Entrepreneur uncovers secret formula for flying first class at half price
In October last year, entrepreneur Steve Hui founded travel startup iFLYflat after uncovering the secret formula for flying first-class at just a fraction of the retail cost, or in some circumstances, for ‘free’. Instead of paying up to $15,000 for a return flight, Hui guarantees to get the average consumer a first-class seat for just $6000 – less than half the retail cost.
How does it work? Simply put, iFLYflat is like financial planning for frequent flyer points. Through the Points Management Program, Hui helps members squeeze the maximum redemption value out of their frequent flyer and credit cards points. The program is designed to help members optimise their points so they can stay ahead of the game and even fly for free.
But those who don’t have enough points are not left behind. The Fasttrack Program helps customers structure a trip at substantial discounts by acquiring points from airlines and other companies.
For instance, some airline companies and organisations with staff who travel extensively sell excess frequent flyer points to the market. There are also ways to earn points faster using certain credit cards, and the points can be transferred and redeemed for airline tickets at a drastically reduced price.
iFLYflat also offers the Points Concierge Service, so customers don’t have to do the math. The service finds and books frequent flyer seats for up to 10 trips per year, and ensures the customer’s points are consistently optimised – which may require updates to strategies when airline companies and banks make changes to their loyalty programs.
Hui worked as an accountant for many years, and has always excelled at numbers. But the catalyst for pursuing the business was a conversation he had with his boss at a previous workplace. The boss revealed in that conversation that her husband redeemed 135,000 Qantas frequent flyer points for an iPad.
“The cents per point in return was really low. He could have redeemed a one way business class trip,” says Hui.
Surprised at how little value the husband was able to obtain, Hui went on to investigate how the system works. And in 15 months, he learned the formula.
“I went on to do a lot of research – first hand and second hand. I tested my own hypotheses from travelling first-class on a regular basis. I spoke to a lot of people who work in the travel industry. I read a lot of articles and blogs and visited many forums, until I understood exactly how the system works.”
He adds that managing points is like budgeting and forecasting. You have to calculate how many points you will earn by spending a particular dollar amount every month, and once you’ve reached your target, you can redeem those points for a first-class return trip to anywhere in the world.
“I always assess value. Most people see things at face value, but I take a couple of steps back and ask myself ‘can I use this for something else that wasn’t the intended purpose and get something awesome?’” says Hui.
Thus far, the business has been entirely self-funded, although Hui is now entertaining the idea of raising investment capital.
“I think you should only raise money when you have a clear profit model that you can show to investors, and I’ve just established that model,” says Hui.
iFLYflat targets small to medium business owners, and those who want to travel business class for leisure purposes.
But how big is the market? This year, Qantas is expected to hit 10 million frequent flyer members. In the 2011 to 2012 financial year, Qantas’ Loyalty division reported underlying earnings of AUD$1.2 billion from the sales of points and membership fees, and $231 million in earnings before interest and tax.
“I know the market is huge. Qantas is one of the very few airlines that revealed their earnings, so I don’t know the exact number across all airlines. I know that there are many people who don’t know how to leverage their points – often they’re just wasting it,” says Hui.
Throughout the development phase, Hui also conducted thorough market testing to assess what steps consumers are willing to take to travel first-class. He realised very quickly that three simple steps were three too many for the consumer.
“They wanted to travel first-class, but they didn’t want to do any of the work, so I had to establish a process where I do all the work for them and they get the results,” says Hui.
The business focuses on medium to long-term relationships with customers so they can obtain maximum value from their membership.
As such, Hui implemented an annual membership model where individuals pay $550 and families pay $750 per year. This fee covers access to all three services – Points Management Program, Fasttrack Program and Points Concierge Service.
But there’s also a social element to the business. Hui says $50 from each membership fee is donated to a registered charity.
A bit like Flightfox?
One of the questions Hui is commonly asked is: ‘Are you like Flightfox?’ The answer is no. While the end-goal is the same – cheaper flights – the execution isn’t.
“My focus is on leveraging frequent flyer and credit card points. I work with customers on a medium to long-term basis, not on a transactional basis,” says Hui.
“For instance, if my customer wants to fly next year, I will build a plan so they’re able to fly for free. I focus on strategy; I position my customers in a way that they receive the best value from their points.”
At the moment, Hui’s main marketing strategies are regularly attending business-networking events where he can reach out to his target market, and providing quality service so customers are compelled to spread the word.
“I’m an accountant so I naturally think about processes, and how to make programmes and plans work. I’ve got all the backend of iFLYflat handled, but marketing is a huge challenge. On a price level, iFLYflat is very attractive. But it does sound a bit crazy to say to people I can get them first-class seats for $6000 when it’s worth $15,000,” says Hui.
“Because the service is brand new, it’s hard to get the right message across. In the upcoming months, I’m going to work on building that credibility through strategic marketing.”
iFLYflat currently services almost 100 customers – one-third are frequent flyers, another third fly once or twice a year, and the final third are business owners looking to earn points faster for planned flights.
Thus far, Hui has saved his customers cumulatively over AUD$200,000 in ticket costs – compared to retail price.
But his proudest achievement is enabling people to fly first-class on a more regular basis or for the first time in their lives.
“I see this as a new way of flying. A lot of people haven’t been able to enjoy the luxury of flying first-class. They’ve always wanted to, but thought it was outside their reach,” says Hui.
“And I don’t think anyone looks forward to flying economy-class. Many people try to shrug it off by focusing on the destination. But I think flying should be about the whole experience. Your holiday starts when you leave your front door.”
Advice for other startups
Hui’s advice to other startup founders is to reach out to the startup community in times of uncertainty.
“I’ve attended many events and I’ve been in a few different co-working spaces like Fishburners; and the startup community is very welcoming. They’re always helping each other in times of need,” says Hui.
“And being connected with other startup founders also helps you stay motivated. Everyone is working on something new and interesting, and that only inspires you to keep going.”
Hui is currently in discussions with a number of potential partners and plans to grow the business at a faster pace by the end of the year.
For more information on iFLYflat, visit www.iflyflat.com.au.