Case Study #11: Pet Airways – Taking Off in the Growing Pet Industry Vertical

Most people I know leave their pets in the care of others when they go somewhere for vacation. But, there are people who want to travel with their pets in the plane. This can be done, depending on the airline and their requirements for in-flight pet transportation. Owners can put their pets in the stale cargo hold of the plane while they anxiously wait to land to be reunited with their loved one.

For the percentage of pet owners who want to travel with their pets, but do not want to subject them to an uncomfortable flying experience, there is a brilliant solution. It is called Pet Airways.

According to the American Pets Product Association (APPA), $43.2 billion was spent on pets last year in the United States ($16.8 billion on food, $10.0 billion on supplies, $11.1 billion on vet care, $2.1 billion on live animal purchases and $3.2 billion on pet services). The APPA forecasts that $45.4 billion will be spent this year on pets in the United States.

There is a tendency to target markets based on their current size and growth projections. Depending on the industry vertical, chances are that a large market size with stable growth projections has a high level of competitive intensity and a consistent stream of customers. But, if you want to be an entrepreneur in the growing pet industry, it is best to focus on a niche category segment, but execute a differentiated offering within that category segment.

Pet Airways was founded by pet owner Alissa Binder and her husband, Dan Wiesel, after they took their aging Jack Russell, Jack, on a cross-country flight (Hosford, Miller and Ferran. “Pet Airways: Where the Fur Flies” ABC News 9 July 2009). "We were totally stressed out," Wiesel said. "We didn't know if she was on the flight, didn't know how she was doing." To avoid a stress shared by several pet owners like Binder and Wiesel, the couple launches Pet Airways with some simple and effective strategic foundations:

• Hub Strategy: Binder and Wiesel save billions of dollars by NOT investing in aircraft specifically designed for pet transportation. Instead, they lease a plane from Suburban Air Freight, Inc. The service will operate from five cities: New York, Baltimore, Chicago, Denver and Los Angeles.

• In-Flight Strategy: There are veterinary technicians to monitor the animals in flight. The use of veterinary technicians adds tremendous credibility to Pet Airways in-flight service. The pet is on their own in a cargo hold. If the pet falls sick in a confined pet carrier on a plane, do you think that the in-flight attendant has the veterinary background to prescribe a solution? Probably not. In addition, there aren’t overhead compartments in a Pet Airways plane. The in-flight cabin is designed for maximum creature comfort.

• Pricing Strategy: A round trip airfare for Fido is $149. Based on my assumptions regarding cost structure, this price is high enough for Pet Airways to generate sizeable margins, but reasonable based on the sensitivities of the company’s target customers. Even though it may be more cost-effective for these customers to leave their animals at a pet kennel, hotel or a caretaker, it is my belief that there’s never a price large enough to pay for peace-of-mind for the safety and security of a pet.

It is entirely possible for Pet Airways to be one of the very few airline brands to generate a profit this year. By capitalizing on addressable industry growth and the sensitivities of a niche market segment, Pet Airways will position themselves for sustainable and profitable growth in the long-term. Now, that is something to bark for and wag your tail at!