flyExclusive exclusive

opinion

by Fayaz Hussain

September 30, 2024

Volato trades on the NYSE America under the ticker SOAR. But sadly, its shares have not lived up to this. When the fractional operator listed in early December 2023 via a SPAC, its shares were at $10. Now they are below 45 cents.

In the past few months, the fractional operator has been trying to cut costs while selling new aircraft shares (with deliveries delayed longer than it hoped). It had planned to take delivery of eight HondaJets and two Gulfstream G280s. But Honda has cancelled its agreement with Volato.

This meant the company’s key revenue stream dried up. Volato posted $0 in aircraft sales between January to June 2024. By the end of second quarter, the company’s cash and equivalents were as low as $6.4m – from $14.5m at the end of 2023.

Volato’s troubles are, however, an opportunity for Jim Segrave, founder, chairman and CEO of flyExclusive. Earlier this month the two companies signed an aircraft management services agreement. FlyExclusive has taken over all aircraft operations. It also has an option to buy the whole company.

“It’s a win-win for the customers and for us,” says Segrave. “It’s also a path for Volato to wind down their operations and pay all of their debts.”

Segrave is confident that he can run Volato’s fleet profitably. “Volato’s operations were a long way from streamlined or efficient such that they could operate profitably,” he says. “What made this such a great transaction from our standpoint is that we had the infrastructure in place to be able to take over 100% of their flight operations, without adding a single person in SGA [selling, general and admin].”

He says Volato had more than 150 pilots on its payroll and about 90 people selling and supporting the 24 aircraft fleet. “At flyExclusive we’re operating with 3.2 pilots per airplane. Our planes are flying 65-70 hours a month each on a unit basis. And our SGA runs it to 2.1 people per airplane,” he adds.

Another way Segrave says he can streamline Volato’s operating cost is by transferring its assets to a 91K, subpart K, of the Federal Aviation Regulations.

“We’re going to put every airplane on our certificate and eliminate 7.5% federal excise tax as soon as they’re on our certificate so can reduce the overhead while taking advantage of synergies.” This should be completed in three months.

Volato can argue that it was unlucky. It is hard to build sales momentum when you do not know when aircraft are coming. It also fitted SmartSky connectivity to a few aircraft (flyExclusive is quickly changing these to Gogo). But Segrave thinks that its real issues were operational.

“One of the nice things was that they were operating completely virtually. Taking over overheads or offices or combining offices was not an issue,” he says. “So it has been one of the easiest transactions I have worked on.”

FlyExclusive also listed via a SPAC in 2023. But investors have not yet got excited about the Volato deal. When the deal was announced its shares were trading at $4.34 now they are at $2.78. FlyExclusive trades under the FLYX ticker. Segrave will be hoping that his shares will now SOAR.