Download - Air Taxi Public Financing Dubai2008

On-Demand Air Travel

Financing in the Public Markets

Dubai - March 10, 2008

Very Light Jets – Middle East Dubai, UAE March 10, 2008

Kris Tuttle, Director of Research

[email protected]

Discussion Points •  Current financing market: Workable

•  Status of a semi-developed public market: Patchy

•  A litmus test: POGO

•  Public market status: Still uncertain

•  Reasons to care: WACC, ROIC, LTV, etc.

•  Outside the box: OpenIPO, Global Exchanges, Celtics


Background

•  Emerging technologies since 1979 –  Pre-commercial microcomputers, Carnegie-Mellon –  IBM Strategy, Development, Marketing and Sales

•  In financing such since 1992 –  Active investor, NYU Stern School –  UBS, SoundView, Adams

•  Research 2.0 launched in 2005 (Software) •  Air 2.0 practice launched in 2007

–  Interest, Contacts, Timing, Resources

•  Retained to provide related research on POGO IPO


Private Market Pockets •  Financing is still largely hand to hand combat •  Market leaders like DayJet and Eclipse are okay •  Second tier companies also fundable but…

–  Largely private investors willing to commit to long durations –  Fairly small in size: One to ten million per investor –  Lots of companies go begging: Actually good news.

•  Related company private financing –  Kayak.com $196M –  Zipcar raised $100M in equity financing to 2006 and now doing

asset-backed and using cash flow (GE).


A Patchy Public Market

•  Today the market for travel-related companies is mixed.

•  “Upstart” airlines haven’t done very well.

•  Online travel services have fared better.

•  Niche software and service providers are embraced.


Ryanair


Frontier Airlines


Southwest Airlines


JetBlue


Expedia


Ctrip.com


Blackboard


POGO IPO

•  Filed for 7M shares at $14.50 (mid-point) for $101M •  Implied valuation of about $153M •  Few minor details:

–  No current assets, no existing operations •  But:

–  Strong management team –  Solid market potential & business plan

•  Marketing now, closing expected week of March 18


Northeast U.S. Market


2009 2010 2011 2012 2013 2014 2015

Trip Demand (000) 337 345 354 363 372 381 390

Share 1% 7% 20% 25% 30% 35% 40%

Trips (000) 3.4 24 71 91 111 134 156

Passenger Hrs. (000) 4.2 32 103 136 167 200 234

Revenue (M) $9M $68M $216M $286M $352M $421M $492M

Trips/Day/Plane 1.0 1.7 2.0 2.2 2.4 2.6 2.8

Planes Required 11 46 118 138 155 171 186

Rev/Plane (000) $787 $1,488 $1,827 $2,079 $2,268 $2,457 $2,646

@10% Net $1M $7M $21M $29M $35M $42M $49M

@15% Net $1.4M $10.3M $32M $43M $53M $63M $74M

[$2100/hr, 1.25 to 1.5 hr trip, 300 day year]

Investor Feedback •  What about the Eclipse?

•  How will the company differentiate itself?

•  Is this the right business model?

•  No real push back (yet) on: –  Market potential –  Financial model


OpenIPO

•  Traditional IPO capital markets are a deep mystery •  Dutch auction

–  All investors bid what they want to pay –  Offer pricing and allocations set objectively

•  Market is developing –  Google, Morningstar, NetSuite

•  Disruptive model still in early stages


Potentially Low WACC


We say $12…

… the market says $26.

(We still say $12.)

Thinking Outside the Box

•  Creative Finance •  OpenIPO •  Could “affinity” equity work? The Celtics •  Other Exchanges

– London, Dubai



To sign up for free Air 2.0 research alerts visit us at: www.research2zero.com/ondemandairtravel.html

Questions and requests just contact me at [email protected].

Research 2.0

•  We offer research and advisory services to company managements, investors and investment banks.

•  Offices in Paris, Boston and New York

•  Lightweight, on-demand business model •  Strong network of resources on staff and via contract •  Our approach is honest, independent and unstuffy

Going Public Workshop

•  The foundation •  POGO example (roadshow and support) •  Investment banks and research •  Creating financing

– OpenIPO – Loyalty programs? – Assets and alternative structures

•  Other exchanges: London, Dubai


The Foundation

•  The basic stuff – Management – Business Process – Financial Controls

•  Secret Sauce •  Effective marketing •  Strong operations planning/execution •  Regulatory and governmental support
