DayJet, Unable to Raise New Money, Cuts Growth Plan and Reduces Work Force

Hammered by the credit crunch, DayJet said this afternoon that is reducing growth plans and cutting its work force. It didn't provide specific details, except to say that it was unable to raise $40 million in needs to continue growth.

DayJet, the first company to enter the so-called air-taxi business using jets, is the biggest customer for the Eclipse 500 very light jet. Based in Boca Raton, Fla., DayJet began flying last summer, offering on-demand, per-seat transportation. Its initial routes were medium-sized cities in Florida, but the founder, Ed Iocabucci, said that the company's future depended on expansion into regional flying throughout the Southeast to airports that it calls DayPorts.

DayJet has taken delivery of 28 Eclipse 500 jets, which cost about $1.6 million each, said Alana McCarrher, an Eclipse spokeswoman. Eclipse says it has a total of over 2,600 orders for the jets, 158 of which have been delivered to customers.

Including the 28 it has received, DayJet made 239 orders for Eclipse 500s, with an additional 70 options.

In a statement today announcing the cutbacks, Iocabucci said (excerpts follow):

---"Effective this week, we have made the difficult decision to scale back DayJet’s 2008 growth plan. Because of this change in strategy, the company has reduced its employee base across most areas of its business. ... These changes were caused by external economic factors and are not a reflection of a weakness in the underlying DayJet business model."

--"Our first phase of operations, the "Proof of Concept" phase, has gone exceptionally well. Response ... was very consistent with our expectations and we answered many nagging questions: Yes, customers will fly in a small jet; Yes, customers will embrace the per-seat model; Yes, customers will pay a premium for tangible value; Yes, the technology works as planned ... All in all, we have signed over 1,500 members, more than 550 of which are active travelers, and nearly 200 are frequent flyers."

---"[This] is only the first step to profitability. The next step is equally important -- growing the network to a density that generates operating margin. Our projections have always indicated a network of 30-50 "line" aircraft serving 20-30 fully developed DayPort markets was needed to reach critical scale. More importantly, this required a $40M infusion of operating capital in the first quarter of 2008. ... given the current state of the U.S. capital markets, the timing of our planned financing could not have been worse."

---"Without the growth capital required to open new markets, the company must scale back to a size that is consistent with the demand ... DayJet’s business model is based on operating at a critical mass, requiring investment ahead of growth. We hired and trained a number of employees in anticipation of future growth and always planned for additional capital investment at this stage. "

---[This] will not reduce our existing service region. ... We will continue to operate and expand our service (albeit at a slower rate) to communities across the Southeast ... when the capital markets recover, then we would expect to resume the growth forecast in our original plan."

###