On-Demand Air Travel
Financing in the Public Markets
Very Light Jets – Middle East
Dubai, UAE
March 10, 2008
Kris Tuttle,
Director of Research
kris@research2zero.com
Dubai - March 10, 2008

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
Dubai - March 10, 2008

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
Dubai - March 10, 2008

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).
Dubai - March 10, 2008

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.
Dubai - March 10, 2008

Ryanair
Dubai - March 10, 2008

Frontier Airlines
Dubai - March 10, 2008

Southwest Airlines
Dubai - March 10, 2008

JetBlue
Dubai - March 10, 2008

Expedia
Dubai - March 10, 2008

Ctrip.com
Dubai - March 10, 2008

Blackboard
Dubai - March 10, 2008

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
Dubai - March 10, 2008

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]
Dubai - March 10, 2008

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
Dubai - March 10, 2008

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
Dubai - March 10, 2008

Potentially Low WACC
We say $12…
… the market says $26.
(We still say $12.)
Dubai - March 10, 2008

Thinking Outside the Box
• Creative Finance
• OpenIPO
• Could “affinity” equity work? The Celtics
• Other Exchanges
– London, Dubai
Dubai - March 10, 2008

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
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 kris@research2zero.com.
Dubai - March 10, 2008

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
Dubai - March 10, 2008

The Foundation
• The basic stuff
– Management
– Business Process
– Financial Controls
• Secret Sauce
• Effective marketing
• Strong operations planning/execution
• Regulatory and governmental support
Dubai - March 10, 2008