Business aviation consultant Brian Foley released a statement today (May 30) analyzing a recent report in the Financial Times (FT) calling attention to similarities between beleaguered charter provider Wheels Up and Malta-headquartered VistaJet. Both follow the owned-aircraft business model and according to the FT, both are suffering financial woes, with VistaJet’s ledger sheet cited as being some $436 million in the hole over the last four years.
Foley cited VisaJet’s doubling its debt load last year to $4.4 billion—adding that even the company’s own auditors Ernst & Young “question the company’s very ability to continue as a going concern.” Though VistaJet is a private company and Wheels Up is public, Foley wrote, “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.”
As reported by CNBC, VistaJet CEO Thomas Flohr disputes the conclusions of the FT piece. He told the network, “We, as a company, both shareholders and bondholders, only focus on EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization], the cash creation of the company. The adjusted EBITDA was over $800 million in 2022. The company has a very conservative depreciation policy where over 13 years, we depreciate our aircraft to zero. That’s, as a private company, a choice we are making as a conservative policy we have in place.” Flohr acknowledged, however, that VistaJet may reconsider that strategy going forward. Asked by CNBC about VistaJet’s auditors’ concerns, Flohr responded, “If we simply change our depreciation policy … to mark to market, we are turning a profit. We might consider this in 2023 if there is noise and concern around that. That’s very easy for us to resolve.”
“…adding that even the company’s own auditors Ernst & Young ‘question the company’s very ability to continue as a going concern.’ ”
In the trade, Ernst & Young are the company’s “outside auditors.” The company’s “own auditors” would be their internal auditors, if they have any.