Surf Air raises $200 million; hires former Virgin America CEO

By Doug Gollan, August 28, 2020

Surf Air Mobility says it has received a commitment for $200 million in advance of plans to go public

Surf Air Mobility, the product of a recent merger between Surf Air and Blackbird, will announce next week it has secured a $200 million investment commitment from Global Emerging Markets Group (GEM). The company bills itself as “a $3.4 billion alternative investment group that manages a diverse set of investment vehicles focused on emerging markets across the world.”

An advance of $50 million will be immediately available on the first day of public trading. Further tranches can be drawn at the company’s option over a three-year period.

Proceeds from the investment will be used to develop and acquire leading technologies in the zero-emission space. 

“The launch of Surf Air Mobility Corp. and our acquisition of aviation marketplace BlackBird were the first steps in our original goal to bring the benefits of private aviation to the masses,” said Surf Air Mobility CEO Sudhin Shahani.

He added, “Now, we look to help drive the industry’s inevitable electrification, as that will play a critical role in making private travel accessible to all. The $200 million commitment and $50 million advance from GEM gives Surf Air Mobility the power to continue adding organic growth, executing strategic new initiatives, and acquiring leading technology players in the space. We are also thrilled to announce key additions to our executive team and board, whom we know will be instrumental in achieving our objectives.”

The news was first reported earlier today by Bloomberg in its Deals section.

Airline veteran CEO Reid joins Surf Air

At the same time, airline C-suite veteran Fred Reid is joining the company as chief strategy officer.

Reid cut his teeth under the legendary chairman of American Airlines Robert L. Crandall. At American, he helped lead its aggressive expansion into Europe in the late 1980s helping push aside Pan Am and TWA, the two main U.S. airlines flying transatlantic routes at the time.

From there he moved to Lufthansa overseeing its operations in the Americas before being promoted to president. He then spent six years at Delta Air Lines. There he guided it past the 9-11 air travel crisis as president and COO.

In 2004 he joined Richard Branson to launch Virgin America as its CEO. He then served as president of Flexjet, which was owned by Bombardier at the time. Most recently, he has been a senior advisor to the CEO of Airbnb.

He was also the president of Cora Aircraft Program (now Wisk, a joint venture from Kitty Hawk Corporation and The Boeing Company). There, he supervised the development of the company’s first autonomous electric vertical takeoff and landing (eVTOL) aircraft.

Additionally, former owner of Fairchild Dornier and founder of Wings West Carl Albert and Dorchester Hotel Group North America boss Edward Mady are joining the board.

Going public

According to Bloomberg, the company will go public via a merger with a special purpose acquisition company, a direct listing, or an IPO.

Surf Air launched in 2013 offering fly-as-much-as-you-can memberships in California. Using a fleet of Pilatus PC-12s, members paid a monthly fee. They then were able to then reserve seats on scheduled flights at no additional charge. It quickly grew by giving intrastate fliers a way to avoid congested airports and terminal, showing up 15 minutes before departure.

Since then, Surf Air stubbed its toes on an expansion into Europe where it ended up liquidating. It also went from operating its own aircraft to outsourcing its fleet to third party operators. There was an IRS lean for unpaid taxes, which it has apparently been paying down.

Reid won’t be the first airline executive to join the company. Jeff Potter, former CEO of Frontier Airlines served as CEO from 2014 through 2017. Simon Talling-Smith, a top executive at British Airways, was hired to launch the European expansion.

Surf Air has also attempted to launch a block-chain based loyalty program.

Surf Air’s short-hop strategy

Most recently it acquired Blackbird, a marketplace seeking to bring affordable aviation for short-flights. Prior to the deal, Blackbird had been warned by the FAA. Regulators said some of the flights it was offering could be illegal charters sold as Part 91 dry leases. It was only offering Part 135 charters at the time of its purchase by Surf Air.

Most recently, Shahani said the focus is to innovate for flights between 50 and 400 miles. Short hops currently account for 50% of flights. That number is expected to grow dramatically with new short-range aircraft that combine features of fixed-wing aircraft and helicopters. Many of these flights will allow workers to commute longer distances more quickly to big cities where the cost of living in nearby suburbs is prohibitive.

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