VistaJet CEO Rebuts Reports of Financial Distress

VistaJet founder and chairman Thomas Flohr has been countering reports that the private jet prepaid aircraft charter subscription service provider is facing any financial difficulty. The denial came even as The Financial Times reported that the privately held company’s auditor had issued a “going concern” warning, its had debt doubled to $4.4 billion, cumulative net losses over the last four years had been $436 million, and cash on hand had dwindled to $134 million against $831 million in prepaid flights. 

A ”going concern” opinion is not necessarily a harbinger of bankruptcy, but it can adversely impact credit ratings and increase the cost of borrowing, according to a 2022 study in the Accounting Research Journal. VistaJet’s unsecured debt rating from Fitch earlier this year was “BB-,” defined as “debt instruments that are generally considered speculative in nature,” according to Investopedia. The new debt was assigned a recovery rating of RR3 by Fitch, meaning it has “characteristics consistent with securities historically recovering 51–70 percent of current principal and related interest.” 

The revelations come days after Wheels Up CEO Kenny Dichter resigned amidst continuing large losses at that membership charter provider, and some industry analysts were quick to draw parallels between the two companies even though they operate with significantly different business models, ownership structures, and financial results. VistaJet is the world’s second-largest provider of private lift, behind NetJets, as measured by annual flight hours, and focuses on customers who fly at least 100 hours annually. It is privately held, with Flohr, a Swiss fintech billionaire, believed to own more than 80 percent of the company personally. 

Flohr said the losses were largely driven by the conservative 13-year depreciation schedule VistaJet takes on its owned jets, as opposed to a mark-to-market strategy, which uses current valuations, and that the company had positive earnings before interest, taxes, depreciation, and amortization (EBITDA) of $800 million in 2022, even while posting a net loss. However, the use of EBITDA as a reliable measure of a company’s long-term economic health remains a controversial metric as it omits capital costs. In an interview with U.S. financial news network CNBC, he said the company’s cash position was a momentary snapshot at the end of 2022 and that the company’s actual direct cost of delivering flights is roughly 22 percent of prepayments.

The company’s fleet numbers 360 owned and/or operated aircraft including 43 Bombardier Global ultra-long-range, large-cabin jets, 18 of which are Global 7500s. It added another 30 aircraft to its fleet last year. Flohr said the company flies each aircraft between 1,000 and 1,500 hours per year. Over the last two years, it issued another $1.5 billion of unsecured debt—$1 billion at 6.375 percent interest last year and a five-year, $500 million bond offering at 9.5 percent this year (against a current prime rate of 8.25 percent). In a news release, parent company Vista Global Holdings said the latest debt offering was “two times oversubscribed” and “attracted overwhelming interest from leading institutional investors and pension funds.”

Cumulative debt was driven by VistaJet’s rapid expansion via a string of acquisitions between 2018 and 2022, including charter operators XOJet, Jet Edge, Talon Air, Red Wing Aviation, and Air Hamburg; charter broker Apollo Jet; and charter platforms Camber Technologies and JetSmarter. However, those acquisitions also fueled the company’s rapid growth. Flohr laid out his vision for not only his company but the industry earlier this year in an interview with business consultancy McKinsey. “One thing on my mind a lot is that we have a massive consolidation process happening right now in this industry. There are thousands of small operators around the world. If you look at the history of any industry over time, there is generally consolidation because it helps with buying power, with reach, with infrastructure, with efficiencies, with technology investments, and so forth,” he said.  

VistaJet reported a “record” first quarter this year, with a 55 percent year-over-year growth in subscription hours sold, a doubling of program hours sold into the U.S. market, and a 50 percent jump in sales into the Middle East. In a press release issued with those results, Flohr said that “Vista has a proven 19-year track record of growth and a prudent financial policy, which has enabled the group to build our global infrastructure to support all of our valued members around the world.”