VistaJet Shares Similarities To Struggling Wheels Up In Private Air Charter

Recent events surrounding personal aircraft charter company Wheels Up regarding heavy financial losses, a crushed stock price and hastily departed CEO caused concern throughout the business aviation industry. On the heels of that, an article in the Financial Times (FT) now suggests the situation isn’t unique, as the closely-guarded financials of charter provider VistaJet Global shows similar hemorrhaging.

To summarize the well-written and researched FT article, VistaJet lost $436 million over the last four years, and doubled its debt load last year to $4.4 billion. Their auditors Ernst & Young (EY) question the company’s very ability to continue as a going concern.

There are parallels between the Wheels Up and VistaJet sagas even though the former is a public company whereas the latter private.

Both have similar business models in that their aircraft are purchased and owned by them. This is in contrast to a firm like NetJets, a Berkshire Hathaway company, that only owns aircraft a short time (if at all) before divvying each up into smaller shares to sell to its customers, analogous to a condo timeshare. Thus, NetJets’ new aircraft capital cost is only fleeting, whereas Wheels Up and VistaJet and their financiers must carry the huge fleet cost of multi-million dollar aircraft and bear the uncertainty of future resale value. While there are exceptions, the majority of other charter operators use the planes of others and don’t actually own any.

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Even though unprofitable, both companies went on expensive acquisition sprees further ratcheting up their debt loads. VistaJet recently acquired the largest charter operator in Europe and another sizeable concern in the U.S., whereas Wheels Up snagged multiple charter operators to become the second-largest private aircraft operator after NetJets in the U.S.

Another tell-tale similarity is the nature of their press releases. Before Wheels Up became a public company and was required to disclose its financials, like VistaJet it typically only spoke in terms of growing customer membership, higher revenues and more flights flown – but never profitability. These are meaningless metrics if never put into the context of profitably, which would have shown that growing the user base could in fact accelerate losses.

Even before the FT article broke, I contacted VistaJet and asked for Vista Global Holding Ltd.’s (their formal name) last three years’ financials, suggesting it would be a timely opportunity for them to allay any possible industry concerns after the Wheels Up revelations. The response from their PR firm was opaque stating that VistaJet is privately held, so instead sent me an “exciting” press release, another fluff piece about revenue growth and hours sold which would have been expected given recent acquisitions of other charter firms.

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Both companies raised working capital in recent months, with Wheels Up mortgaging its aircraft for $275 million at 12% interest with a covenant requiring the company to maintain a minimum liquidity of $125 million. VistaJet raised a $500 million unsecured bond, acts that make both companies even more highly leveraged.

While the final chapters for both companies have yet to be written, aircraft charter is a very capital-intensive business with correspondingly more expensive consequences when things don’t go right. While both companies have ascended to the top when measured by private aircraft fleet size, each has taken on outsized risk to obtain it and remain there.