Over 30,000 machinists and aerospace workers at the company walked off the job Friday after a large majority rejected a tentative contract. A Bloomberg Intelligence analysis predicted Monday that Boeing could be out $3.5 billion in cash in the third quarter if the strike continues through September.

According to the Bloomberg report, the cash loss could reduce Boeing’s balances to $9 billion—near the minimum for the company. The largest driver of results in sales will be 737 deliveries, which Boeing will have made 78 of for Q3 versus 70 in Q2. The report stated that defense and Global Services are expected to perform similarly to Q2.

Boeing Cuts Costs

Boeing executive vice president and chief financial officer Brian West told employees in an emailed memo that the company would take actions to preserve its cash, including:

• Starting a hiring freeze across Boeing for all levels, and pausing any pay increases associated with internal executive and management promotions.
• Stopping any travel that is not for critical customer, program, regulatory or supply chain activity.
• Suspending nonessential capital expenditures and facilities spending.
• Suspending outside consultant spending and temporarily releasing nonessential contractors.

“… [W]e are planning to make significant reductions in supplier expenditures and will stop issuing the majority of supplier purchase orders on the 737, 767 and 777 programs,” West said in the memo. “We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks.”

Which Airlines Will Be Impacted?

Bloomberg Intelligence stated that airlines most affected by Boeing’s strike will be Ryanair, Southwest Airlines, United Airlines, and Alaska Airlines. While it’s not in the high-demand season, this is expected to predominantly affect U.S. air travel.

The report stated that the most-affected airlines in the near term appear to be Southwest, Alaska, Aeromexico, and Jin Air of Korea, all of which are expecting two deliveries in the remaining half of September. With vacation season waning in the U.S., Bloomberg estimates a minimized impact from delays.

Editor’s Note: This article first appeared on AirlineGeeks.com.

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A Form 10-Q—a quarterly financial report submitted to the Securities and Exchange Commission— filed by Volato on August 14 showed the company spiraling into the red, recording a net loss of $34.3 million for the six months ending June 30. The same form stated Volato has a negative working capital of $18.2 million and an accumulated deficit of $98 million as of June 30. Net cash used in operating activities for the six months was $7.4 million.

“These above matters raise substantial doubt about the company’s ability to continue as a going concern,” the form stated. “During the next [12] months, the company intends to fund its operations through a combination of issuing debt and equity as well as the sale of aircraft at a premium to cost.”

Additionally, the form stated that management believes that its current cash position will allow Volato to continue as a going concern and to fund its operations for at least one year from the date the financials were made available.

The filing also stated that on June 18 Volato received a notice from the New York Stock Exchange (NYSE) advising the company that it is not in compliance with NYSE American continued listing standards, requiring it to have stockholders’ equity of at least $2 million if it has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years.

Section 1003(a)(ii) of the Company Guide also requires a company to have stockholders’ equity of at least $4 million if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.

Volato stated in the form that the company has submitted a plan to the NYSE American LLC on July 18, outlining actions the company will take to regain compliance by December 18, 2025.

“The notice does not affect [Volato’s] ongoing business operations or its reporting requirements with the United States Securities and Exchange Commission,” the form stated.

‘Rightsizing’

In a company letter from Volato CEO Matt Liotta obtained by FLYING, Liotta explained the decision to “rightsize” the company’s fleet and crew by removing five leased planes and furloughing some of its pilots.

“This is not a decision we take lightly, and it is the first time we have taken such a step,” Liotta stated in the letter. “However, I want to emphasize that this decision is based on our need to align with both the timing of new HondaJet deliveries, in which we have full confidence, and the pace of demand growth.”

In that statement, Liotta referenced Volato’s 2023 purchase of 25 HondaJets from Honda Aircraft company. These jets were slated to be delivered by 2025, but Liotta said delayed deliveries of the new aircraft and lower than expected sales have put financial pressure on Volato.

He also said demand for Volato’s services, while up, aren’t as high as anticipated.

“This situation requires us to make some difficult but necessary adjustments,” Liotta said.

He went on to say that Volato had been working closely with Honda to increase the availability and utilization of Volato’s fleet.

“…We’ve made substantial progress that allows us to fly individual planes more efficiently, meaning we can meet our flight hour needs with fewer planes,” Liotta said. “This not only strengthens our financial position but also benefits our fractional customers by delivering more revenue share to them—a true win-win.”

After attempts to renegotiate Volato’s more expensive plane leases, Liotta said that the company was unable to reach acceptable terms and decided to end those leases. By flying more hours per plane, he said the company aims to enhance its profitability and attract more interest in its fractional ownership program.

“This decision is about managing our business wisely and positioning Volato for long-term success,” Liotta said. “By rightsizing our fleet and crew now, we’re setting ourselves up to navigate these challenges effectively and prepare for future growth. Thank you for your continued dedication and resilience. We will get through this together and come out stronger on the other side.”

Volato lost over $17 million last quarter and currently has $5.8 million in cash. Volato did not immediately respond to FLYING’s request for comment.

Jet It Déjà Vu

Readers may recall FLYING parent company Firecrown owner and CEO Craig Fuller’s article last summer detailing the demise of Jet It, another fractional ownership charter jet operator. 

“Jet It generated revenue through several major sources— fractional-owner hourly fees; monthly maintenance fees; up-front selling of aircraft fractional positions; and off-network charter flights,” Fuller, who was also a Jet It fractional owner, wrote in the article analyzing its business model.

The flaws in this model emerged when Jet It—-contractually obligated to guarantee fractional owners aircraft availability within 72 hours advance notice—was required to go into the charter market and purchase aircraft time at the charter market’s clearing rate. Fuller stated that these rates were often five times the rate that the fractional owner was paying Jet It for the same service.

Additionally, a key driver of Jet It’s cash flow was in selling fractional aircraft positions—especially during the start of the pandemic.

“In the early days of COVID, as interest around personal aviation exploded, so did cash flow opportunities for Jet It,”  Fuller wrote. “In fact, it is likely that the company relied too heavily on this source of cash to fund its operations.”

Fuller wrote that in 2021, and 2022 supply chain issues started to impact Honda Aircraft Company, and Jet It could not source as many airplanes to sell to members. This caused cash flow from new fractional sales to dry up, severely impacting Jet It’s business model.

Jet It closed down on May 24, 2023.

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According to several sources that reached out to FLYING, Jet It has begun a significant round of furloughs, capping a rough weekend for the company in which it has also voluntarily grounded its fleet and paused operations.

In its recent series of decisions made following a runway overrun accident of a HondaJet last week in South Carolina, Jet It moved first to a “safety stand down,” according to an email sent by CEO Glenn Gonzales to company stakeholders on Monday.

• READ MORE:  Jet It Grounds Fleet of Honda Aircraft

“After careful consideration of this and other recent similar events, we have made the difficult decision to implement a safety stand down as of May 18, and ground this aircraft type in our fleet effective immediately,” said Gonzales. “Jet It has taken this precautionary measure to ensure the safety and well-being of our passengers, pilots, and the integrity of our operations. The stand down will be focused on reviewing policies and procedures for the safe operation of the HondaJet aircraft and gathering more information.”

HondaJet Owners and Pilots Association Responds

In its separate response to a series of 8 accidents that have taken place involving HondaJets over the past year, the HondaJet Owners and Pilots Association had already called for its own safety analysis, and subsequent informational sessions and training for operators to address those concerns at a future date—with no current pause in operations. In a video to its members, HJOPA executive director Julie Hughes framed the association’s position.

“All of you are experienced pilots, and while you have your own ideas involving each of these events, it’s critical that we do not jump to conclusions  or make unfounded assumptions,” said Hughes. “Instead, we are allowing the data to inform us about this concerning trend within our platform. This data-driven approach will guide us in taking appropriate actions to enhance the safety of each of our operations.” HJOPA is working in concert with Honda Aircraft Co., FlightSafety International, and its board and membership.

The “organized break in aviation activities” planned by HJOPA stands in contrast to the emergency-style “stand down” in progress at Jet It.

The Jet It Model

Jet It has positioned itself uniquely in the market, offering share owners use of the fractional fleet at a relatively low rate of $1,600 per hour. When the company is able to serve its customers utilizing its fleet, it typically makes a modest amount per hour on the transaction. But if the fractional has to fulfill a customer request for service with an aircraft outside of its fleet, that margin erodes sharply. 

In the midst of a dispute regarding service from Honda Aircraft Co., Jet It announced it would pivot its fleet away from the HA-420 and to Embraer’s Phenom 300. Part of the reason Gonzales gave for the change was in the “more than $20 million” in off-fleet expenses since 2020 that Jet It had to absorb—which it blamed on the poor service record for the HondaJet.

Honda Aircraft Co. (HACI) responded with a breach-of-contract lawsuit filed against Jet It, saying it had violated certain agreement terms and defamed the OEM with its disparaging statements. HACI dropped the lawsuit in a confidential settlement in April, and it confirmed that it considered Jet It a customer it would continue to provide service for as agreed upon.

However, Jet It’s own customers have reported significant fall off in service levels since the beginning of 2023, to the point of unreliability. Combined with the word from two former executive-level employees (speaking on condition of anonymity) that Jet It has begun furloughing personnel at all levels of the enterprise supports speculation that the business is in serious condition.

FLYING will be updating this story as more information becomes available.

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