The Future of Advanced Air Mobility

Market Gives Cool Reaction to Surf Air Mobility's NYSE Listing

Some emerging advanced air mobility companies continue to face significant financial headwinds as witnessed by the decidedly cool market reaction to Surf Air Mobility’s direct listing on the New York Stock Exchange (NYSE) late on July 27. Its initial sale price was trading at $5 per share—well below the $20 reference price set by the exchange.

As the day went on, the price then tumbled to $2.75 before trading in the company was briefly halted due to stock price volatility as it continued to fall. Surf Air stock opened at $2.64 on July 28 and closed trading that day at $2.55. The current share price gives the company a market capitalization of less than $500 million, substantially below a $1.2 billion valuation projected just two months ago during a fundraising round, but still an enterprise value of 25 times its annual revenue. Surf Air Mobility, which in November abandoned an earlier plan to merge with special purpose acquisition company Tuscan Holdings, said it will receive no direct proceeds from the offering.

Surf Air Mobility plans to operate a fleet of hybrid-electric and all-electric Cessna Caravans to provide regional passenger service, and is developing supplemental type certificates for this conversion with companies including AeroTec, MagniX, and TAI. The day before its stock listing, it merged with Southern Airways Express, an operator with 39 Cessna Caravans in passenger service mainly serving 37 airports with FAA Essential Air Service contracts. Combined Surf Air and Southern Airways operations in 2022 carried more than 450,000 passengers on over 75,000 flights to 48 U.S. cities, mainly using smaller airports.

In a presentation for investors, Surf Air said it intends to order up to 150 more Caravans from the manufacturer Textron to expand its flight network. The company also intends to help smaller operators to electrify their fleets by arranging aircraft financing and access to Surf Air's operating software, including its flight booking app.

In its pre-listing Form S-1 financial documents filed by the U.S. Securities and Exchange Commission, Surf Air Mobility detailed a variety of challenges, including continuing operating losses, mounting debt, and unpaid federal and local tax liabilities. These included operating losses of $96 million since 2021, a net loss of $20.5 million for the first three months of 2023, total liabilities of $124.2 million as of the first quarter, and just $241,000 cash on hand at the close of that period.

Among risk factors, the prospectus acknowledged Surf Air will require additional financing to implement its business plan. In May 2022, Surf Air first announced plans for an initial public offering, indicating that it expected the plan to raise almost $470 million to fund the development of electric aircraft.

At the close of the first quarter, Surf Air Mobility owed the federal government and various California counties a combined $8.3 million in back taxes and various vendors $6 million in “past due” amounts on aircraft leases and related expenses. Combined operations for Surf Air Mobility and Southern for the first quarter, according to the filed S-1, show losses of $22.7 million for the period on $28 million in revenues.

Still, some of Surf Air Mobility’s investors seem undeterred. After the company’s decidedly shaky stock listing yesterday, William Woodward, the managing partner of Anthem Venture Partners, an early Surf Air backer providing seed money and leading Series A financing, said, “The successful listing of Surf Air Mobility is a testament to the team's dedication to creating innovative aviation and technology solutions for new EV air mobility. We are proud to have supported Surf Air Mobility’s growth and development, and we believe their public listing will further accelerate their positive impact on the aviation industry.”