Monday, March 17, 2008

POGO IPO Delayed - maybe indefinitely

POGO is another start-up Air Taxi operator, basing their business on the much maligned Eclipse 500. They were planning a stock issue of approximately $100 million, mainly for the purchase of aircraft. POGO is led by Robert Crandall, ex-AMR / American Airlines Chairman.

This week, their investment bankers were supposed to set the price, but has since delayed the offer due to lack of interest.

Everyone knows of the turmoil in the capital markets so it clearly is not the best time for any company's IPO, let alone anything aviation related. Airlines have a long history of exaggerating market cyclicality. If we are in a recession, airlines will suffer more than most.

Nevertheless, I have serious doubts about the POGO model. According to their last S-1, they were planning on using the Eclipse 2000 hrs / year. I can't imagine how they would get that kind of dispatch ratio. The Eclipse is having significant problems with delayed FIKI, Moving map / GPS, Autopilot and EASA certification. The shortest of due diligence would see through this.

DayJet, the major current operator of Eclipses as Air Taxis, is expanding but still significantly under utilizing their fleet of 28 planes, as you can see in these detailed stats. DayJet is in the Southeast US. POGO was supposed to operate in the Northeast. For reliable business purposes, it is simply impossible to operate a non-FIKI plane of any type in the Northeast winter.

So even if the economy and IPO market were favorable, I'm skeptical of the Eclipse and Air Taxi operators that base their business upon it.

No comments: