Jet.AI Announces Non-Recourse Debt Financing for Proposed Fleet Deal

Rhea-AI Summary

Jet.AI, a private aviation and AI company, announced a non-recourse debt financing for the purchase of Bombardier Challenger 3500 aircraft valued at $280 million. This financing, along with prior Ionic Ventures financing, supports the company's fleet expansion plan. Founder Mike Winston highlighted the significant scale increase from their previous $25 million order with HondaJet. Deliveries are expected to begin in 2026, allowing time for pre-sales and operational setup. The private aviation sector continues to offer high returns on capital investments, boosting confidence in this multi-year commitment despite industry cyclicality.

Positive

• Non-recourse debt financing secures $280 million for fleet expansion.
• Financing from Ionic Ventures supports overall fleet purchase strategy.
• Order of Bombardier Challenger 3500 aircraft increases company scale.
• Expected deliveries in 2026 allow for pre-sales and operational setup.
• Continues investment in private aviation, offering attractive returns.

Negative

• The debt financing terms are non-binding and confidential, adding uncertainty.
• Industry cyclicality poses potential risks despite high returns.

Financial Analyst

Jet.AI's announcement of arranging a non-recourse debt financing for a substantial fleet purchase is a notable development. The proposed acquisition of Bombardier Challenger 3500 aircraft valued at US$280 million signifies a bold step in their fleet expansion strategy. Non-recourse debt means that if Jet.AI fails to meet its debt obligations, only the financed aircraft serve as collateral, with no other assets at risk.

For investors, this shows Jet.AI's commitment to expanding and modernizing its fleet, enhancing its competitive position. However, it's essential to recognize that non-binding arrangements carry risks. The fate of the deal remains uncertain and the specifics of the financing terms are confidential, which means potential hidden costs or unfavorable terms could emerge later.

Furthermore, the long lead time before deliveries start in 2026 provides ample room for market conditions to change. Fluctuations in the private aviation sector, changes in interest rates, or economic downturns could impact the profitability of this investment.

While the Company's confidence is noteworthy, retail investors should maintain a cautious approach, considering both the potential returns and inherent risks of such a sizeable commitment.

Market Research Analyst

The private aviation industry remains highly cyclical, often experiencing significant fluctuations in demand based on economic conditions. Jet.AI's substantial US$280 million investment in Bombardier Challenger 3500 jets reflects optimism about future market trends. The aircraft's delivery schedule, starting in 2026, suggests that Jet.AI expects sustained or growing demand for private jet services in the coming years.

The strategy of pre-selling fractional interests in these jets can be highly lucrative if managed well. It allows the Company to capitalize on the growing demand for fractional ownership, where customers buy a share in a jet rather than owning one outright. This model appeals to businesses and high-net-worth individuals seeking cost-effective private aviation solutions.

However, it's important to consider market competition. Major players like NetJets dominate the fractional ownership market and Jet.AI must differentiate itself through superior service or competitive pricing. Investors should also weigh the impact of fuel prices and potential regulatory changes on operating costs.

Overall, while the strategy has potential, it requires adept execution and favorable market conditions to achieve the desired outcomes.

LAS VEGAS, June 04, 2024 (GLOBE NEWSWIRE) -- Jet.AI Inc. (“Jet.AI” or the “Company”) (NASDAQ: JTAI), an innovative private aviation and artificial intelligence (“AI”) company, announced the arrangement of non-binding, non-recourse, debt financing related to the proposed purchase of Bombardier Challenger 3500 aircraft valued at approximately US$280 million based on today’s list prices. The debt financing arrangement, in conjunction with the previously announced Ionic Ventures LLC financing, positions the Company well to execute on its long planned fleet order in management’s view.

Management’s Commentary:
Founder and Executive Chairman Mike Winston commented, “Today's announcement marks a significant step forward in our fleet expansion plan. Following our successful $25 million order with HondaJet, this new $280 million order with Bombardier for larger jets would represent a substantial increase in scale. We anticipate deliveries to commence in 2026, allowing ample time for pre-sales and operational preparation. Despite being a mature cyclical industry, private aviation continues to offer attractive returns on capital investment. This factor, coupled with the increased likelihood of completing the deal, reinforces our confidence in this multi-year commitment of hundreds of millions of dollars.”

Background:
In December of 2022, Jet.AI had executed a non-binding letter of intent to acquire five new Challenger 3500 super-midsize business jets from Bombardier with the intent of pre-selling fractional interests in those aircraft. Over the course of the next year and a half, the particulars of the aircraft’s specifications were negotiated in detail and the order was upsized for delivery ratably over three years beginning in early 2026.

For avoidance of doubt, the terms of the debt financing remain non-binding and confidential.

About Jet.AI:
Jet.AI operates in two segments, Software and Aviation, respectively. The Software segment features the B2C CharterGPT app and the B2B Jet.AI Operator platform. The CharterGPT app uses natural language processing and machine learning to improve the private jet booking experience. The Jet.AI operator platform offers a suite of stand-alone software products to enable FAA Part 135 charter providers to add revenue, maximize efficiency, and reduce environmental impact. The Aviation segment features jet aircraft fractions, jet card, on-fleet charter, management, and buyer’s brokerage. Jet.AI is an official partner of the Las Vegas Golden Knights, 2023 NHL Stanley Cup® champions. The Company was founded in 2018 and is based in Las Vegas, NV and San Francisco, CA.

Forward-Looking Statements
This press release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of the federal securities laws, including the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, with respect to the products and services offered by Jet.AI and the markets in which it operates, and Jet.AI’s projected future results. Statements that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our Company, our industry, our beliefs and our assumptions. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions or the negative of these terms or other similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties that could cause the actual results to differ materially from the expected results. As a result, caution must be exercised in relying on forward-looking statements, which speak only as of the date they were made. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements can be found in the Company’s most recent Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Readers are cautioned not to put undue reliance on forward-looking statements, and Jet.AI assumes no obligation and does not intend to update or revise these forward-looking statements, whether because of new information, future events, or otherwise, except as provided by law.

Contacts:
Gateway Group, Inc.
949-574-3860
Jet.AI@gateway-grp.com

FAQ

What is the value of Jet.AI's proposed aircraft purchase?

The proposed purchase of Bombardier Challenger 3500 aircraft is valued at $280 million based on current list prices.

What type of aircraft is Jet.AI planning to purchase?

Jet.AI plans to purchase Bombardier Challenger 3500 super-midsize business jets.

When are the deliveries of the Bombardier Challenger 3500 expected to begin?

Deliveries of the Bombardier Challenger 3500 aircraft are expected to commence in 2026.

What is the significance of the non-recourse debt financing for Jet.AI?

The non-recourse debt financing helps secure funding for Jet.AI's $280 million aircraft purchase, supporting its fleet expansion plan.

How does the new order compare to Jet.AI's previous orders?

The new $280 million order with Bombardier represents a significant scale increase from the previous $25 million order with HondaJet.