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Weekly Column

Jet Me to Work: DayJet Software Could Revolutionize More Than Just Air Travel; Also, Apple's HD Video Plot Thickens

Status: [CLOSED]
By Robert X. Cringely

In every industry, there are changes that are evolutionary and those that are revolutionary, and sometimes, it is difficult to tell one from another. Last week's column about DayJet is a case in point. Is the idea of hailing a little jet plane to take you to your next business meeting evolutionary or revolutionary? Certainly for the passenger, this is a case of evolution -- just a different hull in which to carry that same airline seat that is used anyway for 13 percent of regional business travel. But for the provider of this kind of service -- DayJet in this case -- the opposite is true. Per-seat on-demand air travel is revolutionary because it simply could not be done before. The technology didn't exist. And no, we aren't talking about aircraft technology, but scheduling technology. And I think that kind of software could have a lot of other very interesting uses.

A lot of the coverage of DayJet has focused on the company's use of Eclipse 500 very light jets, but talking with company founder Ed Iacobucci, I learned that DayJet isn't inexorably linked to the success of Eclipse and that the DayJet concept would work nearly as well with other light jets in the works, even those that cost considerably more than the Eclipse 500. The software is the key.

"We have spent three years developing the (scheduling) software used at DayJet," said Iacobucci. "We considered selling it to other carriers, but our best return on investment turned out to be by embedding the software inside another service: DayJet."

The programming challenge that occupied two Russian PhDs for three years was to schedule the most profitable usage for the three seats available in 40-300 DayJet aircraft operating in a region about 500,000 square miles in size, and to do this all within five seconds. Because the FAA part 135 air taxi rules require a price quote for each customer, that's the basis of the computational task. Using a few questions (Where do you want to go? When do you need to be there? How early can you leave? How many seats do you need?), DayJet software has five seconds to map a best-case route and generate a detailed price quote with the goal of 85 percent of the time making the potential customer an offer they are unlikely to refuse. This may not seem like much of a routing task, but it is a vast increase in complexity over anything else the aviation industry has tried before.

A big airline like Southwest, for example, has to make the best economic use of 417 aircraft flying 18 hours per day, which is network optimization problem with at most 7,200 variables. But DayJet, scheduling shorter routes on a per-seat basis that involve potentially vastly larger number of destinations, has a 15-hour day that includes a minimum of 13,500 variables before you even get to the possible destinations, and the DayJet network has to be re-optimized dozens of times per hour if the system is going to be profitable.

The result of this three years of schedule development, along with two years of complexity research on agent-based modeling of regional business travel, makes Iacobucci think his company can make money IF it has at least 40 aircraft per region. "Our greatest limiting factor turns out to be the rate at which Pratt & Whitney can make jet engines," he said.

While DayJet is a great idea and ought to be a lot of fun to do, its impact on business travel will really be modest. Iacobucci estimates that if the company is successful the mix of regional business travel in the U.S. southeast will go from the present 87 percent by car and 13 percent by scheduled airline to 84 percent by car, 14 percent by scheduled airline, and two percent by DayJet. Notice that the scheduled airline component is calculated to go UP, not down. That's because DayJet expects that many customers will use the service in only one direction, mixing it with scheduled flights that may be cheaper. So airlines, rather than being threatened by DayJet, ought to help promote the service.

All this talk about optimizing travel networks made me think of an even bigger opportunity to get cars off the roads, which would be to use this same software to optimize a network of carpools. Once again, this scheduling would be done per-seat, and I think it offers some intriguing possibilities. Where DayJet grew from Ed Iacobucci asking himself what would happen if he turned his jet charter business from one that used three $24 million jets into one that used 72 $1 million jets, the same scale effect can work in the carpool business. What would be the impact on commute costs in a large metropolitan area of throwing 10,000 hybrid vans of various sizes onto the streets?

While this looks like a taxi service, it isn't. The per-seat price quotes and network optimizations change that, and in doing so, implement the first real technology improvements in taxi technology since the radio dispatcher. GPS positioning, computerized routing, and real-time traffic information could reduce the need for further highway construction, saving billions. Notice I am not suggesting a routing system for privately-owned cars, since liability issues and lack of vehicle and driver standardization would probably end up making that approach more expensive, rather than less. The issue is whether the payoff would be enough and the only way to really answer that is for someone to give it a try.

Any takers? It would cost less than a WebVan to find out.

Now for a correction. I mentioned in last week's column that the Eclipse 500 had a Microsoft-based operating system, which drew howls from readers imagining the look out their Eclipse windows at the fast-approaching ground caused by a Blue Screen of Death. When Vern Raburn first told me about Eclipse a while back, he said the airplane would be using a variant of Windows NT. No more. Now all the company will say is that the system is Coldfire-based, referring to the RISC processor, but Microsoft and NT are definitely no longer at the heart of the system, which I personally greet with relief.

And I need to bring into perspective a few things that are happening in the news. Bill Gates this week spilled the beans about the introduction date for xBox2 -- a slip that was anything but a slip. If you go to the news stories about this, you'll note the context in which he was speaking, which was talking about Microsoft's potential involvement in the so-called "year of HD."

Where have we heard that term before? Why from Steve Jobs of Apple! Why would Bill Gates use Apple's expression? It's because Microsoft has an inkling of what's shortly to come from Apple and wants to at least appear to have a horse in the race, which it doesn't.

Apple last week shipped Mac OS 10.4, which they have incessantly told us we should call "Tiger," but I prefer "10.4," thanks. The Year of HD is dependent on 10.4 and its H.264 video codec that I believe will be at the heart of an Apple HD video download service to be announced shortly. And in 10.4, we can see the first parts of that system coming together, notably Apple's new HD Video Showcase, which routes you right through the iTunes Music Store. Increase the video selection, add prices, and they are done.

And 10.4 gives us a peek at another evolution of iTunes, which is the inevitable expansion of the system to carry additional audio file formats. Looking at the unused iTunes icons that shipped with your new version of 10.4, you'll notice icons for currently-not-supported ogg vorbis and Windows Media Audio (wma), as well as several others including a variety of video formats, too.

With this new information we can make a pretty good guess about the evolution of both iTunes and iPod. When Apple feels that the success of iTunes is absolutely assured, which will be shortly, they'll address the user complaint that iPod only supports AAC and MP3 audio by adding these additional formats, leading to increased iPod sales. And at the same time, the video icons strongly suggest that Apple will also have a video iPod this year.

Apple's own downward price pressure on portable media players gives us another element of the probable iPod strategy that hearkens back to my question of a few weeks ago whether iPod is the razor or the blade. Ultimately, what Apple wants to do is make its money through iTunes, where the profit margins are better in the long term and the system is easily scalable. It was necessary to create the iPod platform to make this happen. But downward price pressures will eventually hurt iPod profit margins and affect Apple's stock price, so the trick is to know when to switch the business from being a mix of hardware and software to one that is software-only. That switch, which I believe to be inevitable, will happen shortly after Apple begins to license iPod clones.

But Steve Jobs HATES clones, doesn't he? He killed the Mac clones back in the late 90s.

What Steve hates is hardware competition, but iPod clones will only happen at a point when Apple has decided to get out of the business of making its own iPods. Think about it. If Apple licensed iPod technology, the company would receive from its OEMs a per-CPU license fee of anywhere from $5 to $25 depending on how smooth Steve is as a salesman and how desperate the would-be OEMs are for that license. As Apple's profit drops on each iPod it makes, eventually the per-CPU figure will approach what Apple might receive from licensees. At that moment it makes more sense for Apple to license clones than it does to make more iPods. Licensing clones AT THE RIGHT TIME would lead to huge clone sales, effectively killing any significant iTunes competitor. And in the long run, iTunes is where the money is.

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