US would-be start-up Avatar Airlines has again submitted ambitious business plans to regulators, after failing in previous attempts to obtain a declaration of financial fitness.
US would-be start-up Avatar Airlines has again submitted ambitious business plans to regulators, after failing in previous attempts to obtain a declaration of financial fitness.
Avatar claims that it plans to raise $300 million to fund the acquisition of 14 Boeing 747-400s configured with 581 seats. It has also set out intentions to fund expansion to a fleet of 30 747-8s through an initial public offering in three to five years’ time.
The US Department of Transportation has yet to respond to this latest iteration of the company’s strategy.
It dismissed a previous filing by Avatar in 2017, after several years of trying to obtain more detailed information about the company’s plans for a private placement to raise $300 million, and describing its application as “largely deficient”.
“We have no reason to expect that that the applicant will be able to obtain the financing necessary to meet our financial fitness requirements in the foreseeable future,” it added, dismissing the application in order to avoid tying up resources which could be spent on assessing operational carriers.
Nevada-based Avatar was originally incorporated as Family Airlines in 2004, and adopted its current name nearly about a decade ago.
Its revived filing to the Department of Transportation, dated 19 November, contains an enthusiastic and extraordinary narrative in which it describes its business plan as a “radical departure from the norm” which is “laser-focused on passengers’ paying less and getting more”.
It claims it can tap the advertising market to provide the income stream necessary to cut fares to “ultra-low” levels.
“Nothing will be sacred,” it says. “Anything that you see or touch will be available for purchase.
“Management even envisions patrons using the restroom and being ‘greeted’ by a named brand bathroom tissue company when they look inside the lid of the lavatory bowl.”
It has retained the $300 million initial funding plan, stating that up to 20 million shares will be offered privately, with a minimum investment of $75,000 per purchaser – the equivalent of $15 per share.
The company says it intends to raise net proceeds of $279 million through the offer, but adds that it has “no other prospective source of capital” other than this share sale.
Avatar’s business plan envisions achieving unit costs “well below average” and, with the high-density 747s, claims it will be able to offer fares of $79 on transcontinental services and $99 to Hawaii, falling to as low as $19 for shorter flights.
