9 airlines at our facilities last week for a comprehensive workshop and mini simulated flight-of note, every single airline that participated in the workshop expressed strong interest in working together to develop the concept further-and we're thankful for their continued partnership in getting the product to market.
And that workshop was shortly after another full-fledged passenger test, this one with over 100 passengers and a trained flight crew.
Lastly, we've even received a letter of intent from an MRO interested in completing engineering, flight test, production and certification work for an A320-based Transpose aircraft in the next 2 years.
On getting Transpose flying
Getting Transpose in the air is our next step. To get there, we're in the final stages of technical review with Airbus cabin and structural engineering. We've built a proof of concept with a full scale physical aircraft mockup and several modules using aircraft-grade materials and sized to withstand crash loading conditions. And we're continuously engaging with the FM, EASA and other regulatory experts to ensure we're on track for certification.
We've just completed a technical validation workshop with Airbus, where our panelists concluded that there are no major showstoppers, and expressed support for future project phases and expressed support for future project phases.
Apart from these three questions we get from our friends and family, there's also a last one that we have the definitive answer to.
Do passengers really care about choice? Yes. And airlines can only benefit from offering it.
Thank you to our engineering and production partners for helping bring the prototypes to life: NK Labs, New Territory, Motivo Engineering, Gizmo Art Production, PMV Industries, Luminary Air Group and Oculus Technologies ... and of course our colleagues at Airbus for lending their expertise and support!