VistaJet CEO Thomas Flohr defended his company’s financial standing following reports that the fast-growing private charter jet company is facing liquidity and debt trouble.
Talking to CNBC’s Dan Murphy, the Swiss entrepreneur-turned-aviation-disrupter denied that VistaJet’s high debt levels were spooking investors.
“Look, none of that is latest. All documents and data was at all times available to our equity and debt holders,” Flohr said.
VistaJet offers a charter service that it says eliminates the expense and burden of owning a personal jet, as an alternative using a subscription model that bills by flight hours and provides private travel to and from airports world wide in as little as 24 hours’ notice.
A report published this week by the Financial Times said that VistaJet’s net losses totaled $436 million over the past 4 years, and its debt “greater than doubled last 12 months to $4.4 billion” as the corporate’s fleet grew to 360 jets, a 50% expansion after its acquisitions of charter firms Air Hamburg and U.S.-based JetEdge. The FT cited company disclosures to investors and bond holders.
Auditing firm EY warn in a report on the corporate’s 2022 accounts that “a cloth uncertainty exists that will forged significant doubt on the group’s ability to proceed as a going concern,” the article said.
Flohr denied that these points meant any risk to the corporate, which is headquartered in Malta and flies to 1,900 airports in 96% of the world’s countries, in accordance with its website. He stressed that VistaJet is profitable on an EBITDA basis, which is the corporate’s foremost focus.
“We as an organization, each shareholders and bondholders, [are] only focused on EBITDA, the money creation of the corporate,” Flohr said. “The adjusted EBITDA was over $800 million in 2022. We never focused below the EBITDA line.”
EBITDA stands for earnings before interest, taxes, depreciation and amortization, and is a way of measuring an organization’s income before a slew of deductions. If an organization’s investors see an excellent growth rate in its EBITDA, they might use that indicator to evaluate future growth and return-on-investment potential.
EBITDA will not be an actual indication of money flow, because the ultimate figure after interest, taxes, depreciation and amortization is usually substantially different. Berkshire Hathaway leaders Warren Buffett and Charlie Munger famously deride the accounting metric.
Flohr also explained his company’s depreciation timeline, which is when the price of an asset purchase — like a jet — is regularly written off over the course of its operating lifetime.
“The corporate has a really conservative depreciation policy, where over 13 years we depreciate our aircraft to zero. That is as a personal company the selection we’re making as this conservative policy in place, but we’d change it going forward.” Thirteen years is a comparatively shorter timeline of jet use in comparison with the industry average, which is between 15 and 25 years.
“If we just mark-to-market our airplane, the corporate could be highly profitable,” the CEO added, referencing an accounting strategy that gives the present market value of company assets. Mark-to-market would calculate the jets’ values by comparing their cost to how much they’re value in current market conditions, fairly than once they depreciate fully.
An airplane in VistaJet’s fleet.
Courtesy of VistaJet
Flohr said that he may think about using mark-to-market accounting this 12 months fairly than what he describes as “a really, very conservative 13 years to zero” depreciation policy, which he says would then mean the corporate is popping a profit. He stressed that the corporate has a transparent EBITDA growth path.
“Going forward, this infrastructure really allows us to grow the corporate from roughly $800 million EBITDA to $1.5 billion EBITDA,” he said.
The FT report also notes that VistaJet had $831 million value of prepaid flights on its books at the tip of 2022, but only $134 million left in actual money.
Flohr emphasized that this didn’t warrant concern, explaining that the corporate only needs roughly 22% of clients’ up-front payments to fly the jets they book.
“It is not an issue in any respect. It is a snapshot of December 31. Take into consideration when clients pay us money up front — we want only about 20 to 22% of that number to serve our clients for the direct operating expenses of those flights,” he said.
He stressed that those deposits are non-refundable and will not be money that clients can withdraw. “We’ve a subscription business model. The important thing of this number is to serve these hours. It costs us about 22% of those numbers to truly fly them.”
“We feel very confident … after we have a look at the primary quarter these net latest hours that we’re adding on a yearly basis,” Flohr said, citing 9,000 flight hours added on this 12 months’s first quarter and the “same sort of pace” within the second quarter.
“Whenever you have a look at absolute debt, you mostly must make it relative to the EBITDA that’s infrastructure produces, and truly our EBITDA has grown more in relative terms than our debt and hence, the corporate is amazingly comfortable,” he said. “So are the shareholders and so are the bondholders with the capital structure that the corporate has in place.”
Private jet demand has soared within the years for the reason that Covid-19 pandemic, as travelers and businesses opted for safer flying options and wealth for prime net value individuals has skyrocketed. This combined with supply delays attributable to global supply chain and staffing difficulties has made the ever more popular sector even costlier.