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You know, Eric, on the show time and time again, founders talk about the importance of hiring great employees.
Eric Hornung 0:07
And they always say it’s so hard and so important early on to hire the right person.
Jay Clouse 0:13
It makes a lot of sense that it’s difficult because most founders don’t have experience doing high level searches or hiring top level talent.
Eric Hornung 0:20
And they’re also limited to their local talent pool a lot of the times.
Jay Clouse 0:24
That’s why a lot of founders choose to work with SPMB, the one of the fastest growing executive search firms in the country. For over 40 years, SPMB has specialized in recruiting upper management and board members to early stage VC funded startups and larger growth stage companies do.
Eric Hornung 0:38
They bring the knowledge of a large global firm and combine it with the personalized service and attention
Jay Clouse 0:45
of a boutique, they have a dedicated team focusing on the Mountain West and Midwest emerging tech markets. So no matter where you are in the country, if you’re trying to hire top level talent, SPMB can help you out.
Eric Hornung 0:56
If that sounds like you, you can go to upside.fm/SPMB to learn how they are closing hundreds of C level searches annually.
Andy Hakes 1:11
On the other side of the equation, you absolutely do have many airports where the people that are coming out and touching the airplanes are we kind of affectionately call them two men and a truck type enterprises.
Jay Clouse 1:25
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to Upside.
Eric Hornung 1:53
Hello, hello. Hello, and welcome to the Upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my co host, Mr. home maintenance himself, Jay Clouse. Jay we are sitting here in your beautiful home.
Jay Clouse 2:13
The maintenance never ends, though. You look around this room. Everything’s in working order. It’s working great. But a lot of elbow grease went into that. I learned electrical work. Every outlet, every light switch in this house has been replaced. And there’s a lot of outlets and light switches.
Eric Hornung 2:29
I am so impressed with the amount of work that you did. I mean, the master bedroom, you’re laying floor, you’re building a wall, you’re hanging a 500 inch TV? Like, yeah, there is,
Jay Clouse 2:44
490 inches actually.
Eric Hornung 2:47
There’s there’s so much that happened here. There’s so much that you did. And you didn’t really contract much of it out.
Jay Clouse 2:54
No, we had, we had someone come to do overhead lighting. We did have somebody lay the flooring. You know, I have ambivalent feelings on contractors because to me, the pricing seems very reasonable. Somebody came in $75 an hour and did an incredible job and quick time. I talked to my dad or other people have hired contractors in the past. And I think it’s highway robbery. They say $75 an hour what is going on, which speaks to supply and demand in the trades for one. But still sitting here to have the level of work and quality done for $75 an hour. I feel like it’s a magical time.
Eric Hornung 3:33
One thing I like about how you guys moved in, you kind of spent two months living at the old place while you’re doing work here. You weren’t building the airplane, while you know you’re taking off right in the air.
Jay Clouse 3:44
That’s true, because we negotiated an extension on our lease that ultimately proved to be unnecessary. And so we had two months on the lease that we didn’t necessarily need. But that did give us lots of time and space to work on a house safely without worrying about friend of the podcast, Baloo our little kitty.
Eric Hornung 4:01
Jay Clouse 4:02
With the painting and things we were doing in here. But you’re right it’s it’s good to do the maintenance while the plane is on the ground. Something that today’s guest knows a lot about. His name is Andy Hakes. He’s the co founder and CEO of AireXpert. AireXpert offers maintenance control, quality assurance, bass line and vendor maintenance, enabling users to experience reduced repair times on airliners, decreased delays and lower time costs while mitigating risk of FAA compliance.
Eric Hornung 4:33
FAA compliance men. Is there a more interesting term out there.
Jay Clouse 4:38
Probably. Andy has been an aircraft maintenance guy and aviation geek since 1989. Eric, a founding member of the AireXpert crew, he’s worked in tech ops in on the heavy iron for several decades.
Eric Hornung 4:52
This is an industry Jay that I know nothing about. I know I am. It used to be a frequent flyer I understand how to fly. But the back end operations of an airport are so hidden from you, you don’t actually really see him.
Jay Clouse 5:06
What was your preferred airline? And what was your status.
Eric Hornung 5:09
So when I lived in Chicago, it was Southwest. And I had whatever the top status was. And when I moved from Chicago, Southwest was not as prevalent as easy to fly between the cities that I needed to go to. So I changed and now I’m a Delta guy, and I got up to platinum, I believe.
Jay Clouse 5:28
Delta is the best. Delta is by far my favorite.
Eric Hornung 5:31
Oh, I love it. I rave about Delta.
Jay Clouse 5:34
I don’t know anything about the airline industry, either. However, I like when we can talk to a founder who’s in an industry we know nothing about, but still interacts or touches, products and experiences that we have pretty frequently. We’ve flown, we’ve all experienced delays. What’s going on out there? Should I be afraid of these delays? When I’m de icing the wings? How serious of an issue is that? What does that mean? And I have no idea what the lines of communication look like. And it sounds like AireXpert is helping to improve those lines of communication making lives easier for that flight crew.
Eric Hornung 6:10
Communication is the key to making life easier. But you know, what’s a bigger key to making life easier? Jay, our friends at Ethos Wealth Management who helped you live the one life you have the best way you can. If you want to learn more about Ethos, you know, to upside.fm/ethos
Jay Clouse 6:25
AireXpert was founded in 2018. in Buffalo, New York, we were connected to Andy from our new friend of the podcast and super connector Jack Greco, the Buffalo Bridge,
Eric Hornung 6:35
The Buffalo Bridge himself,
Jay Clouse 6:37
The Buffalo Bbridge himself. So we’re excited to talk to Andy and spend more time spread our wings in Buffalo, if you would.
Eric Hornung 6:43
Oh, I’m ready to take off in Buffalo.
Jay Clouse 6:45
Then we’ll get to that interview with Andy right after this. Eric, we got to make some big changes to how we do operations here at Upside.
Eric Hornung 6:54
This feels like an intervention. Jay,
Jay Clouse 6:56
it’s a bit of an intervention, I have to give you some tough love. We’ve had some calendar problems over the last couple of weeks.
Eric Hornung 7:01
I’ve had some calendar problems, you don’t have to throw the third person on this.
Jay Clouse 7:04
I do like to take the blame for you. But this one is on you. And Eric, I think we have found a solution to our calendar and scheduling problems.
Eric Hornung 7:12
But there are 101 scheduling tools out there Jay that can help you avoid the awkward dance of finding a time to meet. But this tool is by far and away the best one I’ve seen and I have looked at a lot of scheduling tools. And I am talking about SavvyCal.
SavvyCal makes it a collaborative effort allowing you to personalize links and allow recipients to overlay their own calendar on top of yours.
Jay Clouse 7:34
It’s going to make booking guests for upside and even just one on one conversations a complete breeze. You got to see what this looks like you got to see how it works. Because you’re going to ask why wasn’t it always this easy.
Eric Hornung 7:45
You can sign up for a free account at SavvyCal.com/upside. That’s SavvyCal.com/upside. And when you are ready to test out a paid plan, use the code Upside to get your first month free.
Andy Hakes 8:09
I got interested in I got interested in aircraft maintenance way back in the seventh or eighth grade, and thought it might be a great career choice. I’m one of the lucky guys that found his calling at a very young age was able to go to a school, a high school in Buffalo that actually had an aviation course. So over the course of five years, there was a you went back after you graduated, I was able to come out of a program there I guess I guess in reflection, it was actually six years. But when I came out of the program, I was able to get a license or a certification from the FAA. That allowed me to start the process of of working on airplanes. That path I like couldn’t have possibly guessed what it was going to look like at that point. It’s been just amazing. For me, I came out of school, I spent the first 19 years of my career working for United Parcel Service, taking care of their airplanes, left there for a little while, was out of aircraft maintenance or sort of out of aircraft maintenance for just a couple of years, came back and went to a company worked for a company that that supported airlines airlines business aviation aircraft, small little single engine, prop airplanes, so really got a flavor for that or a taste for that. And then around 2015 we made a move, we started a company ourselves. And it’s been just an amazing ride.
Eric Hornung 9:36
A lot of people I feel like when they see an airplane, they’re like, I want to be the pilot or you have people who are really into car mechanics. You don’t hear a lot of people who are like 6th, 7th grade. I’m in the airplane maintenance. Where did where did that spark come from?
Andy Hakes 9:51
Yeah, you’re right. Everyone looks at aviation and they immediately think of pilots and it makes a lot of sense because they’re the most visible. People don’t really Have a window into who takes care of the airplanes for a couple of reasons. You know, if you’re not fortunate enough to be on the inside of the perimeter fence at an airport, you typically don’t see those people. And very often those people that take care of the airplanes, they’re not working during the day, the airplanes, you know, at least in in for passenger airlines. A lot of those, you know, aircraft are flying throughout the day, the only time that you see someone come come on board to take care of a problem is when there’s something that’s going to prevent an airplane from actually departing. So a lot of those people are working on the backside of the clock, there’s actually a huge industry problem right now, because of a talent pipeline that isn’t being filled. Because of that, so I was just fortunate enough to land in it. And yeah, like I say that it’s, it’s been just amazing.
Jay Clouse 10:49
How high stakes does it feel doing airplane maintenance, I just replaced or I just fixed my like, push lawnmower. And the whole time I was like, gosh, I hope I’m not screwing this up. And then I took it out. And I tried to start it and didn’t work. But I can test that pretty easily. pretty low stakes. So how does that feel when you’re working on a plane that might be carrying dozens, hundreds of passengers,
Andy Hakes 11:10
it’s something that you’re always very cognizant of, you know, when you first start out, and I guess, you know, I’m reaching back in my memory, you know, 30 plus years now. It’s very, it can be very intimidating. And I remember the feeling of the intimidation and and feeling, always recognizing what that risk was, and how important it was to, to stay on top of things. And multiple things at once. You know, 30 plus years later, I can say that it’s become like anything else. It’s a you know, it’s a muscle that you flex over amount of over an amount of time and then you get muscle memory with it, you become comfortable with that. Now, there’s there always is the recognition that that you know that if you become too comfortable with it, you become complacent. But you become No, I can say that in in the high pressure situations where I and that’s actually where I really enjoy working in those high pressure situations is just something that you do in the type of environment that I was used to working in. Many times I’d be working on an engine working on the aircraft, the pilots or ground handlers would call up and start talking, Hey, what are you doing things that were unrelated? And you really have to focus here for you know, I’m really, you know, now now’s not the time for idle chatter. I’m super focused on on what I’m doing. So it can be a little bit a little bit intimidating at times. But overall, it’s just something that you that you come to grips with, and always have in the back of your mind.
Eric Hornung 12:42
When you’re flying on an airplane today, having such an intimate knowledge of airplanes, they always make these sounds that I have no idea what’s going on. Do you ever, like sit there and just diagnose what’s happening on a plane in the back of your head? And is it ever bad?
Andy Hakes 12:56
Yeah, well, we’re always thinking about it. I know, I have never heard an unusual sound that and I know exactly some of the sounds that you’re that you’re referring to. And it makes sense that you’d be questioning, you know, what the heck is that? But yes, I think that it’s safe to say that anyone who is kind of on the inside is always looking at things through a different lens than the people who are just getting on from a passenger perspective.
Eric Hornung 13:20
So take us to the idea of starting this business. You said you were in the industry popped out for a bit you came back in and then you started a business, how’d that come about?
Andy Hakes 13:30
If I look at the genesis of this whole thing, it really, it probably started about 10 years into my career. So I was working for ups like that, you know, taking care of their airplanes, was very fortunate as a as a very young guy to be able to start working on those types of airplanes at a young age. But while I was working for UPS as a part time and then a full time employee for them, I was also doing some independent contractor work for other airlines at at that point, there were there were some smaller cargo airlines that flew into Buffalo, mostly flying car parts. And we did a little work on those airplanes. And what became apparent over time, was that regardless of the airlines, regardless of the type of aircraft that they’re flying, everybody is facing the exact same challenges. So from UPS being a large cargo airline to a small cargo airline. Boy, he saw the same problems day in day out and end up the problem that I was seeing. And the problem that I was experiencing personally at that point was, you know, I didn’t know all that much about the airplanes that were coming in. I had to reach out to other people for there to leverage their expertise and tap into their knowledge that was that was something that was really difficult to do. So what started out as an idea, just a half baked idea of being able to communicate with someone else back in a remote facility via video that that just turned out to be the the just an idea that kind of sparked the whole thing and then it over time it took on a life of its own.
Jay Clouse 15:02
Can you zoom in on that a little bit, understand even better what you’re saying. So planes are coming in, you’re saying you don’t know much about them, you mean the inner workings of them, where they’re coming from, I would assume there’s something that gets translated to you about where they’re coming from.
Andy Hakes 15:16
So let me drill down into that a little bit into what the qualifications are for being, you know, someone who can actually go out and fix airplanes, as an aircraft mechanic, you get, you know, you get certificated, by the FAA, or whatever regulatory agency, body of the geography you’re in. And really all of that that base level of sort of certification is, it’s essentially a license to learn, it doesn’t mean that you have very specific knowledge on say, a 737, or an Airbus A320. So you can go out and work on these airplanes. And when you repair these airplanes, you absolutely have to do it in within the guidelines and, and, and parameters of a regulatory framework. But when it comes to troubleshooting, and figuring out actually what’s going on with the airplane, that sort of knowledge comes from many different sources, and it can and, and it can come from many different sources. The problem with that, of course, is that, you know, while you’re troubleshooting, and while you’re trying to learn something, and dig into a problem, the airplane sitting on the ground. And obviously, if an airplane is sitting on the ground, it’s not making money, there’s real impetus to get it back in the year. So it’s that sort of challenge that really led me to believe that, okay, there’s, there’s something here.
Eric Hornung 16:36
When you’re looking at those airplanes sitting on the ground, can you give me a sense of like how long they’re sitting there.
Andy Hakes 16:42
So at a minimum, so most airlines during the day, and I’ll use Southwest Airlines as an example, their business model dictates that they turn those aircraft very quickly. So you know, you’ll see the airplane come in them offload passengers very quickly, immediately, start boarding passengers so that they can maintain a very tight turnaround, that can very often be 35, 45 minutes, you know, the larger aircraft you get, the more ground time it’s going to have for obvious reasons. But it can be a very small window of time to take care of issues. And and many flights come in, and they depart. And there’s there’s no maintenance necessary. There’s nothing that nothing that needs to be done. But it can be a very tight window for aircraft that come in and do need something smaller, in some cases, something large done.
Jay Clouse 17:34
Talk to me a little bit more about the airline business model, generally. So we understand the constraints these guys are working on, because they’ve kind of anecdotally heard, you know, the planes themselves are super expensive. So to even just pay back the investment on the plane, you have to do some number of trips, just give us a little bit more of a sense so that we can kind of go into the next part of the conversation with the baseline that we need.
Andy Hakes 17:55
I guess in regards to the business model, the one thing that I always highlight, what and in the context of maintenance and operations is that, you know, you have an airline that flies into for the sake of conversation, you know, 100 different cities. And if they’re flying into 100 different cities, then very often that means I’ll say most often, that means that in 80% to 90% of those locations, they’re not relying on their own people, their own teams to maintain those airplanes, the level of maintenance activity is low enough in those areas that they can’t justify that cost. airlines are known, most airlines are known as having the margins are very thin. So they have to show real financial constraint. So when 80 to 90% of those locations, they’re relying on third parties to maintain the aircraft, that becomes a significant opportunity for them from a cost savings perspective. But that’s also a significant risk and liability from an operation from the standpoint of operational performance. And that’s, that’s really one of the areas that we that we focus on particularly so coming out of COVID. That problem has even been exacerbated a little bit more.
Eric Hornung 19:12
Who are these third parties for these large national players have a small airport by airport players.
Andy Hakes 19:18
There are several large players and when I say large, I’ll kind of put an asterisk next to that the largest third party maintenance companies out there only have a presence in 25, 30, 35 airports. So you know in from a global and a global context. That’s actually very small. On the other side of the equation, you absolutely do have many airports where the people that are coming out and touching the airplanes are would kind of affectionately call them two men and a truck type enterprises. And I actually ran one of those for a little while up in Buffalo. So that really kind of runs it’s quite a range of companies out there. There’s really no one single demographic to describe those companies.
Eric Hornung 20:03
So if I’m Southwest, we use them before, how many of these third parties Am I dealing with in a given year?
Andy Hakes 20:11
So Southwest Airlines is probably one of the airlines that uses outsource maintenance the most. And while I can’t recall the number of markets that they operate into, I’d say with confidence that they’re using outsource maintenance in more than 90% of the locations that they fly into.
Eric Hornung 20:30
And are they using one outsource maintenance person at each location, one outsource company? Or is it are using multiple at each location?
Andy Hakes 20:38
Good question. Most airports have a couple of options for maintenance providers. We were a maintenance provider up in Buffalo. And we also had one other company that we that we that we competed with, sometimes airlines would flop between the maintenance providers that they use, there’s very little while again, there’s you know that there’s always the requirement that that maintenance providers adhere to that strict regulatory guideline. But in terms of the structure and uniformity in that space, there was really very, very little it’s a it’s a, it’s a highly under underdeveloped market.
Jay Clouse 21:14
So airplane comes into the port, who determines that there’s a maintenance need, and how severe does it have to be to actually bring someone out to work on it.
Andy Hakes 21:24
So the recognition of the defect, and that’s really where our where our product starts and rule kicks in. But the recognition of the defect usually comes from two sources, I would say that the bulk of the time, it comes from the flight crew, so the flight crews, either in flight or on taxi and are shut down, they notice something that’s that’s out of place or something they have a question about something that needs to be addressed. What they will typically do is they’ll reach out to back to the airline back to the airline’s headquarters or their technical Operations Center and say, Hey, is this something that we need to that we need to address? Or is this a normal situation? And that’s actually a very, very valid question. The airplanes have such a level of complexity, that sometimes what the flight crew perceives as something that’s questionable, may vary. And you may very well be on normal condition, the other source of defect identification, and this is becoming increasingly so as the airplanes becoming more advanced as the aircraft itself. So the aircraft is transmitting a lot of data, a tremendous amount of data, and generating its own data set during the flight. And in a best case scenario, the airplane can report that it is that that that something is wrong, and and the reporting process for that is most often going to be much quicker, much more efficient in getting that information to the people who can actually do something about it and decide what type of rectification is required.
Jay Clouse 22:53
So let’s talk a little bit more about timeline. And after a defect is identified, because you mentioned that the downtime is you want to keep it as tight of a window as possible. So let’s say the the plane lands, either the flight crew or the plane itself has said, hey, there’s something in check out here. What wheels go in motion next ticket this back into a place where it’s ready to fly again.
Andy Hakes 23:13
So this, this, this process is kind of ugly here, as a matter of fact, can be quick, be quite ugly. And before I get into it, I’ll mention that, you know, from a passenger perspective, you’re sitting on the airplane, you’re sitting in the gate area, you’re waiting for your flight to depart. And, you know, when that announcement is made, that there’s some sort of mechanical defect with the airplane, you know, as a passenger, I think it’s natural to say that, you know, that, that your next question is going to be okay, is this going to be something that’s going to take 15 minutes? Or is this going to be a three hour ordeal that I need to start making contingency plans for? And most often, the airline can’t give you an answer. And I know that’s frustrating as hell, but they can’t give you an answer because they don’t know they don’t have, they don’t have enough knowledge, you know, within the operation to be able to accurately predict that. So when the when that process does actually kick off, it’s a process of again, the you know, the flight crew or the aircraft actually reporting the defect, little bit of discussion or decision as to whether that is something that actually does need to be addressed. The people that are back within the airline headquarters or their technical Operations Center will reach out to the vendors at a specific location, they’ll either reach out to their own maintenance base, if it happens to be in an airport where they have a maintenance base, or they’ll reach out to the the maintenance vendors at that location. That process is something that is really just done via phone calls, emails, maybe an occasional text message, but there’s no real structure to that. From there requires some getting someone out to the airplane and and that is a big question to mark itself, in how long it’s actually going to take for someone to show up. aeroplane and start taking care of that issue. There’s fault isolation in there, that’s figuring out what’s actually going on. There’s communication that has to occur between the flight crew and the maintenance people that that show up on site. There’s technical documentation that absolutely has to be accessible. Within that regulatory framework. There’s a lot of decision points there, there’s a lot more communication and mandated communication that has to occur between the people that are actually out of the airplane and the people that are back at that technical operation center. There’s communication that exists between the people that are backing that technical operation center, and the people who actually communicate with the flight crews to coordinate what the you know, what if there might be flight limitations or restrictions based upon that maintenance defect. So there’s an incredibly complex process and and, and a lot of pieces to the puzzle that have to be coordinated between people that typically have siloed means of communication. So that becomes a big area that we focus on.
Jay Clouse 26:08
How readily available are these maintenance groups are they literally just on premises all the time, and what does supply look like?
Andy Hakes 26:16
It really looks different from airport to airport to airport. The expectations, in most cases are not service level agreements, unfortunately, but the expectations are really all over the place. So in many cases, they you know, during will say normal flight hours or normal departure hours, there are people actually staffed on site and ready to respond. In many other cases. And this, this probably applies more at at much smaller airports that have lower flight frequency and lower amounts of flight activity, there will be people that they’re actually calling in from, from home, I was told of a, I always like telling the story, there was a down in, I believe it was Nassau, Bahamas, there was a maintenance vendor who his full time job was not maintaining airplanes, his full time job was taking people out on like sailing charters or something like that. And if he would get a call, to take care of an airplane, he would actually have to bring his sailboat back in docket, he would get on his bike. And what his bike had a little tool bag on it. And he would head out to the airport and take care of the problem on the airplane. So you can just imagine how much time that took. And I guess just as importantly, what a sight that look like from a passenger perspective as the mechanic showed up on his bike.
Eric Hornung 27:39
So I want to take a step back here. Can you tell us what AireXpert is today?
Andy Hakes 27:46
Sure. So AireXpert is is a technology it’s a it’s a it’s a SAS technology that we deliver to airlines, airlines, our primary customer at the moment, the overarching objective is that we help them reduce their delays and costs in the process. And, and and compliance risk also. But what it is, is it is a means of facilitating the entire repair process, from the point that a defect is recognized on an airplane, to the point in time in which that defect is in some way, shape, or form, successfully rectified. And we have a big emphasis, rather significant emphasis on the communication portion of that because as I mentioned, everyone has these, everyone has these silos. And there are a lot of natural barriers within the industry to facilitate and communication.
Eric Hornung 28:42
When you decided to build this, you mentioned this whole complex system, the fault isolation, the flight crew, the technical documentation, the mandated communication between all these different parties. Where did you Where did you start? Or did you do the whole thing at once.
Andy Hakes 28:58
It’s become an evolution. So we decided that we would pick off, I believe it was a total of five was four or five different functions in which we would start to, you know, our MVP would focus on these four or five different areas that we deemed to be absolutely crucial to a solving this problem and be having something that was robust enough that we could take to airlines and ultimately they would they would they would adopt it, they would buy it, what we learned is that we were too early and in in several different respects not only in not only in terms of our product, but so we had to go back several times and build in you know, x feature to meet the needs of a specific a specific airline or, you know, a certain set of certain functionality sets to make it truly something that airlines could say yes, this will meet our needs across the board. So it’s been a absolutely been an evolution.
Eric Hornung 30:01
When you’re looking when you say the word airlines is your primary customer. I mean, there’s the Deltas, Americans of the world. And then there’s also the elevator in Cincinnati, the ultimate air shuttles that only do maybe two, three routes. How do you think about the breakdown of airlines by type and which ones are you focused on?
Andy Hakes 30:22
So we focus right now, primarily, and this is something that’s actually changing that we’re that we’re actually shifting our focus right now. But to date, what we focus primarily on was ultra low fare carriers, as well as regional airlines. And there was a little bit of a, that was deliberate, we knew that the sales cycle for your major airlines, your Southwest Airlines, your American Airlines, was going to be really lengthy, we knew that we were going to have to have a lot of champions on the inside. And we were going to have to go through processes that we probably weren’t equipped for as a very young company. So we decided that the best place for us to enter would be with regional airlines, the bar is a little bit lower there in terms of what it takes to open the door. And I guess most importantly, we had some great relationships there some great existing relationships there. When I mentioned that we had a maintenance company in Buffalo, the purpose that we started that maintenance company was because we knew that we were going to have to know their operation inside and out, and the real intricacies of their operations if we were going to be successful in selling them to them. And we also know that we were going to have to have great relationships. As I mentioned earlier, you know, if you’re not within the perimeter fence of an airport, it really makes it difficult to knock on an airline’s door and say, hey, I’ve got something great to sell. Yeah. So we started that maintenance operation. In 2015. We ran it for just about five years. And it absolutely accomplished its goal. And we were able to walk out of there with great relationships and and the trust of airlines, both large and small. So today, our focus has been on regional airlines and the ultra low cost carriers simply because of their operating dynamics. But more now, we’re focusing more on major airlines, International Airlines, we earlier this year, we were fortunate enough to be part of a accelerator, a UK based accelerator that was run by the aerospace technology Institute, and Boeing. And that’s opened a lot of doors for us. So that’s really why we’re shifting our focus here.
Jay Clouse 32:42
If I’m reading between the lines a little bit, were you building the first version of this product, while you were still doing the maintenance business
Andy Hakes 32:49
100% 100%. This this is this is really become the tool that as a as a truly engaged mechanic or Aircraft Maintenance Technician that absolutely wanted to deliver, you know, amazing service to the airlines that he took care of. This has become the tool that I wanted to use, and that I knew was necessary to have based on all of my conversations and interactions with people at the airlines that we now take care of.
Jay Clouse 33:22
At what point in that products development? Did you have a conversation where you thought, Okay, this is gonna work? Like when did it click for a customer to say like, yep, we’ll take a bet on you. We’ll put this in place.
Andy Hakes 33:35
Uhm, boy, I wish I wish I remember, I guess there have been so many, so many affirmations and validations. Over time, there’s two aspects to the validation here. There’s the operational validation and talking on the phone with someone and working through a very difficult problem that takes an hour, two hours, three hours, and knowing with 100% confidence that if we had this tool in place and this resource in place, that we could have solved that within five or 10 minutes. There’s the validation you get from from experiencing these problems on a daily basis. And and seeing it play out time and time again. But there’s also the validation that you ultimately need from the from the management teams that buy into this and say, yes, this makes total sense. It’s exactly what we need. That level of validation is something that we struggled with for quite some time. It’s certainly no surprise to find that people on the frontlines and people who are out of the airplanes and touching the airplanes on a regular basis, very often have a different perspective from people who are sitting back in an airline technical operation center, or management folks that are at a higher level. There’s a lot of blind spots out there. So we would constantly get the operational validation, getting the business validation was much more difficult. That has changed significantly. And in large part because of COVID. I think that, you know, just about every conversation that we have today with an airline, and especially with airline management teams, you know, uncovers the fact that they are absolutely trying to become much better at what they do try to become much more efficient, that they’ve sort of taken the blinders off, and are seeing a lot more than they ever saw before. And that’s something that absolutely plays into our favor.
Eric Hornung 35:44
How do people pay for this? How are airlines paying for this.
Andy Hakes 35:47
So to date, our pricing model has been monthly recurring revenue for us, and that’s based on a subscription model from the airlines. And they’re paying on the basis of how many aircraft are in their fleet. We did that for a couple of very specific reasons. One being that, you know, no one wants to pay for seat licenses that don’t get used or only only get used on occasion. You know, when I talk about ultra low cost carriers, a significant portion of their business model is having seasonal routes, how do you manage seat licenses when you’re flying into, you know, a vacation market for three months out of the year. So that really posed a challenge for having a business model, a revenue model that was based on seat licenses, it seems to be a quite a common scenario that that revenue models are simply based on the size of an aircraft fleet. Today, that works for us pretty well. At the same time, we’re also now starting to evaluate alternative pricing models for airlines that have different needs and prefer to do things in a different way.
Eric Hornung 36:53
And then about from the integration side, you mentioned, this is the tool that you would want when you were working in maintenance. But it also does so much. There’s so many functions here, does it take a long time to get one integrated into the system into people trained up on using it?
Andy Hakes 37:11
So now. So the way I you know, when we sit down with with airlines, I think the one of the one of the biggest perceptions that we have to overcome is that implementing this is going to be difficult, and they have a great reason for thinking that traditionally, many if not most, it implementations in the airline industry have been just flaming failures to the, you know, way over schedule, way over budget, the sum in which, you know, they simply decided after x many years to cut the cord and take the loss. So that’s one of the biggest things that we have to overcome in terms of adopting the technology itself. It’s actually very easy. Fortunately, we’ve got great UI and UX people on staff that can make it very easy. And and when we sit down with airlines and say, All right, here’s what it’s actually going to look like, let’s go ahead and start playing with it. All of a sudden, it becomes Wow, this is this is this is that we haven’t seen something like this before. This is this is really easy. So that really lowers lowers the bar and and removes that that perception. In terms of the integration piece. You know, one of the first airlines that we were working with, said, we love what you’re doing. But there is a little bit of overlap between what you’re doing and what we what we currently use. And the last thing we want is to have to ask our people to do dual entry or in this particular airlines case, triple entry. So we said all right, we can do that integration. So you know we have we absolutely have the capabilities to make that to make that integration very easy. What I would say is that at its core, and the best way to get started with what we do, and airlines typically nod their heads and say, Yeah, that makes a lot of sense when I bring this up is, you know, this entire process that we’re talking about right now. And the fact that we have this whole emphasis on communication means that airlines are trying to manage all of these complex events, all of these complex transactions, using phone calls and emails. That’s really what it boils down to phone calls and emails and and even the occasional fax. So when we talk about integration, we say, all right, the best way to get started with error expert is to just look at it as a replacement for phone calls and emails. You don’t have anything that’s integrated with your phone system, you don’t have anything that’s integrated with your email system. So this is a great way to start without integration over the course of three, four or five months. Now the integration piece is going to become much easier to understand and you’re going to be able to figure out what the what the first steps for that actually are versus trying to do an integration right out of the box.
Jay Clouse 39:56
We started this interview talking about you know, these third party main systems and a lot of the communication is between the airline team and the third party maintenance teams in these locations it sounds like so if I’m an airline, and I want to put AireXpert in place, do I also need all these third parties to be on AireXpert for me to use it effectively?
Andy Hakes 40:15
Yes, you do. Yeah. And so I think it’s really important to note that, you know, in the third party space, there is no common platform, no common existing platform that exists between, you know, vendor X, Y, and Z, at locations A, B, and C, and the airlines. So, you know, if you if it for an airline that’s flying into 100, different locations, you know, what they’ve effectively got is 100, plus vendors, as well as their own maintenance staff, doing things all in their own way. So yes, they do need all of those vendors using the AireXpert platform. But we’ve made that very easy. And we’ve made that very easy for the, for the vendors to adopt. They like it from the perspective of Hey, they’re able to deliver better support to their airline customers. And we’ve also realized it was probably about maybe a year or so ago, we realized that what we were what we really had was a multi sided platform, that this wasn’t a pure, the software sale to the airline, that we had to provide value to third party maintenance providers as well. So that’s what we started doing. And that’s being very well received.
Jay Clouse 41:31
Do they also have to become customers then? Or is this something that you make available to vendors, because your customers need it to be available to vendors?
Andy Hakes 41:39
Yeah, that we don’t, we don’t view those third party vendors as a revenue source. When we look at the real pain point, it’s the airplane that’s sitting on the ground and who’s, you know, bearing the brunt of the cost of the airplane sitting on the ground? And that’s the aircraft operator, third party maintenance vendors, they simply don’t feel the pain from that. So there’s no, there’s no, the vendor market is isn’t particularly high, high margin. So the opportunity to see that I’ve seen that as a revenue sources is absolutely minimal. And I should mention also that, you know, yes, a significant portion of our focus is on this third party vendor market. But in the 10, to 20% of cities that are that airlines fly to where they do have their own people, they absolutely feel the exact same pains, just that the pains are just nuanced a little bit.
Jay Clouse 42:33
The teams for the airlines, you know, you get sign off from management, they say, Yep, we want this, we’ll put it in place. There’s behavior changes that happen for the teams, are they eager to do this? Because they do see the efficiency right away? Or are they often kind of rooted in the old style?
Andy Hakes 42:50
So yeah, we, you know, we recognized early on, and in large part because because, hey, I’m one of those guys that, you know, that has that has turned wrenches for a long time that we needed to minimize, if not completely eliminate that behavioral change. So you know, so we certainly are always focused on that. But at the end of the day, at least initially, it was a question mark, all right, what is the, you know, what is the what is the what is the reaction going to be to this, people in this space, they are highly skilled, highly knowledgeable, they also have a lot of autonomy and shoving solutions down someone’s throat is simply not an option, they, you know, users absolutely will reject it. And management teams simply do not have the, they won’t be able to, they won’t be able to push it down anyone’s throat to people that want it. So it was a big question mark at first, but what we and initially Yes, when we when we went in, and we we actually go in and talk with these maintenance teams, we don’t, we don’t require, you know, the the airlines to have these conversations in many, in many cases, you do get a little an initial level of hesitancy. And a, why would I want to do it this way. I’ve been doing it the other way for years and years and years, that quickly fades. I think that it really helps when people understand that it was actually designed and built by their peers versus, you know, an IT consultancy that came in and said, Hey, we’re going to we’re going to tell you how to do your job better. That goes a long way toward solving that problem. I guess one of the one of the most telling examples, is you know, when you get people that are that have been around for a long time and want to say a long time in aviation, I mean, 30, 40 years, when you’re able to turn those people pretty quickly. That’s a real sign of success right there. And, you know, we always like telling the story of one guy who actually worked back in a technical operation center, that a guy who you know, is a pretty old guy, and I can say that because because I’m old myself, he was he showed a lot of hesitancy upfront. But on a subsequent trip back to their back to their maintenance facility, he actually said, Yeah, you’re not going to take this away from me, you’re not going to take AireXpert away from me. He thought it was awesome. So I think that that while we’re always mindful of competitors coming onto the scene, I think that we have a real strength in the fact that, that we know this space at such an intimate level. And and I think I think it shows and is reflected in the comments that we hear back from people who know it just as well as we do.
Eric Hornung 45:36
My last question is around funding this growing this going forward? According to crunchbase, you’ve raised about $700,000. I don’t know how real that is. You never know with crunchbase? Are these contracts? Like, are you guys profitable? Is this going to be kind of a steady growth thing? Are you going to go out do a big round? What’s the goal for to capture this opportunity? It sounds like you have a really put some time into the product over the last five plus years.
Andy Hakes 46:01
Yeah, yeah. Yeah. So crunchbase crunchbase is is certainly a little low there. You know, like you said, on surprisingly, so earlier this year, when we were part of the Boeing accelerator, Boeing put some money into us. Not a crazy amount, but significant enough, and certainly, much needed for a for a young company like ours, because of the energy that we’re that we’re seeing coming out of COVID. And, you know, because of what our pipeline looks like, right now, we’re absolutely looking at doing I’m doing a formal round. I don’t know, I’m not quite sure yet. You know, the timing of it, or the amount of it. But it’s simply something that makes sense for us at this point, everything, you know, what we’ve seen is, is conversations that have gone cool or cold over the last year, then people you know, saying flat out we really like what you do, it’s just not the right time, people circling back to us and saying yes, now absolutely is the right time. And that’s coming from, you know, that’s coming from us major airlines as well as as well as regional airlines and international airlines. So the you know, the the accelerator really opened up a lot of doors for us, it validated a lot of the things that we were doing. So yes, a formal round is in the is in the short term here.
Jay Clouse 47:22
Sounds like a lot of good validation. You’ve been working for years towards Andy, it’s been great to chat with you here on the show. If people want to learn more about AireXpert after the show, where should they go?
Andy Hakes 47:34
Yeah, thanks a lot. It’s been a it’s been a lot of fun. So they can look at our website, which is going to be AireXpert.net. They can also of course, reach out to me on LinkedIn, Andy.Hakes. And I’m in my email address is Andy.Hakes@AireXpert.net. I always love having conversations with people.
Jay Clouse 47:58
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All right, Eric, we just spoke with Andy Hakes, the founder and CEO of AireXpert, let’s land this interview. Where do you wanna start?
Eric Hornung 48:47
There’s a concept on Upside Jay that we talk about all the time, which is founders who start on second base. This is a quintessential example of someone who just deeply understands the part of the industry that he needs. He understands a whole industry, but he really understands deeply what vendor management and airplane repair look like, what what it feels like he he is he has been in that business. So he’s solving a problem that he has felt.
Jay Clouse 49:13
I love the story of somebody scratching their own itch. I love the story of somebody building software on the side of a services business that is going well for them. Andy has spent so much time in the airline industry, as you said he knows the problems intimately. But beyond that, Eric, one of the things that we love about starting on second base, is that you also come into it with not just the insight but the relationships that are so key to doing this. That is part of the reason why certainly I would take a serious look at err expert as an opportunity here. Just given Andy’s pedigree and experience in the industry.
Eric Hornung 49:47
I can’t believe how fragmented the vendor management space is.
Jay Clouse 49:51
I’ve never thought about this system of third party airline maintenance and mechanics that just I’m guessing is stationed in a lot of these airports, I mean, he talked about the example of the guy in Hawaii who was on a fishing boat who had to drive in and ride his bike to the airport. But I would assume that a lot of these major metros, you have these third parties literally on site all the time, so they can make these repair calls quickly.
Eric Hornung 50:16
I guess my shock comes from Why has no one gone and bought bought all of these little vendors who have exclusive contracts and rolled up into one national vendor managed platform that just was in every big city across the country that that to me, whenever you find fragmented industries like this, there’s usually a reason they’re fragmented. And I don’t know how sustainable that reason is, I don’t know the industry well enough, maybe it’s that local contracts have to go to local companies. And you can’t do this to a national company. And it looks bad, because there’s public money that goes in airports, I don’t know what it is. But the fact that it exists, is a huge opportunity for AireXpert.
Jay Clouse 50:53
Totally agree. I also love innovation in an industry that touches on a lot of trade skills and blue collar work, which we seem to see is slower to adopt technology and a little bit more resistant to it, which means that it’s probably one of those few frontiers that in 2021 has some real base level software innovation opportunity. You know, software has been eating the world for a long time credit going to whoever that was either Paul Graham or Marc Andreessen as Andreessen and some of those low hanging fruit opportunities are not there anymore. But when you get into an industry like this, where you can so clearly see the benefits of software here to streamline communication to make it much easier for everybody involved. The friction comes from behavioral change. And that’s much more easy to overcome, I think than regulation, or a leap in technology that you need to make to be able to facilitate things.
Eric Hornung 51:47
Here’s what I love about AireXpert. You ready for those key cells into an airline. It’s called Allegiant, they were focused on regionals. He sells into Allegiant and Allegiant is in 50 airports. All the vendors that work with Allegiant are now using this communication platform, which is a great way.
Jay Clouse 52:05
You’re saying Allegiant the airline? Yeah, they’re saying a legion and like was a legion.
Eric Hornung 52:10
Jay Clouse 52:10
Allegiant the airline? Yes. Okay, sells into Allegiant.
Eric Hornung 52:13
And they have the wedge of the communication platform, which is a great wedge. It’s easy. It’s low touch, it doesn’t take any integration, no one has to change anything, except for replacing phones and fax. Now, that vendor at that airport, let’s use a specific airport, where you want to go.
Jay Clouse 52:31
Let’s go to Dallas Fort Worth.
Eric Hornung 52:32
Dallas, Fort Worth, let’s say there’s one vendor Dallas, Fort Worth. And they’re using this platform for Allegiant. Well, now, they’re using this platform for Allegiant, they’re seeing how great it is. And they themselves are also working on Delta’s flights and Southwest flights and United flights and all the local regional airlines flights. And they’re saying, why don’t you guys use this platform, it would be a lot easier for me, if I everybody was on the same platform, rather than Oh, it’s an Allegiant flight. So I need to check AireXpert. It’s a Delta flight. So I need to do us a call. It’s a Southwest flight. So I need to use a fax. So now all of the vendors become advocates for you. And at a increasing rate, the more airlines you sign up.
Jay Clouse 53:14
I agree. That’s the best case scenario, and what would seem to be the l’m looking for the word impending, but like the natural conclusion, if it goes that way, and if it goes that well, but behavior change is hard to overcome, right? So right now, if you’re starting at near zero, and you work with a vendor, and they are working with one airline, and they use this, even if they like it, that friction of having to check those different systems is difficult to overcome, they’re going to not like that experience. It’s going to feel like duplicative effort, or maybe even data entry, which Andy addressed. You know, they are taking on the challenge of integrations so that even if you are using multiple systems that integrate together, I think it’s a really great stuff. I think that’s really smart. And I agree that network effects exists. If you get that flywheel turning,
Eric Hornung 54:00
Which is network effects, network effects are exponential by nature. So it doesn’t feel like the flywheels turning until it does. And I think that businesses that have b2b business models with the potential for network effects are incredibly sticky. Look at like a sales force, or I mean, what everything they’ve done. Those are the types of businesses that just become absolute killers if they can reach that.
Jay Clouse 54:24
There’s a positive market condition of timing here as well. You know, not only is AireXpert developed to a point where it can be used in market but it’s at that point of development, while also the airline industry is rebounding from pretty bad year,
Eric Hornung 54:44
But also got so much free money.
Jay Clouse 54:47
Oh, tell me more about that.
Eric Hornung 54:48
Well, through all of the cares act and all the legislation that’s come out all the fiscal stimulus, the airlines were given specific amounts of money. So while they had a rough year, no doubt, they cut flights they called Staff, they’re now in a place where I don’t know if you’ve tried to buy an airline ticket lately, a flight to New York is usually about 300 bucks from Cincinnati. It’s like 500, right now
Jay Clouse 55:10
really more expensive. Now,
Eric Hornung 55:11
they don’t have as many lock routes running because they cut everything back, they’re probably going to be very profitable. I have not looked at any of the recent airline numbers to tell you that for certain. But my guess is it’s going to be a boom cycle for airlines right now, as we have this kind of tourism snapback in the world. And they are struggling to keep up with the demand that everyone has.
Jay Clouse 55:35
Hmm, well, good time to remind you that this podcast is for entertainment purposes only. And this is not financial advice. That’s interesting. That is an angle I hadn’t thought about. But in any case, it seems like given what Andy was saying, there is more market demand for this product than before, I think there’s always going to be a market demand growing market demand for decreasing costs, which is inherently what this does save me more time. And there’s a lot of costs involved here, when you decrease the time of maintenance, both the cost of just communication and paying your people but the bigger costs of airplanes being on the ground, which just seems I can’t imagine running an airline. And looking at the statistics of just like how much ground time there is and feeling the pain of the money that is lost. While it’s on the ground. I wish we would have gotten more information into like how much airplanes cost, because I have heard anecdotally, airplanes cost billions of dollars, you kind of buy that you finance it as an airline, it takes you the entire life of the usable plane to pay it off. And then you just upgrade to the new model. super interesting to me, but very expensive to keep those planes grounded. And AireXpert is trying to eliminate that.
Eric Hornung 56:45
One of my shadows is related to the industry. I just talked about how I’m bullish on it. I think that there’s some really great stuff happening. The airline industry is notorious for being well, it’s consolidated. There’s some innovation happening in it with regionals, but it’s consolidated. And it’s likely I mean, it’s old, it’s probably bureaucratic. I have not dealt with an airline directly. But I would assume that the organization’s are pretty bureaucratic, very corporate, and probably hard to sell into. I don’t imagine it being very, very easy sales cycle.
Jay Clouse 57:22
Yeah, when we were at CES, the last time we were there, we heard from the CEO of Delta Airlines. Now imagine that’d be a hard guy to get ahold of and spend time with as a startup company. In truth. same would be true of these other airlines, even if you are in the industry. So Andy kind of alluded to this said they’re focusing on regional airlines and immediate term, because the sales cycles are long for the major players. But those regional airlines will likely give some really great data that you can present as a case study as to well, if we can do this with regional airlines, apply the same mathematics to your airline, Southwest, your airline, American, Spirit, Frontier. Let’s just keep naming airlines, United.
Eric Hornung 58:03
Ultimate air shuttle and Cincinnati. Jay, what you want to see in the next 6 to 18 months from AireXpert, don’t say revenue.
Jay Clouse 58:10
I won’t say revenue. But I want to, I want to see hard data across a statistically significant sample of numbers of airliners that this has impacted. I want to see growing stable of customers, which kind of speaks to revenue. Sure. But I also want to hear that they are in conversations with one of the majors or productive conversation and the majors.
Eric Hornung 58:38
I think that the vendors as advocates model is incredibly strong. So I’m not the biggest fan of NPS scores, but some level of case study or analysis around this vendor loves us so much that they’re pushing on airlines to bring this platform across. Because that is where I think the magic will happen is the vendors essentially becoming a distributed Salesforce for AireXpert.
Jay Clouse 59:10
embracing behavioral change. Well, dear listener, we’d love to know what you think about this episode. You can email us Hello@upside.fm or tweet at us @upsideFM if you think that this episode, really took off and flew, flew by had so much fun. Listen to this episode, tweet at us @upsideFM and let us know.
Eric Hornung 59:30
I think this was a first class episode.
Jay Clouse 59:31
First Class. That’s right. Damn, don’t have another pun. Thanks for listening. I’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear what you think about this episode. So tweet at us @upsideFM or email us Hello@upside.fm and let us know. You can learn more about us and browse our entire back catalogue of email@example.com and if you love our show, please leave a review on Apple podcast that goes a long way in helping us bring high quality guests to the show.
- Airplane Maintenance 10:49
- Idea Behind AireXpert 13:20
- Aviation Business Model 17:34
- Outsource Maintenance 20:03
- Airline Maintenance Process 22:53
- AireXpert 27:39
- Evolution of AireXpert 28:42
- Target Airlines 30:22
- Operational Validation 33:22
- Pricing Model 35:44
- AireXpert and 3rd Party Vendors 39:55
- AireXpert Funding 45:36