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Global Airlines Pivots Business Model, Expects Saudi Investment?
Unusual Airbus A380 startup Global Airlines recently operated its first flights, which were two one-off roundtrip transatlantic journeys. These were ”proving flights,” though the reviews weren’t great, and the flights reportedly had fewer than 100 people each on them, so I’m not sure what exactly was being proven.
Unusual Airbus A380 startup Global Airlines recently operated its first flights, which were two one-off roundtrip transatlantic journeys. These were “proving flights,” though the reviews weren’t great, and the flights reportedly had fewer than 100 people each on them, so I’m not sure what exactly was being proven.
Understandably, the big question is what’s next for the airline. After all, the company has been promising it would operate regularly scheduled flights across the Atlantic, taking on established players like British Airways and Virgin Atlantic. So there’s an interesting update, along those lines…
Global Airlines reportedly has a new business model
Aviation Week has some interesting updates about Global Airlines, according to “sources familiar with the proposed deal.”
First of all, Kingdom Holding Company, a major Saudi Arabian investment group, is reportedly “in negotiations to take a substantial equity stake in Global Airlines.” As it’s described, this would enable the airline to fund and accelerate plans to acquire four A380s. Currently, the airline has a single A380, which is a former China Southern jet.
Second of all, the airline reportedly plans to modify its business model. The airline no longer plans to concentrate on scheduled operations using its own brand. Instead, it plans to switch to an aircraft, crew, maintenance, and insurance (ACMI) model. In other words, the airline wants to become a wet lease operator, and lease planes to other airlines to fill in gaps in demand. Keep in mind that the airline doesn’t actually have its own air operator certificate, so as things currently stand, it can’t do that directly.
The claim is that the strategy is being changed due to the demand for wide body aircraft on short and medium haul routes, due to delivery delays of new aircraft from Airbus and Boeing.
My take on this Global Airlines development
Let me try to stay as sass-free as possible here, because, well, there’s a lot more Global Airlines news coming soon, and not necessarily in the way you’d expect (or maybe exactly in the way you’d expect).
A Saudi Arabian investment firm is “in negotiations” to take a substantial stake? Well, if there’s one thing that Global Airlines CEO James Asquith is good at, it’s raising money. He’s phenomenal at it. He did it at Holiday Swap, and he has done it with Global Airlines. Based on the presentations I’ve seen, the company sure has some strong projections, and promises lofty returns to investors.
Will this investment actually happen, or is the intent that this triggers investments from other parties, given that the Saudis are reportedly interested and nearing an investment (“invest now, because soon our valuation will go up to [insert amount]”)? I don’t know, but I guess we’ll find out soon.
As far as the pivot to being a wet lease operator… I mean, I guess that makes more sense than Global Airlines operating its own commercial flights, but it still doesn’t make a whole lot of sense. Keep in mind that Global Airlines doesn’t have an air operator certificate, but instead, the airline uses Hi Fly, which is also a wet lease operator.
So if I’m understanding this correctly, Global Airlines is looking for investors, so that the airline can buy A380s, so that it can then pay a third party (Hi Fly) to operate wet lease flights on behalf of other airlines? That… doesn’t strike me as particularly efficient, or a recipe for profitability.
Keep in mind that Hi Fly (one of the world’s most reputable wet lease operators) actually tried exactly this at one point. The airline acquired an A380, with the goal of leasing it out, exactly as Global Airlines is proposing. It failed pretty quickly, and the plane ended up being parted out.
There’s absolutely a market for wet lease operations. However, the A380 isn’t the right aircraft for that, in my opinion. It boasts too much capacity, it can’t fly to all airports, etc.
Like, what is Global Airlines realistically expecting? Yes, Airbus and Boeing are experiencing delivery delays, but for 787s and A350s, and not A380s. “Hey United, I know your 787s are a bit late, but we can give you four A380s, are you interested?” If the business model is really just to acquire four A380s and wet lease them out… well… good luck?
Bottom line
Many of us wondered what Global Airlines would do after its two “proving” flights. Now we know. The airline reportedly wants to become a wet lease operator, and acquire a fleet of A380s, so that it can lease them out to other airlines.
Very few airlines want want A380s in the first place, and even fewer airlines want to lease them. We know this because Hi Fly did exactly that, and the strategy failed. The claim is also that the airline is in negotiations for a new investment from Saudi Arabia.
What do you make of this Global Airlines update?
