Why would anyone want to list?
It is just over two years ago since Wheels Up’s management team rung the bell at the New York Stock Exchange. The company started trading on July 14th, 2021 at $10 a share. It is now at $2.37 (after a 10-for-1 reverse stock split).
Today (Wednesday August 9th), Wheels Up will report its second-quarter results. The first-quarter announcement was overshadowed by the departure of founder Kenny Dichter as CEO. This time the numbers will get much more scrutiny.
Many will focus on how much cash it has. At the end of March, it had $363m. It could be getting close to breaking debt covenants. We will find out more soon.
The company had record first quarter sales and its new strategy of focusing on two regions looks sensible, but 12 weeks is not a long time to implement it, especially for a membership business. Wheels Up does still have some supportive large investors – especially Delta Air Lines, which owns 20%.
Wheels Up launched in a market when investors were happy to support what were called pre-profit companies (and many pre-revenue ones). It was unlucky that this mood changed before it became profitable.
But it does make you ask: why would any business aviation firm want to go public today? Surprisingly, a lot of companies do.
Last week Volato, the fractional operator with a fleet of 25 aircraft, announced plans to merge with a SPAC. Jet AI (formally Jet Token) is likely to become listed this week. North Carolina charter operator flyExclusive is still in the process of listing. Set Jet, which has access to a fleet of five Bombardier Challenger 850s, is hoping to merge with a SPAC by the end of the year.
These are very different businesses. And have very different motivations in listing. (Pictured is the New York Stock Exchange building).
Matt Liotta, Volato’s founder, 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. This is also a good thing for a market where it is difficult to get hard data.
They are going public at a time when demand for business aviation is cooling from its post-lockdown highs. Private Jet Card Comparisons says that hourly jet card rates fell 1.3% in the second quarter of this year, after a 5.2% drop in the first three months.
“The overall market is cooling,” says Liotta. “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.”
Kenn Ricci’s FlexJet has stayed private. In October last year Flexjet announced a merger with a SPAC sponsored by long-term investor and partner Todd Boehly. This was cancelled in April citing market conditions. Last week Flexjet acquired Flying Colours to bring more maintenance – especially completions – in-house.
Flying Colours received strong interest from a mixture of strategic and financial investors (it was advised by Jefferies). The fact that it was not listed is arguably an advantage when closing deals.
Spare a thought for Surf Air Mobility which became public through a direct listing on Thursday July 27th at $4.60. It is now at $1.50. Surf Air is a very different business – relying on small aircraft and certification of electric aircraft – but now is not a fun time to be running it.
SPACs get a lot of criticism but the fact they typically launch at $10 is useful.
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