S&P lowers Vista Global’s outlook to negative

S&P Global Ratings lowered its outlook on private jet operator Vista Global Holding to negative from stable, citing a disappointing financial performance in 2023 that fell short of expectations.  S&P affirmed Vista’s ‘B+’ credit rating.

“Private jet operator Vista Global Holding (Vista’s) weaker-than expected operating performance and higher interest costs in 2023 resulted in S&P Global Ratings-adjusted funds from operations (FFO) to debt being well below 12%,” said S&P in its rating commentary.

The ratings agency said a key metric for creditworthiness, adjusted FFO to debt, fell bellow  the 12% threshold S&P considers healthy for a ‘B+’ rating.

This stemmed from a decline in profitability and higher costs. Vista Global Holding’s adjusted EBITDA, a measure of profitability excluding one-time items, dropped by 4% to $670m in 2023.  S&P had forecasted a range of $820-850m.

S&P forecasts some improvement in Vista’s performance over the next two years, driven by growth in its subscription program. Yet, the ratings agency acknowledges potential risks, including lower-than-expected revenue from on-demand flights and rising costs.

The negative outlook signifies that S&P could downgrade Vista’s rating if the company fails to achieve a minimum FFO to debt ratio.  S&P could revise the outlook back to stable if Vista outperforms expectations and maintains a conservative financial strategy.

Revenue came in weaker than expected, particularly in the on-demand and third-party marketplace segments. Demand for private charter flights in North America and Europe, while exceeding the broader market according to S&P, also fell short of forecasts. Additionally, a refurbishment program for jets acquired in 2022 affected fleet availability and revenue in 2023.

Despite these headwinds, there are some positive signs. Vista’s subscription program continues to see strong growth. The completion of the refurbishment program has also led to a double-digit increase in total flight hours in the first quarter of 2024.

“We could revise the outlook to stable if Vista’s adjusted FFO to debt increases beyond 12%. This could occur in 2024 if Vista’s EBITDA exceeds our base case due to higher than-expected fleet use or yields, and the group maintains a more conservative financial policy,” according to the S&P.

In addition to the financial challenges, S&P also highlights the ongoing presence of key-person risk. Thomas Flohr, the founder, CEO and majority shareholder, is seen as a critical to Vista’s operations.