Never Mind Regional Banks – Private Jet Charter Is Having Its Own Financial Crisis

First it was publicly traded private aircraft charter company Wheels Up that disclosed that its CEO had departed amidst financial losses. Work is underway to try and improve the balance sheet.

Next, an article published in the Financial Times indicated that privately owned Vista Jet Global, another business jet charter provider, was flagged by its auditor Ernst & Young (EY) stating that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.” Its Founder and Chairman has taken to the airwaves denying that this means any risk to the company.

Just like dominoes, a third albeit smaller company, Jet It, is believed to have closed its doors altogether, telling its customers to find someone else to manage the fractional shares of aircraft they own. The company blames the aircraft manufacturer for its situation but has parked its other makes and models as well.

Collectively these firms are affiliated with a fleet of hundreds of private aircraft worth billions, and there are some common themes amongst all three firms. First, they were all highly leveraged in a capital-intensive business with no evidence to have ever been profitable. Compounding and expediting the problem, private aircraft charter usage has tumbled around 25% year-over-year since its pandemic high when private flyers were willing to pay a premium to avoid crowded airports and airliners.

Another conceivable similarity was naive investors who never fully understood the industry, business model and risks involved. In addition, VistaJet and Wheels Up went on an acquisition spending spree before becoming profitable. In Jet It’s case, it was more likely as being simply undercapitalized, with a business model that didn’t allow breathing room.

It’s believed that before the end of the year others in the industry matching this profile could also emerge. Established companies with a record of profitability could benefit from any client inflow from these companies, who have lamented about lost sales due to trips being flown below cost. After the dust settles, those who remain should be in a healthier business environment.

Potential implications beyond employees, shareholders and customers are other aircraft lenders, unpaid service providers and depressed model-specific aircraft values should any be divested from the fleets. Longer term, the business aviation industry may have a hard time attracting further investment from those with long memories on Wall Street.