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The Downfall of Avantair
Avantair, founded in 2003, used to fly high during its early years. It was the fifth largest company offering fractional ownership of the aircraft Piaggio Avanti P.180, which is the world’s fastest turboprop. The Piaggio Avanti can fly as fast as most light cabin jets but has a cabin size as most midsize aircraft. It also operates as a fixed-base operations or FBO facility that provides services such as deicing, fueling, hangar rental, maintenance and restoration and ramp fees.
The company thrives on providing the benefits of private aviation to many people but at a lower cost. Avantair provides the luxury, convenience, time flexibility and safety of a private flight to its shareholders and private jet charter cardholders,which were once experienced only by high-profile individuals and large companies.
With the rise of a number of frequent travelers and the demand for commercial air transportation, Avantair’s revenue grew from $7.7 million in the fiscal year 2004 to $26.2 million in FY2005 and $49.2 million in FY2006. At the time, Avantair owned 25 Piaggio planes with 58 planes in order.
However, the company suffered losses since the beginning of its operation due to further investments in infrastructure and expansion. In FY2004, the company’s net losses amount to $5 million then $8.7 million and $20.7 in the next two fiscal years respectively.
To get the capital to increase its fleet and expand FBO facilities, the company was publicly traded and was acquired by Ardent Acquisition, a New York-based firm that invests on operating businesses.
Ardent Acquisition purchased Avantair for an initial payment of $41 million. Ardent offered to initially buy 7 million shares and to assume Avantair’s $33.6 million debt. Additional payments to Avantair’s stockholders will also be made if milestones are achieved depending on the fractional company’s future revenue performance.
Avantair was finally acquired by Ardent in 2007 and promised additional payments for 1 million shares if operating cash flow for FY2007 is equal to or higher than $6 million, another 6 million shares if it is equal to or more than $20 million for FY2008 and another 5 million shares if stock price reaches the target.
Ardent decided to retain the fractional company’s management team and plans to grow its fleet, expand its FBO business to diversify revenues and lessen repositioning cost.
As years passed, Avantair was involved in major issues that involve safety and maintenance of its fleet. In October 2012, the company grounded its fleet after an incident where the left-hand segment of the plane’s elevator was missing during an inspection. In June 2013, the company grounded its fleet again due to incompliance of maintenance standards particularly the replacement of time-sensitive parts. Avantair was even accused of transferring parts from one Piaggio Avanti to another just to keep the other planes flying to those in need of private jet charter.
At the same month of the same year, the fractional company furloughed its employees. The management looked for alternative ways to finance its operations despite facing legal issues such as class action lawsuits and individual lawsuits. In January 2014, Avantair finally declared bankruptcy and auctioned what is left of the company.