Odyssey Airlines first hit the news with its order for 10 CS100 aircraft in June 2011. No one knew who Odyssey was, but it had the industry’s interest.
Then came over-egged reports about how it’ll be the first airline to finance its entire operations through crowdfunding – or so the story went. The reality is much richer than this. And, reassuringly, more sensible.
Due to start its business-only flights from London City Airport in 2016, it’s true that Odyssey has used crowdfunding to create some capital, but the visions of its CEO, Adam Scott, reach far wider.
At the time of ’s interview with Scott in October, Odyssey had raised over $10m – much of which was through crowdfunding – but it has plans to raise another $100m in 2015 through more traditional means.
Working the crowd
So if it’s not sourcing all of its cash through crowdfunding, why did it do it at all? “We wanted to do things differently. We wanted to turn the traditional way an airline starts up – and the way an airline runs – on its head,” the CEO tells.
Equity and peer-to-peer crowdfunding was not part of the plan from day one, says Scott. “But it was part of the plan insofar as wanting to do things differently.”
Towards the end of 2013, Odyssey “dabbled” with crowdfunding in a peer-to-peer lending structure. “It was so successful, we actually did the largest non-profit peer lending ever done for a total of £2.1m ($3.4m). And we did that in the weeks leading up to Christmas.”
This sum came from a number of investors, all of which are a good reflection of the types of people Scott hopes will fly with the airline. “A lot of city folk, a lot of bankers, a lot of lawyers, accountants and wealthy individuals.”
“That was really eye-opening for us as that was a closed platform, so it wasn’t in the public domain,” he explains. “It really showed that there was a lot of appetite and engagement in terms of questions and ideas for the business and so really, we thought, we’ve had such a fantastic response this way, why don’t we leverage that and go a little bit more public about it.”
Having raised £2.1m through the closed group, it then raised just over £1m ($1.6m) through its UK public equity offering and $500,000 of commitments from its US offering.
The average ticket from the UK public offering was £4,000 to £5,000 ($6,500 to $8,000) and in the US it was higher. “So it’s still attracting the right people,” says Scott.
Odyssey hasn’t yet used the third type of crowdfunding, which is the most familiar to the public as it’s open to all. Scott appears less interested in this financial instrument but one gets the feeling that you never know with him – he keeps his cards close to his chest.
For example, he has a US airport destination in mind, but won’t say which. He has a well-developed aircraft configuration and seat manufacturer, but won’t talk about either. He also refuses to leak anything about the customer experience, saying: “We want to save the best for last.” It seems he knows just how to use strategic silence to work the media’s interest.
What we do know is that Odyssey will fly business class using the CSeries aircraft on long-haul routes out of London City Airport.
“We’re targeting business class and we’re aiming to price it at business class, but we’re really aiming to be something very different. It’s almost a new hybrid, it’s certainly above business and potentially even above first.”
Boston, Toronto, Chicago, Washington and some markets in between are all longer-term possibilities for Odyssey, as is the Middle East and some of the airfields going into them.
But what we also know is that Odyssey doesn’t like traditional hubs and won’t be flying to JFK.
It wants airports that offer short check-in times, short queues, short walks to your gate and a high customer service.
“We want to offer something that is truly different to the incumbents while not being seen as a direct competitor, because we’re also going after the part of the market that would otherwise fly business jets,” says Scott.
Brains behind the business
While Odyssey has certainly gained a great deal of interest, it has also received some reticence, chiefly for its focus on business and the history of some of its key staff, three of which were involved in failed business airlines.
John Bavister, Odyssey’s CFO, was formerly the CFO and co-founder of Silverjet. Its executive director, William Stockbridge, founded Maxjet Airways, both of which failed.
“Those businesses were very different from our model but they were fundamentally all-business class carriers,” Scott admits. “But we’ve taken the experience of those who’ve come before us and we’ve learned from them. And with what they’ve shown us, we can get it right this time.”
When pushed on what exactly those lessons are, Scott explains that Silverjet and Maxjet operated old 767s to secondary airports; they had a discount offering, targeted at discretionary spenders who would otherwise have flown premium economy.
“And so even if oil hadn’t hit $147 a barrel, the writing was probably on the wall come the great recession.”
And here’s the crunch: “We’re using the right aircraft, we’re using the right airports, and we’re launching at the right time. We’re not going to be dependent on discretionary spenders, we’re not using old, fuel inefficient aircraft, and we’re not going to be operating into secondary airports.”
Despite business travel being one of the first sectors in aviation to be affected by a recession (cargo being the other), Scott believes he can ride out the cycles with this business model. Indeed, he argues that while short-haul business flights take a significant dip in a downturn, in the last recession some companies found there were more transatlantic flights – due to a heightened need to please clients – it was just that fewer people were flying them.
He is also confident that he has the team to weather any storm. Scott spent 10 years at Goldman Sachs and was also involved in developing the A318 transatlantic concept from London City Airport. Fellow co-founder, Raymond Hickey, had nine years at Goldman Sachs.
Executive director, Patrick Creely, has worked in aviation structured finance with DVB Bank and later its aviation investment management division, while its chairman, Jacques Bankir, and executive director, Stephen Miller, share experience at over 10 airlines, including Air France Régional, CityJet, Dragonair, Hong Kong and Oasis Hong Kong Airlines.
“We’ve been very lucky with the team that we’ve put together over the last two years… their own backgrounds speak for themselves,” Scott boasts.
While the team’s experience will no doubt help greatly, so far Odyssey’s biggest boon has been the media attention surrounding its crowdfunding.
“The response has been fantastic. There have been a couple of individuals and reporters saying ‘what the hell are you doing, how can you finance an airline through crowdfunding?’ And we had to crack them. We have no illusions; we’re never going to finance an aircraft, let alone an airline, through crowdfunding. It’s more a case of ‘can we use that as part of our capital raising?’ and more importantly, ‘can we use it as a PR tool to create our profile and get people talking?’”
One example of its success is the number of CVs and LinkedIn requests that Odyssey gets the number of people who want to participate has grown exponentially.
“It’s been fantastic PR,” admits Scott. “But in the greater scheme of things it’s just one little piece of where we ultimately need to get to and what we’re doing. But for us, especially on raising larger amounts of money as we gear up to institutional lenders next year – which is likely to be more traditional – this has really elevated our profile. Rather than walking into a meeting and taking 20 to 30 minutes explaining who we are and what we’re doing, we walk into meetings and everybody knows what we’re doing.”
Scott plans to raise around $100m starting in the first half of 2015 and is already in serious talks with a lessor willing to buy and leaseback its aircraft.
It’s looking to launch in the middle of 2016, and after securing an international fundraiser it will seek its air operator’s certificate; that process needs to be under way in the middle of 2015.
While Scott doesn’t think that many traditional airlines will adopt crowdfunding as a source of capital, one other, at least, has shown interest. Virgin Boss, Richard Branson, owns a stake in Indiegogo, a crowdfunding website, and has said that he would have used it had it been available at the birth of his business empire.
Scott agrees that it’s better suited to start-up companies. “Over the time that we’ve been working on this business, crowdfunding as a potential source of capital raising has really come into being. I would say that it’s definitely been a really interesting feature of ours and something that has certainly played an interesting and important role in what we’ve done.
“Will more airlines participate in crowdfunding activities? Yeah, I certainly believe that’s the case, but I also think that you need to have some new blood in the establishment which is more familiar, let’s say more readily accepting, of the great changes that are under way in terms of finance and capital raising.”
As a young blood itself, the way Odyssey has worked the new financing tool – as well as public interest – has been exemplary. And, while we’ll all be interested to hear what comes next, Odyssey really had us at ‘hello’.