Why Volato plans to list via PROOF SPAC
Volato, the fractional operator, only got its first aircraft in August 2021. Two years later it has announced that it will merge with the Special Acquisition Company (SPAC) PROOF Acquisition Corp and plans to list on the NYSE. “I always planned to list Volato but we are going faster than I expected,” Matt Liotta, CEO, Volato tells CJI. “We have seen strong demand for our offering, but we have also been very disciplined.”
The deal values the company at $261m. “We have worked really hard to put together a deal that correctly values our company today,” says Liotta. “We are different to other companies in the industry and we want investors to understand that.”
Liotta accepts the risks in becoming public but says there are real benefits. “One of the benefits of being public is the increased transparency for customers and prospects,” he says.
Volato operates 25 aircraft. Some 18 of these are HondaJets. It has 27 aircraft on order (23 HondaJets and four Gulfstream G280s). It plans to take 11 HondaJets and four Gulfstream G280s in 2024.
The fractional company has agreed to merge with PROOF Acquisition Corp I (PAC1); a $276m SPAC that floated in December 2021. The SPAC was sponsored by the venture capital firm PROOF (originally Pro Rata Opportunity Fund). The VC firm has backed a number of fast-growing companies – including Epic Games, the publisher of Fortnite and Zipline, the medical delivery company. The founders also have significant aviation experience – John Backus, co-founder of PROOF and chair of the PAC1 SPAC was a senior executive at Key Airlines and World Airways. Coleman Andrews, the SPAC’s lead independent director, was CEO of South African Airways.
The PROOF venture capital fund has invested $10m in a preferred equity series A round. At the same time some $38m of existing convertible notes were converted into Series A equity. The series A equity will become normal shares when the SPAC merger happens. Existing Volato shareholders will own 63.5% of the company once it merges.
Volato had $96m in revenue in 2022. Some $14.5m of this was recurring revenue with most ($67.6m) coming from fractional and whole aircraft sales. In the first half of 2023 it has recurring revenue of $16.9m – with just $5.7m in fractional sales.
Liotta accepts that they are planning to become public at a time when demand is starting to fall. “The overall market is cooling,” he says. “Charter traffic is down and private traffic is down but fractional is up compared to last year. We are not a typical fractional company and are seeing strong demand.”
Volato offers customers a different product to traditional fractional companies. Owners pay an hourly fee to fly but have no limits on how much or how little. They receive income when their aircraft is chartered out (Volato has a jet card and also pays a fee to charter brokers) and can benefit from bonus depreciation.
Liotta says that Volato is raising money to grow and invest. He is not ruling out using cash or shares to acquire other companies – and this is highlighted in the investor presentation – but he says this is not a key driver of the listing.
Volato acquired Gulf Coast Aviation, a small operator, in 2022 to get a Houston base. The company wants to expand to Colorado, New York, north California and the Pacific northwest.
Investment bank BTIG is advising Volato (it is also advising flyExclusive on its SPAC meger) with Womble Bond & Dickinson legal advisor. Steptoe & Johnson are legal advisers to the SPAC with Lowenstein Sandler advising PROOF venture capital.
Volato has gained some customers from the fall of rival JetIt, but Liotta says that plans to merge were already underway. He does not expect it to affect demand.
“We hope investors see that this as not just another aviation company and not just another SPAC,” says Liotta. “We are not looking to exit. Management are investors and are staying with the company.”