Jeff Klee appreciates the simple things in life: his favorite pair of Converse sneakers, the Denver Broncos and cheap airfare. The CEO and founder of online travel company Cheap Air.com began the Calabasas-based company out of his college dorm room at the University of Michigan in 1989. More than 20 years later, the company’s business model and operations have evolved with the ever-changing travel industry. After years of functioning as a call center — 1-800-CHEAP-AIR — the company switched gears and launched CheapAir.com in 2003. To date, the site averages about 1.5 million visitors each month and 1,100 ticket sales per day. CheapAir’s search engine allows customers to instantly view all possible options for outbound and return flights and sort them and filter them, without having to re-load the pages or restart searches. The company makes a small margin per ticket — usually between $3 and $10 — and supplements that with income from advertising, hotels, rental cars and travel insurance. Since its launch, CheapAir’s gross airline ticket sales have increased by 736 percent. The company’s revenues have remained flat over the past few years, reporting $9.6 million for 2009 and $9.8 million in 2010. Revenues for 2011 have yet to be determined, but the company is projecting figures will be similar to the year prior. This year, the company is aiming for a 20 to 25 percent increase. It’s also holding its own in the $50 billion online travel business, which is led by heavy hitters such as Expedia, Orbitz and Travelocity. Klee says the company competes by offering customers more than a great price on a flight. CheapAir’s feature, Price Drop Payback, offers customers the difference of their original payment in the form of a travel credit, should the price of a ticket go down any time before the trip. And the site’s search results also include the various amenities included in the listed flights such as Wi-Fi, in-flight movies and live television. “Most (online travel agencies) are all about price and only about price,” Klee said. “We like to bring value to both the consumer and the supplier.” Dozens of testimonials on the company’s website tout the company’s services. “I have used CheapAir for seven flight arrangements thus far and I am a believer,” said Jacqueline G. of Atlanta. “I love the user- friendly, bottom line website and the best fares on the web. I always check CheapAir first and I tell everyone to do the same.” Another customer, Sharrone S. of Austin, Texas, said: “Thank you so much for revolutionizing the user interface on airline websites. Everywhere I look I have to scroll blindly through a thousand pages of flights but now, it’s finally become convenient.” Klee, a self-proclaimed computer enthusiast, thrives on coming up with software applications and services that can help the company better serve its clientele and remain competitive. This month, the company plans to launch a service that caters to travelers on a budget. “(The product) shows you instantly a map of the world and all the cities you can go with your budget,” he said. In selecting a specific city, customers will be given a list of dates and times that flights are available for their potential getaway. From Dorm Room to “.com” With three offices nationwide and a workforce of 65 full-time employees, CheapAir has come a long way from its early years as a two-man operation. Intrigued by the market for airline tickets, Klee and a college friend started the business by selling cheap airfare to travelers looking for a good deal and utilizing the classified section of the Los Angeles Times for advertising. “We marked up the tickets $100,” Klee said. “It was a pretty good job to have in college.” After graduation, Klee put his law school aspirations on hold to pursue the travel business full time. The business, which functioned as a call center for more than a decade, shifted as the Internet and the e-commerce craze transformed the travel industry. “The margins became way too low to be able to continue to make a living selling tickets over the phone,” Klee said. To generate ticket sales and attract clients to the company’s software development business, Klee eventually decided to move the business online. The development process was a lengthy one, taking about five years, and Klee said his perfectionism and attention to detail slowed down the company’s arrival in the market. “We were very late,” he said. “By then there were already established companies.” Joe Rubin, president and executive director of the Interactive Travel Services Association, a Washington D.C.-based organization that supports online travel companies and global distribution systems, said although he had heard of CheapAir, he was not familiar with the company’s operations. He said the start of the online travel industry began around 1997, so by that timeline CheapAir was six years late. That’s when Microsoft launched Expedia and a slew of other companies sprung up, hoping to benefit from the Internet’s popularity. “By 1999, the online travel business was a $5 billion industry,” Rubin said. Despite its timing, the 2003 launch of CheapAir.com was a hit, Klee said. Between 2003 and 2004, the company’s gross sale of airline tickets increased by 98 percent. The company’s success even surprised Klee and his team, who did not expect to compete with the “deep pocketed” heavy hitters. “Despite all of the competition we had from much bigger players, people really liked our site and found it so much easier to use than our competitors,” Klee said. Raising Awareness for CheapAir.com With dozens of travel sites out there and more added to the mix each day, Rubin said one of the major challenges smaller online travel agencies face is getting noticed by consumers. “Figuring out a way to get through all the clutter and get consumers to search your site,” can be difficult, he said. For the past decade, the company has flown under the radar, relying mostly on some online advertising and word of mouth, but now the company’s working to change that, Klee said. Armed with a renewed focus on its online business, the company is taking a “much more aggressive marketing approach,” he said. Last year, Klee hired Gregory Samson to be CheapAir’s vice president of marketing and business development. He is ramping up the company’s online advertising and e-mail marketing campaigns. CheapAir also partnered with StrongMail, an online marketing company based in Redwood City, to help build the company’s brand awareness through e-mail marketing. “(Our services) allow for CheapAir to leverage the email communication vehicle to communicate with customers offers and promotions to increase the value of customer relationships,” Tal Nathan, StrongMail’s vice president of client services. To date, CheapAir has about 1.3 million e-mail subscribers. In working with clients such as Travelocity and Flight Centre, Nathan said e-mail campaigns have been known to substantially boost a company’s performance. CheapAir’s decision to invest more in online marketing was a wise one, he said. “It’s a very effective way to market to existing customers.”
Flying High
