October 22, 2024
HondaJet fractional and jet card operator Volato is the latest private aviation flight provider with plans to go public.
Volato is the latest private aviation flight provider to announce its intention to go public via SPAC.
The deal, announced this morning, is expected to close before the end of the year.
Volato has shown they have the entrepreneurial mindset and the nimbleness to make a mark in an industry that is dominated by a few large successful companies but cluttered with smaller companies with failed or failing business models
– John Backus, CEO of Volato SPAC merger partner Proof Acquisition Corp. I
“Bringing Volato to the public markets will allow us to build on this momentum and accelerate our vision to provide unique and customized travel experiences that deliver a better aviation experience for all our customers,” Volato Co-Founder and CEO Matt Liotta said in the announcement.
Volato’s senior management will continue to serve in their current roles.
The current owners of the private jet flight provider will retain approximately 63.5% of the ownership at the close.
The deal is with Proof Acquisition Corp I (NYSE: PACI).
After the merger is consummated, Volato will trade on the New York Stock Exchange under SOAR.
John Backus, CEO of Proof Acquisition, added, “Volato is the ideal partner for PACI. We were impressed by the depth of experience across Volato’s management team, which is highly complementary to PACI’s deep aviation acumen and expertise. We were also attracted to Volato’s innovative yet simple business model, set within a highly regulated, traditional industry which is ripe for disruption.”
Backus continued, “The private aviation industry is buffered from many of the headwinds that face other industries, and Volato is further protected through its entry-point positioning and efficient best-in-class HondaJet fleet. We believe this merger and related funding provides a unique high-growth, low-volatility opportunity to be part of a strong operating company, and we are committed to helping drive growth over the long term.”
Before becoming a venture capitalist, Backus began his career at Bain & Co and then co-founded US Order, which went public in 1995 and was sold to Visa.
According to Backus, members of the Profit Acquisition board bring significant aviation experience from turnarounds at Continental Airlines, World Airways, and Volaris.
The deal will give Volato a pro forma enterprise value of $261 million.
The 2021 start-up is not yet profitable, although Liotta tells Private Jet Card Comparisons, “We understand the market expects profits and growth, not just growth, and we expect to deliver what the market expects.”
He declined to provide a timetable for getting into the black.
However, he noted Proof Venture Capital Fund had already led a preferred equity raise of $48 million for Volato.
It closed on July 21, 2023.
That money will accelerate Volato’s growth plans ahead of the merger and IPO listing.
Volato reported 2022 revenues of $96 million, of which $67.6 million came from aircraft transactions.
Recurring revenue from management fees and flying totaled $14.5 million last year.
The company forecasts over the typical five-year contract; a single HondaJet is expected to produce a 17% EBIDTA, or $5.6 million in profits out of $32.4 million in total revenues per tail.
Volato’s presentation indicates a 16% margin based on an initial sale price of $7.7 million.
It breaks even on management fees and expects a 31% margin on $3.9 million in annual flight revenue per tail (chart below).
The pro forma indicates that as the company matures, aircraft sales should account for less than 25% of Volato’s total revenues.
Three new HondaJets are expected to be delivered in Q4, with 11 scheduled to arrive in 2024.
Volato follows Wheels Up, Blade Urban Mobility, Flexjet, FlyExclusive, Flewber, and Jet Token (now Jet.AI) down the SPAC merger path.
Both Wheels Up and Blade have seen their stock prices hammered since going public.
FlyExclusive and Jet Token are expected to complete their SPAC mergers later this year.
Surf Air abandoned its plans for a SPAC IPO with a direct listing last month.
After pricing the offering at $20 per share, its price fell to $5 on the first day.
Flewber launched last year, claiming proprietary technology that would enable it to become an Uber for private jets.
Its SEC filing showed despite grand plans; it generated only $4.3 million last year in revenues with $6.9 million in expenses.
Most of its revenues were from a traditional on-demand charter brokerage arm, as opposed to its much-touted app.
Directional Aviation’s Flexjet, Inc., announced plans for a SPAC IPO last year.
However, in April, it decided to stay privately held.
During a prerecorded call, Backus said, “Volato has shown they have the entrepreneurial mindset and the nimbleness to make a mark in an industry that is dominated by a few large successful companies but cluttered with smaller companies with failed or failing business models.”
Volato intends to be targeted and focused with plans to grow centered around its HondaJet fleet; something executives believe gives it a unique niche.
That means targeting users who fly with four or fewer passengers on flights under two to three hours.
About 70% of all domestic private flights are under three hours, according to the company.
The key target for sales efforts is the current Phenom 300 flyers, according to the presentation.
NetJets, Flexjet, and Airshare each offer fractional and jet card programs using the type, with GrandView Aviation, Magellan Jets, and Nicholas Air all selling Phenom 300 jet cards.
Over 150 Phenom 300s are currently operating in domestic fractional and jet card programs.
Liotta says for his target, the HondaJet provides more legroom, a quieter cabin, and cheaper prices than Embraer’s light jet.
According to its Investor Presentation, the HondaJet uses 30 gallons per hour less fuel than the Embraer light jet.
Liotta says he doesn’t want to be grouped with the other IPOs.
In other words, don’t look for a rollup.
While acquisitions are possible, Liotta says customers shouldn’t expect much to change.
“We don’t want to be all things to all people,” he says.
There are no plans to create an industry charter marketplace.
There aren’t any grand visions to evolve into an urban mobility solution or become a luxury lifestyle brand.
The focused approach extends to its fractional and jet card programs.
Both offer their most attractive pricing for flyers who are traveling within a half dozen zones measured from base airports.
The current bases are in Atlanta; St. Augustine, and Fort Lauderdale, Florida; Easton, Maryland; Houston, and Carlsbad, California.
Customers who want to fly outside the zones are charged repositioning fees.
Liotta says the approach means shorter empty-leg flights, more efficiency, and lower operating costs, which enables it to offer lower flight prices.
According to QUICK COMPARE FLIGHT PRICING by Private Jet Card Comparisons, a 1/16th owner with Volato would pay $5,752 for a 45-minute flight, including the cost of ownership and management fees.
That compares to $8,000 to $10,000 for Phenom 300 programs.
Volato would cost just under $10,000 for a 90-minute flight versus $14,000-to-$17,000 for the larger, longer-range Phenom 300s, which can seat between six and eight passengers in the cabin.
Its fractional agreements provide owners a rebate for flight hours on their tail, enabling them to share in the charter revenue.
Future expansion will see bases in New York, Northern California, Colorado, Chicago, and the Pacific Northwest.
Volato has 18 HondaJets in its fleet, with 23 on order.
As many as a half dozen preowned VLJs could come from owners stranded after Jet It’s shutdown.
There are also seven aircraft as part of a managed fleet.
As-available jet cards and on-demand charter enable Volato to keep the fleet flying when members aren’t.
However, by only guaranteeing availability to fractional customers, Volato avoids the expense of having to go off-fleet for card users during high-demand periods.
Its structure, according to Liotta, also enables shareowners to gain tax benefits even for non-business flights.
Volato is progressing with its Gulfstream G280 fractional program, with the first super midsize aircraft expected in 2024.
It has ordered four jets with a 10-passenger configuration, which will give it a unique position in the super-mid program segment.
During the investor call, Liotta said that Volato has been focused on developing its homemade technology solutions.
Existing off-the-shelf software solutions are “antiquated and inadequate for our business requirements,” he said.
According to the CEO, Volato Mission Control is a cross-divisional platform to manage reservations, CRM, pilot management, flight scheduling, and analytics that will drive efficiencies.
Volato will need to file a proxy statement that gives a deeper look at its financials and the merger that will make it traded in the public markets.
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