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| 8-K - 8-K - Avantair, Inc | v222774_8k.htm |
Avantair, Inc.
(OTCBB: AAIR)
Steven Santo, CEO
May 2011
SAFE HARBOR
This document contains forward -looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, including, without limitation, statements regarding Avantair’s financial position, business strategy, plans, and Avantair’s management’s objectives and its future operations, and industry conditions, are forward -looking statements. Although Avantair believes that the expectations reflected in such forward -looking statements are reasonable, Avantair can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from Avantair’s expectations (“Cautionary Statements”) as described< FONT size=5 face="sans-serif"> in Avantair’s public filings include, without limitation, the effect of existing and future laws and governmental regulations, the results of future financing efforts, and the political and economic climate of the United States. All subsequent written and oral forward -looking statements attributable to Avantair, or persons acting on Avantair’s behalf, are expressly qualified in their entirety by the Cautionary Statements.
INVESTMENT HIGHLIGHTS
Industry leader in light jet management
Sole North American fleet provider of flight hour time cards and fractional shares in the Piaggio Avanti aircraft - the roomiest, quietest, safest and most fuel efficient aircraft with the lowest operating cost in the light jet category
•Superior growth rate relative to private aviation market; Avantair continues to gain market share
• Taking market share from competitors
• Gaining customers new to private air travel
•Defensible competitive advantages - Piaggio Avanti is technologically superior to other light jets and is exclusive to Avantair
•Recurring revenue stream via fractional share and Axis Lease Program sales
•Substantial operating leverage inherent to business model, strategic initiatives designed to achieve and drive sustainable profitability
FLEET STATISTICS
• 56 aircraft in fleet
– 5 new Piaggio Avanti II aircraft added to Avantair’s operating certificate since February 2010
– 51 additional Piaggio Avanti aircraft on order through 2013
– Anticipating addition of at least 5 aircraft before Dec. 31, 2011
• Realize economies of scale due to larger fleet size
– Reduces non-revenue repositioning flights and charter costs
– Leverages existing infrastructure
– Fixed Base Operations in three key hubs provide operating and maintenance efficiencies and lower fuel costs
BUSINESS MODEL: AWARD WINNING PROGRAMS
* Includes FET
FRACTIONAL REEMERGENCE
*On February 22, 2011 the Company announced the introduction of the Axis Lease Program, replacing the Axis Club Membership through a gradual phase out
FLIGHT HOUR CARD & AXIS MEMBERSHIP SALES
Flight hour cards sold increased 24% YOY in the third quarter of fiscal 2011
*On February 22, 2011 the Company announced the introduction of the Axis Lease Program, replacing the Axis Club Membership through a gradual phase out
LEAD GENERATION + CUSTOMER PRINT LOYALTY ADVERTISING = SALES PRINT ADVERTISING
Substantial marketing leverage generated as growing customer base results in more customer referrals
• 90% renewal rate among fractional owners in the third quarter of fiscal 2011
• ~25% of new customer sales in year-to-date fiscal 2011 were from customers new to private air travel
“Overall, flight activity last month fell 0.5% year-over-year, with the Part 135 charter and Part 91K fractional segments seeing activity slump by 8.7% and 3%, respectively, compared with February 2010. Fractional turboprop activity again bucked the decrease in both its aircraft category and operational segment, climbing 5.8 percent over the same month last year, thanks mainly to increased flying at Avantair. ”*
* Source: Aviation International News (ARG/US ), March 2011
REALIZING EFFICIENCIES
Fleet expansion drives recurring maintenance and management fees
– $55.9 million for the first 9 months of fiscal 2011, up 2.5% year-over-year – $73.0 million for fiscal 2010, up 3.2% year-over-year
Leverage opportunities
– Fewer repositioning flights
– Fewer charters
– Decrease in overall costs of flight operations
Superior flight optimization technology
– Fully integrated in March 2010 and approved by FAA in April 2011
– Increasing utilization: expect to gain ~100 hours of revenue generating flight capacity per aircraft
– Automated flight tracking, scheduling and adding new legs to the trips provide increasing efficiencies
THIRD QUARTER FISCAL 2011 HIGHLIGHTS
• Total revenue increased to $36.5 million, compared with $36.0 million in the third quarter of fiscal 2010.
• During the Company’s seasonally slowest sales quarter, 9 new fractional shares were sold, in addition to 5.5 fractional leased shares through the Company’s newly introduced Axis Lease Program.
• Flight hour cards sold in the fiscal 2011 third quarter increased 24% year-over-year to 102 and six new Axis Club memberships were sold.
• Revenue generating flight hours flown reached a new third quarter record of 10,582. This is an increase of 10% compared with 9,623 hours in the third quarter of 2010.
• Fractional owner hours flown increased 2% to 8,032, up from 7,878 in the third quarter of fiscal 2010.
• Operating income was $62,000 and EBITDA profit was $0.9 million, compared with operating income of
$501,000 and EBITDA profit of $1.8 million for the third quarter of fiscal 2010.
• Net loss attributable to common stockholders decreased $3.1 million sequentially to ($1.3) million, or ($0.05) per share, based on 26.4 million weighted -average shares outstanding.
• Retired approximately $1.2 million in long-term debt during the quarter bringing the fiscal year-to-date total debt retirement to $9.2 million.
• Cash flow from operations for the nine months ended March 31, 2011 was $4.9 million.
• Strengthened fleet with the delivery of 56th aircraft and put down deposits on three additional aircraft, which AAIR anticipates to take delivery on in calendar 2011, with the first two anticipated in August.
• G&A costs increased by 8.5% sequentially and will continue to increase through fiscal year-end to support fleet expansion and provide a strong operational base for fiscal 2012.
• Sole fractional share / flight hour card fleet operator of the Piaggio Avanti
– Lowest fuel burn and fuel surcharge*
• Average of 40% more fuel efficient than comparable jets
• Average of 35% less carbon emissions than comparable jets
• TerraPass: Offset over 13.3 million pounds of carbon dioxide
– Largest cabin in category
– Short runway capability
• Substantial leverage in business model
– Increase in fleet size reduces operating costs
– Opportunity for significant margin growth
• Single type aircraft fleet
– Lower maintenance and training costs
– Fewer parts in inventory
• Company -owned FBOs
* Source: Seasons Consulting, October 2010
EXPERIENCED MANAGEMENT TEAM
Steven F. Santo Avantair Founder
Chief Executive Officer Former Assistant District Attorney in NY
Former Managing Partner, Fields, Silver & Santo Former CEO of Skyline Aviation, aircraft leasing company Pilot for 20 years Over 1,000 flight hours in the Piaggio Avanti
Richard Pytak Former Treasurer at Gibraltar Industries Chief Financial Officer Former Senior Manager at PricewaterhouseCoopers
Kevin Beitzel
Former Executive VP of Maintenance and Operations Chief Operating Officer Over 20 years experience in aviation industry 16 years with US Airways
OUR BUSINESS AVANTAIR PROGRAM SUMMARY
Avantair Fractional Ownership AXIS Lease Program
Edge Time Card Hourly Operating Cost*: Hourly Operating Cost*: Hourly Operating Cost*: $3,676 $4,515 $2,610 (25 hour card) (1/16th share)
Program Highlights:
Program Highlights: Program Highlights:
· Low upfront costs
· One-time acquisition cost; no · All inclusive, one-time cost hourly cost · Reduced hourly rates
· 15 or 25 hour cards available
· Customizable fractional share sizes · 2-year minimum lease
· 12-month term
· 5-year term · No restricted travel days
· Only 10 restricted travel days per
· No restricted travel days · Customized share sizes year
· Expanded Primary Service Area · Attractive conversion options · Expanded Primary Service Area available
· Lower operating cost per hour · Conversion options available than other fractional programs · No residual risk
* Includes FET
TOTAL MARKET SHARE
Fractional Aircraft Market Share of Major Fractional Operators
11%
Avantair
38%
NetJets
Flight Options, 51% FlexJet, CitationAir
• Five companies have 11.0% or more of the total market for fractional aircraft, based upon unique owners
• Avantair holds 11% market share
Source: Percentages are based on data derived from the 10-31-09 JetNet Fractional Report
LIGHT-CABIN MARKET SHARE:
MEASURED BY NUMBER OF FRACTIONAL OWNERS
• Avantair has the highest market share of 28% as measured by number of owners in the light-cabin category
• Low hourly cost continues to attract former owners of shares in jets at the competing fractionals to Avantair
Source: AvData Fractional Aircraft Report, June 2010
LIGHT-CABIN MARKET SHARE: HOURS UNDER MANAGEMENT
• Based on fractional hours under management in the light-cabin category, Avantair has the highest market share of 27%
Source: AMSTAT June 2010
** NetJets hours under management exclude the hours registered under Marquis Jet Holdings
AVANTAIR FRACTIONAL OWNERSHIP Year One Operating Cost Comparison
Aircraft Description:
Flight
Avantair CitationAir Options NetJets NetJets Flexjet Make Piaggio Cessna Embraer Raytheon Cessna Bombardier Model Avanti CJ3 Phenom 300 Hawker 400XP Encore Lear40XR
Acquisition Cost $ 425,000 $ 518,432 $ 525,000 $ 165,000 $ 275,000 $ 560,000
Share Size 1/16 1/16 1/16 1/16 1/16 1/16 Maximum Hours per Year 50 50 50 50 50 50
Unit Operating Costs:
Occupied Hourly Rate $0 $4,464 $1,400 $1,842 $1,837 $1,930 Fuel Surcharge/Hour* $304 $228 $744 $753 $763 $1,048 Monthly Management Fee $9,950 $ - $6,500 $8,040 $9,194 $7,850
Year One Annual Operating Costs:
Occupied Hourly Cost $ - $ 223,200 $ 70,000 $ 92,100 $ 91,850 $ 96,500 Fuel Surcharge Cost $ 15,200 $ 11,400 $ 37,200 $ 37,650 $ 38,150 $ 52,400 FET (7.5%) $ 10,095 $ 17,595 $ 13,890 $ 16,967 $ 18,025 $ 18,233 Management Fee $ 119,400 $ - $ 78,000 $ 96,480 $ 110,328 $ 94,200
Total Annual Operating Costs $ 144,695 $ 252,195 $ 199,090 $ 243,197 $ 258,353 $ 261,333
Effective Hourly Rate of Operation $ 2,894 $ 5,044 $ 3,982 $ 4,864 $ 5,167 $ 5,227
Yearly Cost Savings With Avantair 44% 29% 42% 45% 46%
* Fuel surcharges based on July 2010 Prices subject to change
ECO-FRIENDLY OPERATIONS
Luxurious Private Jet Travel with Minimum Carbon Footprint
• Standard setting aircraft
– First fleet in the industry to offset aircraft carbon emissions
• Lowest fuel burn and carbon emissions in the industry
– Burns average of 40% less fuel than competitors at 450 mph
– Average of 35% less carbon emissions
– Lower overall costs
• TerraPass
• Funds US clean energy and greenhouse gas reduction projects
• Purchased flight TerraPass credits for all new owners
• Offset over 13.3 million pounds of carbon dioxide
* Source: Aviation Research Group US (ARG/US ), October 2009
REVENUE AND OPERATING RESULTS
* Includes increased flight operations costs from the strategic acceleration of fleet maintenance during the fourth quarter of fiscal 2010 through the second quarter of fiscal 2011 to strengthen fleet availability in response to strong sales and increasing customer base.
NON -GAAP MEASURES
The following table reflects the reconciliation of net loss, prepared in conformity with Generally Accepted Accounting Principles (GAAP) to the non-GAAP financial measure of EBITDA.
Reconciliation of GAAP Net Loss to EBITDA:
The Company believes that the non-GAAP financial measure of EBITDA is useful to investors as it excludes certain non-cash expenses that do not directly relate to the operation of aircraft. This measure is a supplement to accounting principles generally accepted in the United States used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP measure may not be comparable to non-GAAP measures of other companies.
NON -GAAP MEASURES
The following table reflects the reconciliation of total revenue and net loss, both prepared in conformity with Generally Accepted Accounting Principles (GAAP), to the non-GAAP financial measures of total revenue before fractional aircraft sales revenue and net loss before fractional aircraft sales revenue and cost.
Reconciliation of GAAP Total Revenue to Total Revenue Before Fractional Aircraft Sales Revenue and GAAP Net Loss to Net Loss Before Fractional Aircraft Sales Revenue and Cost:
The Company believes that these non-GAAP financial measurements are useful to investors as they highlight results of operations from fleet management. These measures are supplements to accounting principles generally accepted in the United States used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.
THE PIAGGIO AVANTI
As the best value in the private aircraft industry, the Piaggio Avanti offers an unparalleled combination of comfort, speed, performance, safety and efficiency.
Avantair, Inc.
(OTCBB: AAIR)
Headquartered in Clearwater, FL
727.538.7910
www.avantair. com