Richard Noble is a man with a mission. He led the team that broke the world land speed record and broke the sound barrier with his car Thrust SSC in 1997 . Now he has set his sights on a much more difficult goal. He is CEO of Farnborough-Aircraft.com and wants to do nothing less than revolutionise the air travel business with a completely new design of aircraft and, if that weren’t difficult enough, he plans to do it without having anything do with the City. His new plane, the F1, needs the latest technology to get off the ground – laminar flow wings, a high-tech Pratt and Whitney turbo prop engine, state-of-the-art avionics – but it also needs sixteen million pounds. He hopes to raise at least half of that money over the Internet from fellow enthusiasts.
I was intrigued – not only as a writer, but as a pilot and businessman. So on a very cold January morning, I drove down to Farnborough to meet him. Farnborough Airfield is home of the famous air show, but when I visited it, it seemed rather deserted and forlorn. The runway is surrounded by hundreds of old hangars and run-down office blocks that all seem to date from a happier age of British aviation. The place is run by DERA, the British government’s military research organisation so security is pretty tight. Once I had signed in, I drove over to hangar P71 which is where Farnborough-Aircraft.com is based. I met Richard Noble in his office and we started talking about his new approach to fund-raising.
Raising the Money
His disenchantment with the city runs deep and dates back to his experiences with an earlier aircraft company. He started ARV in 1983 to build a two-seater aircraft aimed at the training and hobby market. They built the first prototype in twelve months and achieved type certification in eighteen– which is light speed development in the aviation world. He raised the money to do this using traditional venture capital but when the inevitable problems arose he found that the ‘city folk,’ as he calls them, did not have the stomach to support him into volume production. So despite an initial production run of several dozen aircraft the company ran out of money in 1987 and had to shut down. It wasn’t just a lack of guts that disappointed Noble but the lack of basic understanding of the business proposition. He recalls one incident where a slightly inebriated banker called him and, perhaps thinking that the plane was a kind of mini-business jet, said, “I’ve just looked at the plans for your plane and there’s no room for a set of golf clubs.” He vowed that he would never put himself at their mercy again.
While the British financial mind does seem unimaginative and near-sighted, there is no doubt that Noble’s messianic enthusiasm jars against the MBA mentality. Where Noble says ‘damn the torpedoes, full speed ahead,’ the money men tend to say ‘I’d like to see a three year torpedo projection and risk analysis.’ Personalities aside, Noble spotted a structural failure in the market for funds for small businesses. The government has given financial institutions, primarily banks and VC houses, a legal monopoly over capital fund-raising. It is very difficult in the UK for a business to solicit funds directly from the public. The intention was surely to protect widows and orphans’ investments, but like most monopolies, it quickly turned to self-interest and inertia. Indeed, if the recent pensions and endowments mis-selling scandals or the dot.com bubble are anything to go by, it’s a bit like giving an alcoholic the keys to the bar.
So, Noble asked, how do we get around this confederacy of dunces? The answer came from his last enthusiasm – the world land speed record. He had built the car and was ready to go to the Black Rock Desert in Nevada to make the record attempt. Heavy Lift had even given him free use of an Antonov cargo aircraft. What he did not have was the money to pay for the 250,000 gallons of aviation fuel needed to get it to America. What he did have was a loyal base of supporters and a web site. He put out an appeal on the Thrust SSC website for funds to pay for the fuel and within a few days he had raised the £150,000 he needed. When he started Farnborough-Aircraft.com in 1998, he knew he wanted to raise the capital he needed in the same way.
He found that there was a legal obstacle in his way. A private limited company can only approach a handful of potential investors. On the other hand, if the investors come to the company uninvited then that’s fine. As a result, you will not find an application form or prospectus on Farnborough-Aircraft.com’s website. Instead Noble’s personal email address is very visible throughout the website. When people email him to ask ‘how do I invest in your company,’ they have made an unsolicited approach and he can send them a confidentiality agreement and then a business plan.
His second innovation is the Farnborough Airforce. This is, in effect, a fan club that offers members a chance to get closer to the company. It has all the trappings you’d expect like regular meetings and newsletters. In the latest jargon, it is opt-in relationship marketing. More importantly, it allows Farnborough-Aircraft.com to make regular share offerings to members. This is thanks to a change in the law (to be specific the Public Offers of Securities Regulations 1995 under Rule 7.2.c) that was originally designed to allow railway preservation societies to raise funds. The only requirement is that people who are sent share offers must be members of some kind of club related to the venture and must, therefore, have a personal interest in it.
The results so far have been staggering. Farnborough-Aircraft.com have raised over £700,000 from unsolicited approaches over the Internet (with an average investment of about £4000) which accounts for 52% of their capital. 44% of the people who contact Noble in this way eventually invest in the company which perhaps says as much about Noble’s infectious enthusiasm as it does about the business proposition. A further £307,000 has been raised from the Farnborough Airforce club (another 22%) and the balance has come from the original angel investors. In all there are 340 investors who own 24% of the authorised share capital. The share price is currently £2.60. If Noble sells the remaining 76% at this price he will secure the funding needed to see his aircraft to certification. From Noble’s point of view, this means that he has a loyal, committed, informed investor community who are likely to become customers or passengers of his product. More importantly, they are likely to stick with the company through the three or four years it will take to get the F1 aircraft into production and yet they don’t have a controlling or dominant voice in the management of the business. They let him get on with running the business.
Central to his new way of raising money is the Internet. The Farnborough-Aircraft.com (www.farnborough-aircraft.com) site is extensive, detailed and fascinating. The whole development process is conducted under the lens of web scrutiny. By making the company so public, so transparent, it appeals on an emotional as well as an intellectual level with visitors. The traffic on the site increases by 15% per month. Of course, Noble has a good precedent: the Thrust SSC (www.thrustssc.com) site has had over 58 million hits in its life and is still going strong. The company is growing rapidly as well – it now has 47 staff and has sold two aircraft, even though its still on the drawing board. He is creating a system of direct, popular capitalism mediated by the Internet. The fact that the law makes this difficult just inspired his imagination. This is his way, I think. As he says, “We’ve got to change this country … we’re afraid to be British.”
To fill the air taxi role, which is central to Noble’s vision of the future, he needs a revolutionary aircraft. It needs to cruise at over 300 knots so that it can compete, speed wise, with airliners. It has to get in and out of small general aviation airfields around the world, rather than the tiny handful of large airports serviced by the airlines. This meant that the fast flying plane also has to be a handy slow-flyer. It also needs to be capable of single-pilot operation in bad weather (so called instrument flight rules where the pilot relies solely on cockpit instruments to fly and navigate). Of course it also needs to be easy to build, easy to maintain, and highly reliable. Lastly and most importantly it has to be safe.
To fulfil this specification required four things. First: a high-performance wing using laminar flow aerodynamics to make them cut through the air better at high speed. Second: a single turbo-prop engine. This is a compact jet engine that drives a propeller to give the reliability and power of a jet but the acceleration and low-speed handling of a propeller-driven aircraft. It is an established, but counter-intuitive, fact that a single engine propeller aircraft is far safer than a twin-engine one. This is because a failure of one engine on a twin causes asymmetric thrust, which is very hard to control – as pilots joke ‘the remaining engine just gets you to the impact point quicker.’ Third, it requires advanced avionics to allow, among other things, instrument approaches to any airfield. Finally, it demands a fuselage and wings made of composite materials, like a F1 racing car, rather than conventional aluminium. Not only is it more crash resistant and significantly lighter but it is also easier to manufacture because the planes can be put together like giant Airfix kits. The result is a plane with the performance of a Spitfire, the carrying capacity of a London taxi, and the short-field performance of a little Cessna.
This last point is significant because, as Noble says, it takes a good Japanese car company under twenty hours to build a four seat family saloon but it takes Cessna nearly fifteen hundred hours to build a similar-sized aircraft. No wonder they cost so much. It also allows him to pursue his vision of licensed manufacturing where the F1 Aircraft will be built by different companies in different locations using a template ‘factory-in-a-box’ designed by Farnborough-Aircraft.com.
Typically for Noble, his vision also required a change in the law. Until the middle of the nineties, aviation governing bodies around the world would not permit commercial single-engined operations under instrument flight rules. This made air-taxi operations expensive because they required two engines and so double the fuel and double the maintenance. This began to change recently and now the US, Norway, Sweden, Denmark, Germany, France and Spain permit it and other countries are expected to follow suit eventually.
This was the final piece in the puzzle that enabled the Farnborough-Aircraft.com project. Noble raised his initial funds in 1998. Since then he has been building up a team of designers that seem like a who’s who of the British aviation industry to turn the vision into reality. The plane’s first flight planned for 2003 with certification scheduled for 2004-5.
The Air Taxi Business
It’s a commonplace observation that when someone buys a drill they are not buying it because they want a drill, but because they want a hole. Similarly, Farnborough-Aircraft.com are not selling planes, they’re selling transportation. To do this they’re planning an ambitious new way of getting about by air.
Today if you need to fly somewhere and you don’t own your own plane you have two main choices. First you could catch a scheduled flight from a large airport with all the hassle of getting there, checking in and delays. Second, you could charter a business jet at great expense and fly from one of the handful of airfields with runways long enough to accommodate them.
If you think that commercial air travel is bad now, just wait. It will only get worse. For instance, Boeing predict 20,000 new aircraft will be sold in the next twenty years while, at the same time, 38 major European airports including Heathrow will run out of capacity by 2009. According to Noble, the big carriers have a monopoly on long-distance travel and so we dance to their tune. It’s all part of what he calls the “big airline deception.”
Now imagine an alternative. You’re in Reading and you need to fly to Rome with a couple of colleagues urgently. You go to your computer and hook up to a central booking website, enter your postcode and the postcode of your destination in Rome and you say you want a direct flight. A short wait and you get a reply confirming the flight and a price which you accept. Twenty minutes before the flight a taxi arrives at your office and takes you on a fifteen minute drive to White Waltham airfield where your plane is waiting. You introduce yourself to the pilot, climb in and off you go. No check-in, no airport queues, no waiting for air traffic control slots. Ten minutes later you’re cruising at 25,000 feet heading directly to Rome. At a speed of 300 knots, the journey takes about two and a half hours – comparable to a commercial flight from Heathrow but without the queuing and waiting. The cost? Perhaps about £2000 (based on projected costs per hour of £459 including pilot salaries plus an estimated 100% operators mark-up), divided between three of you. This is a little more than a direct flight on, say, British Midland which works out at about £750 for three of you one-way; but when you factor in the massive time saving and the cost of time for you and your colleagues, it looks like a bargain. If Farnborough-Aircraft.com succeed the result will be nothing less than amazing – frictionless business air travel.
It’s easy to root for Richard Noble and Farnborough-Aircraft.com. They’re doing something that looks almost impossible in a business environment that seems completely unsupportive and yet if they succeed the rewards and kudos will be huge. However, bloody-minded determination isn’t the answer to every business problem. This is a highly risky project, as Noble himself frequently acknowledges. Apart from the inevitable risks with a high-tech engineering project, Farnborough-Aircraft.com are dependent on a continuing flow of investment to meet day-to-day expenses. Once the design is complete another, substantial round of funding is needed to get the aircraft into production and also to start up the air taxi operation. The risks don’t stop even when they get into production – the air taxi concept might not take off as they hope or, if it does, competitors may emerge very rapidly by adapting existing aircraft to the new role.
Having said that, Noble makes a convincing case for his business. If their air taxi idea can capture 5% of the business travel market in key territories – something in the order of ten billion passenger miles a year – they will sell 19,000 planes. It’s an astonishing goal but even if they are out by an order of magnitude they will have a business that generates several billion pounds of revenue. The upside may seem dramatic but Farnborough-Aircraft.com plan nothing less than a breakthrough technology and a breakthrough business model. Noble put it much more simply. He said “imagine writing a business plan for the motor car in 1920.”