The year 2013 saw the launch of three innovative business aviation companies: Wheels Up, Blade and Surf Air.
All talked about democratising aviation but had very different strategies. Wheels Up chose a King Air membership with hourly fees, Blade focused on helicopters and Surf Air launched a membership with unlimited flying on its PC-12 fleet.
All three are planning to float this year through mergers with blank cheque or Special Purpose Acquisition Companies (SPACs). And this is why both Blade and Surf Air have added the word Mobility to their names.
Blade Mobility is set to launch on NASDAQ with a $800m valuation. Wheels Up is going on the NYSE with a $2.1bn valuation. Surf Air is in talks with several SPACs. It has not announced a buyer yet but last Thursday (February 18th) acquired electric aviation company Ampaire.
Ampaire is one of the leaders in the electric-hybrid aircraft revolution and has successfully powered several existing aircraft. In October last year Ampaire flew a six-seat adapted hybrid-electric powered Cessna 337 Skymaster almost 350 miles. It also has plans for a new aircraft.
All three companies have evolved significantly. Wheels Up has gone from a King Air only fleet to buying operators (giving it managed aircraft to charter) and a big focus on third party charter using its Avianis platform. Blade has added medical transport and other services. Surf Air has reshaped completely.
$19,200 annual membership
When Surf Air launched in 2013 with a $19,200 annual membership, you could fly as much as you wanted on its scheduled PC-12 flights. People used Surf Air to commute to work. It then acquired a charter broker and is planning to re-launch with hybrid aircraft that are cheaper to operate.
When Wheels Up was announced, Kenny Dichter its founder, liked to say that his company was more “Netflix than NetJets”. Now he is more focused on being the Amazon of business aviation. “The King Airs will always be important to us, just like books are for Amazon,” said Dichter in a call with Corporate Jet Investor a few weeks ago. “But we want to be the everything store of aviation.”
Netflix is an even better example for what Blade and Surf Air are trying to achieve. When Netflix launched in 1997 it sold and rented DVDs by post. It only started streaming in 2007.
“Helicopters are our DVDs,” said Rob Wiesenthal, founder and CEO of Blade Mobility at a Revolution.Aero conference. “Electric vertical aircraft will be our streaming.”
Surf Air Mobilty’s acquisition of Ampaire is exactly the same idea. The company has proved that there is demand for its model. New hybrid – and eventually electric – aircraft will be cheaper to operate and completely change its model. Ampaire makes the company more attractive to one of the many SPACs that has listed and needs to merge with a private company. Two other electric vertical take-off companies – Joby Aircraft and Archer – are also in the process of being acquired by SPACs.
In investor presentations, Wheels Up, Blade and Surf Air are each comparing themselves with Amazon, Netflix, Uber and others. Each says that they have the potential to disrupt private aviation (Wheels Up), urban mobility (Blade) or zero-emission aviation (Surf Air) in the same way as these companies did in their market.
Not trying to make profits
The other thing that unites them is that their investors have been investing for the long-term and not trying to make profits. Wheels Up lost $107m in 2019. In 2014 Wheels Up spent 25% of all its flight and membership revenue on marketing. Last year this marketing figure was 6% and the company saw revenues grow by almost 80%. Blade – whose airport shuttles and commuting flights were hit hard by Covid – lost $6m.
Making a loss is not an issue when it comes to listing on an exchange at the moment. Research by investment bank Baird shows that 95% of all IPOs in 2020 were for loss-making companies.
This is also a warning sign. It has only been above 80% three times before: in 2019 and in 1999 and 2000 (the dot.com bubble). Bull markets always end.
We are only in the second month of 2021, and have already seen nearly 60% of the total number of IPOs in 2020. Kirsten Bartok of Airfinance priced a $240m SPAC IPO this week with Ex-Boeing CEO Dennis Muilenburg. New Vista Acquisition plans on investing in Fourth Aviation Revolution companies.
There is another thing about Netflix to remember. The shift from DVDs to streaming took years. As the video below – featuring Ampaire’s founder – shows, the change from traditional helicopters to electric vertical aircraft (or turboprops to electric fixed wing aircraft) will take even longer.
In 2021, Netflix still has more than two million customers who prefer to get DVDs in the post rather than online.