Transcript 0:00 All right. Good morning, and welcome to the VIP Seat. Uh, today is February 13th, and we have a little bit of a different episode today. 0:06 Usually, we just cover news stories, but today we actually have John Matthews, the chairman and founder of AirX with us. John, welcome to the show. Thanks for having me. We're, we're very excited to talk with you. 0:17 Um, I think everybody in the industry is, you know, somewhat familiar with the things that have happened and what you guys are doing. So we're, we're looking forward to, to hearing your perspective on things. 0:26 All right, folks, sit back, buckle up, and let's take off. [upbeat music] All right, John. Well, first of all, thank you for joining us. We know you have a busy schedule. You're running a busy, uh, charter airline. 0:43 Um, tell us, you know, what you're up to today. I know that, you know, you've recently received some more investments. Um, you guys are growing, seeming to do well. So just, you know, give us an update. How's AirX doing? 0:53 So we've done a Series A round, which went very well. Um, working on Series B, and it's just trying to work out who the right partner is really. 1:03 It's 100 to 150 million on what's called an accordion, so we can call upon it as we need each quarter for growth because you can only put on so many aircraft at once. 1:16 And then accelerating the business plan, which has been one for years and years. Couldn't find the capital to execute it, which is to take us to about 40, maybe 45 heavy jets, uh, within the sector. 1:29 And I mean, is this... You know, one of the questions I had too was, are there any leasing involved in your operation, or it's just straight finance and operating? Full risk, really. So it's, uh, you know, it's... 1:39 There are some leases, but they're accidental. They're not by a business plan. I like to buy the asset below Blue Book, significantly below, then do our own maintenance on it, bring it into market. 1:50 So it's, it's two things. It's quantum of capital, and then you've got to address the, the cost of capital. And so it's hunting these aircraft which have been repossessed or for sale, you know, and of a certain vintage. 2:02 So I'd be under in seconds if, if I was trying to buy a new aircraft. Yeah. No, uh, b- buying them right, you know. And I, I had the same experience at Grandview. 2:11 You know, I, I look at the market today and, and the prices of Phenom 300s, and I'm like, it'd be-- it would've been tough to have the business model that we had at the time. 2:18 You know, we bought them new, but we were buying them as fleet and, you know, getting a decent price on them. 2:23 Um, but I think that's tougher and tougher these days as, as manufacturers just aren't producing, you know, the quantity- Yeah... that they used to. Absolutely. I mean, if you look at the 2:32 live rate, so what I call bums on seat price, you know, and you divide that by the acquisition, it's quite incredible. So if you go down an Avinode quote, and you start to peel data off from it. So you say, "Okay. 2:45 My-- Let's look at any given quote on any given day, take year of manufacturer, take market price now to buy, and divide the charter price by how many live hours there is." There's no relation. 2:56 There's no relationship between my old BBJ flying for the brokers now, 2001, with a new interior, and an eighty-five million dollar purpose-built one. The hourly rate in the market is, is ten percent different. Yeah. 3:11 Well, and I haven't seen-- But we've obviously seen huge cost increases over the last couple years. I am not seeing charter rates going up in the same way. Have-- Has that been your experience as well? 3:21 The market is artificially suppressed, which people will know from my LinkedIn messages [chuckles] and articles. We live in a, quite a surreal world, really. So my understanding of private aviation, it's never doing bad. 3:34 It's supply issues. It's never decreasing charter rates. It's normalizing. But the reality of what I see is charter rates are becoming more competitive. 3:43 Cost of business is increasing, so you've got to be really clever how you make that margin and keep morale. That's a huge thing. Keep company morale, keep the margin, increase costs, flat charter rate. 3:54 Um, and then you're competing against people who have no qualms in printing hundred million dollars quarter cash loss. That, that's tough, and there aren't too many businesses I know that in the high-end luxury area. 4:06 Yeah. So yeah, it's tough, but it's exciting. It is. And, and I, I think we saw that a lot too, you know, during the SPAC boom here in the United States in particular. 4:14 You know, the market was, in a way, artificially busy with a bunch of empty legs that no one was actually paying for. A- and now we've kind of seen that go away. You know, the supplemental lift excitement i- is gone now. 4:27 You know, we don't see all those guarantees, uh, that crunch in the market. I've read every single prospectus, every promise, every forecast, every comparison with Amazon and Spotify and just think, "Wow." 4:40 I mean, is this what we've become? It's incredible. But yes, I think the SPAC boom has eased off a little, shall we say. Uh, reality has kicked in. 4:50 I mean, the biggest problem with the SPAC is that because the, the investors get around twenty percent free equity- Yes... on the first day of liquidity, you can't stop that redemption coming. 5:01 And when that redemption flows and there are no buyers, that thing tanks. Um, I can't think we've got one SPAC within the sector, not one, that has an investment bank researching the stock. 5:14 So without research documents, you're not gonna get daily liquidity up, and that's the tough thing for our sector. So no, you're not doing that. So, you know, how do you, how do you succeed in this realm where people are 5:25 raising funds, not truly profitable? I mean, you seem to be- been doing it really organically, you know, from the outside looking in. So what does that journey look like, and how do you keep fighting it? 5:33 Journey looks better if I hadn't made so many mistakes, but I truly believe that is part of business, actually, is trying to learn the way forward. I mean, look, it's quite simple really. 5:44 There is a margin that this company needs to make, and the moment that it's not making those margins, I'm cutting, I'm squeezing, and I'm out there with a fire hose. So I will not allow us to fly at net cash loss, ever. 5:59 I've been there. I've done it. I've tried to fool myself that busy schedules make sense. 6:04 Don't worry, we'll get an empty.After 14 years of chaos, that last two years, that 14 years, I'm now printing proper money and I've got there. 6:12 So in fact, I'm just doing a, um, social media video on January's announcement. So I want to try and behave like a public listed entity now. 6:19 So you can't criticize people who've got public funds and then say, "Well, actually, I wanna be a closed book." 6:23 So January is like 2 million EBITDA with 700,000 net cash, which for January is, I mean, you know, it's quite something. And then to, to circle back your question, how do I do it? It's utilization. 6:35 So the average utilization is about 1,200, 1,150 hours a year per aircraft. 6:41 So on the lineages, they're easily doing 1,300 hours a year, and that, that's I think quite good going by industry standards, in my opinion, from the due diligence I've done anyway. Yeah. 6:50 No, I think if you're, you know, over 1,000 is where you need to be from a utilization perspective to- Yeah... to really be pulling any cash out of the company. 6:58 Anyone who's not flying that much or, you know, getting paid to fly that much specifically [laughs] is gonna be- Yeah... having challenges. And I look at the asset price too. 7:06 So, so really I, I'd like on any given day to be able to cut up the aircraft into parts and assets and roughly be where I am on the acquisition. Anything more than that, I don't really know what you're buying. 7:18 I can never really work that out. So I've never understood that actually. 7:21 So for what a citation latitude, I could get, you know, two old legacies, and when I look at the legacies producing 2 million EBITDA a year, I'm thinking, "Why would we do that? It makes no sense." 7:34 I look at it as a Microsoft Excel airline and try to stay away from the jet fuel, the sexiness, the buzz of it, and the conferences where you can get yourself a bit lost on year of manufacture, and we've got a new jet. 7:45 Well, and I, I think too, the, the world's changed. I think there was a time in which, you know, a burgeoning fleet operator could get a deal. You know, they say, "Hey, I'm gonna come in. 7:53 I'm gonna buy 10 airplanes from you over this next, those next three years." 7:57 I think just because manufacturing has changed and they're going after, "Give me, give me the new first time buyer that wants to pay full price. 8:04 I'll make fewer airplanes and I will, you know, do better on my margins that way." I think, I think everyone's gone that way. I don't see any manufacturer that's really producing more quantity. 8:13 You know, they're really focusing on, on pricing and margins. And they should be because their order book is shrinking. Yeah. So- Yeah... 8:21 you know, the, we've just ordered billions of aircraft that will actually never arrive and not binding. That's great for media, but if you actually want to focus on order book, that order book is doing this. Mm. 8:31 And the only reason that number is remaining consistent with how many aircraft in the pipeline is because of supply chain issues that are pushing everything back. Mm-hmm. 8:40 So it's an interesting time, not just in operators, but in manufacturers. You can't keep having a record year. There has to be a reckoning. There aren't that many people in the world that need a brand new private jet. 8:50 Newsflash, it, you know, reality comes at some point. It-- the graph for any manufacturer is not that. 8:57 It's not one day that you taxi out of an airport and you say, "Oh look, half of it's private jets and half is low-cost airlines." There is an ending to record sales. 9:05 We're, we're looking at 2025 here in the US, and we're hoping for bonus depreciation. You know, I mean, do you think that's gonna have a meaningful impact? 9:12 I think a lot of people do think it is, you know, that they're saying, "Oh, all these buyers are just kind of sitting on the sidelines waiting for this great, you know, tax incentive." 9:20 Interestingly, although I have no business in the US, but I raise money from the US, and I pay in dollars, and I have... my only direct clients seem to be American. 9:31 Um, yes, I saw some people rush for the Trump bonus thing that came out, or whoever it did. I'm not political, by the way. I'm just doing whoever, whichever leader brought that out. 9:39 And yes, you do get a bonus depreciation. But here's the problem. I've yet to meet any aircraft owner that says, "That was a great experience." I just, I, you know, if I was you, go and put your money in owning in a jet. 9:50 It's so much fun. When the management bill comes in and the simulator and the cost, oh, it's, it gives you that little tickle feeling when you pay it. No. 9:58 So there is the bonus depreciation versus the, oh my God, corrosion. What? And that I don't think will have the same effect. So my view is that it helped, 10:09 but there's a really cool graph on the global inventory, and this tells you what it's like to own a jet. Years ago, 2008, Dick calls, uh, Texas hold 'em with the feds and he loses. Lehman Brothers collapses. 10:23 He can't believe it. He thought it was gonna be rescued, it wasn't. One of the biggest investment bank collapse in the history of the Western world occurs. 10:31 And so that inventory starts to go up and it takes over a decade or more to c- to actually correct itself. When COVID starts, it comes down dramatically. 10:40 And the funny thing is here, that when the COVID restrictions have gone and we're back to normal world and people now know what it's like to own a small jet, that V corrects itself to the point which tells you a story in data. 10:53 Almost everyone who bought a jet in COVID for the new private jet boom returned it to the market as fast as they could because they realized what, uh, aircraft ownership was like. 11:04 And- Well, and that's probably, you know, why we're seeing fractional, I think just go bananas, quite frankly. Yeah. 11:09 You know, they're beating out everybody because, you know, it's like, wow, I can have the same experience of owning, but I don't actually have to do the work and see the crazy bills. 11:16 I mean, they still get crazy bills, but- No... unexpected ones. You get no crazy bills. At least you get n- at least you get quantified crazy bills where, you know, NetJets is an incredible business. 11:24 If you, if you just sit back and look at the net cash generation of that business, wow, that's amazing. That is intelligence on steroids when aviation. But you need a massive network to feed it. 11:35 You need a massive buying power. But there is an advantage. You have one fee to pay and there's no surprises, unlike jet cards, which is the same sort of service, but with massive risk of pumping money in. I mean, 11:48 at the moment when I've just, uh, I've got some new accounts in today and I'm just reading them, I'm totaling up something in the region of $2.4 billion of outstanding jet card payments to the industry. 12:00 If I total the cash to hand, it's just under 200 million. So let's just visualize that. This isn't unpaid creditors, this isn't unpaid taxes. 12:08 This isOver 2 billion of jet card owed, serviced by two hundred million across all of them. Yeah. Where is it going? Where's, where's the reckoning? Well, I think that's a good segue into you've been very vocal. 12:21 Yeah, yeah. You've been very vocal about, you know, the issues you see in the industry, the things that you like, the things that you don't like, and I think very fair points in many ways. 12:29 But, you know, how's it affected your business, and how do you see it? I, I guess, you know, the question I think everyone would ask you is why even bother, you know? 12:36 If you have a business to run, what do you get out of it, and do you think the education is so important that you, that you really need to be out there? 12:42 So there's three answers to one question there, and I'm gonna try- Yes... to get them in order. 12:47 Let me just first of all say, I think-- So the elephant in the room is what does it feel like to be sued for three hundred and eighty-six million for a WhatsApp group, and has it affected my business? Okay. So- Yeah... 12:57 I, I, I mean, it's a bit strange really. So I'm being sued for discussing losses which have occurred and being accused for making them occur. 13:06 So I can only discuss the losses that have been printed, but I'm accused of making them occur. Interesting. 13:11 So I was threatened with court in UK, but UK we have a couple of problems like proving how you got to the damages and also evidence. 13:19 So we've gone to Malta, which isn't really built for this court case, and the answer to that, has it affected my business? Not really. Of course you have to disclose it. 13:27 You, you, you, you discuss it, but then anyone listening to it is saying, "Well, I can't quite get this. How have you caused the losses?" And I'm saying, "Well, uh, you and me are in the same camp, so we can't... 13:36 I can't wait for the trial." So that's that. Second, there is this perception which I completely forgive anyone for making, which is this mad banshee-like cry towards Vista and wheels up accounts for... 13:47 uh, when I should just be enjoying my family life here and my working life. Yes, but there's something deeper there. 13:52 And I'm a bit careful with my words, so I'm only going to talk about what's publicly available, uh, during the legal structure, as no doubt some lawyers might be on the edge of their seat listening to my words now. 14:02 So, uh, I, you know, good afternoon, and I'll, I'll be careful with what I say. 14:06 I believe that there have been attempts by individuals and operators perhaps working together or not to, to have a drastic effect against Airex, which, uh, luckily, I, I, I survived three injunction applications in Canada. 14:21 Scary times. And I promised myself after that event that I would dedicate some time towards studying the use of public money and 14:34 the intricate relationship with industry PR, which is unregulated, and the reality of accounts. 14:40 And so I think perhaps this quarter's not the time to go further into that, given that I've got to wait till things are publicly uploaded before I can talk, which I can't wait for the next one. 14:52 Uh, but this is not a unjust, unfair, sudden reaction. 14:58 This is a reaction to the defense of my family business that protects my family, my five hundred staff, and my children's future, and for that, I'm prepared to be vocal. 15:08 And I think the best defense of any defamation, which I think any lawyer watching this will be nodding their heads at this stage, is the truth. 15:15 It's very difficult to say, "Well, y-you, you've, you've gone to the FT, and you spoke to them, and you shouldn't have done." I say, "Well, even if I did, I'm not the head of legal of FT." 15:25 So if the Financial Times wants to print something based upon their own investigation or The Wall Street Journal or a German paper, that's their job. There's nothing to do with me. 15:34 So yes, I feel quite ashamed of this sector in the way that it is handling public money, and I think that that needs to change. 15:44 And to close the question, we don't have analysts, which means we don't have punchy write-up documents saying, "Look," I don't know, "Walmart's got a related party," or Ford or, you know. 15:56 And that doesn't mean those companies I've mentioned have. It just means giving examples of on Bloomberg every day, traders will be getting from analysts information on buy, sell, hold, you know, muddy waters research. 16:07 We don't have that. So what we have is we have public investing money, and I don't think they know where it's going, and it's creating personal wealth, and it's creating grand personal wealth. 16:19 And that, for me, that's not right. That's- Yeah... my answer, and I will pursue this until the last breath in me, until I'm heard, and I'm making good progress. I think you are. 16:31 I think a lot of people wanna hear what you have to say, and just to, to put it out there, like, this is not directed at any company specifically. No. 16:36 Obviously, we know there's dis-disputes between certain individuals, but I, I tend to agree with you. 16:41 I think, you know, even when we were building our business at Grandview, there was never a moment where I said, "Okay, we're just gonna burn cash, and then one day we're magically gonna make money." 16:51 Like, that was never the intent. Yes, there was kind of so... There was a six-month delay between getting an airplane onboarded and actually making money off of it. 16:59 That makes sense, but you don't build a business model saying that, "Oh, in ten years we'll be able to actually produce something for investors." 17:07 I find that unethical from, from my seat as an entrepreneur, and yes, it may mean growth isn't ca- you know, isn't this giant hockey stick, but it's also I think a really rational approach to building a business. 17:19 I don't think it's put a bad taste in investors' mouths at this point to say, "Well, private jet companies can't make money." Like, well, they can- Yes, they can. Yeah... if they're run properly and, and carefully. 17:29 Um, a-and, and there's a lot of claims too that, oh, you have to have a hundred airplanes to make money. You absolutely don't. You know, I had t-twenty aircraft, and we had excellent EBITDA results. Yes. Yeah. 17:40 I'm actually working with someone now to publish some of the information so that it's very transparent and clear that, no, this is possible. Yes. Yeah. But we've- Good luck... 17:48 kind of had the, a lot of people in the industry doing something that didn't actually make sense and didn't make money, and now investors think, "Oh, well, this is just a scam- Yeah... industry that doesn't make money." 17:56 And it's interesting, you, you, you know, your natural adversity towards Grandview burning cash, you said, and that, I think, has to stop in this sector. And that's not aimed at one company. 18:07 That's aimed at multiple companies that are carrying out related party transactions-And, you know, I'm making progress a lot in America now, and it's really interesting, the authorities have just overlooked private aviation because it's unregulated in the consumer. 18:23 But when you start presenting this stuff, it's like, "Jeez, wow, what's this?" It's, it's not the right way to behave really. It's, um... 18:31 I, I am a firm believer that disclosing financial murder, for want of a better word, doesn't make it legal. Okay. 18:38 Just because you say somewhere deep in the document, "By the way, I'm actually, uh, having this out the back door, but it's okay 'cause it's on line 780," no, that is not the way you should handle public's money, and I think we're gonna see a change. 18:52 Yeah, I think so. I, I think one of the problems too is we don't have enough regulators, we don't have enough educated regulators. You know, we've seen that even with illegal charter in the United States. 19:01 I mean, it just doesn't end, but there's operators who cross the field. 19:04 Some will be running a, a non-certificated aircraft, charging money for it, and no matter how many times they tell the FAA or DOT this is going on, they can't get enforcement, and even the, the FAA will tell you, "We don't have the people to, to do this. 19:18 We don't have the, the, the ability to investigate it," and that's, that's a tragedy, and that's only-- the only people who are gonna know about that is through customer education from us, not from the regulators, unfortunately. 19:29 Yes. Yes. Absolutely. I've just actually, uh, asked my lawyers to begin seeing if I can, um, present to a select committee on starting with one country at a time. 19:37 So let's start House of Commons, try and present to say that handling agents at an airport have to be shown the charter contract for the customers coming in to the lounge, otherwise they have to declare private, and the handling agent knows straight away if they've got an AOC for fuel or not. 19:51 That kind of stops it at the security gate, and I think I've put together quite a good presentation for that. Um, I, I... 19:57 It's gonna cost me a bit of money, but I, I'm quite excited to present that to see what the outcome is. How receptive are you finding customers? 20:03 I think that's one of our big challenges, too, is people are always are looking for the cheapest deal. Do you have to pick and choose who your customers are based on, you know, what they, what they think of these things? 20:13 So I don't think it's a service-driven industry. I think that's a myth. I think we fly the tightest people in the world, and that's why they're rich. 20:20 I, I have people in two categories: people who like untold luxury with a known service and don't really care too much about the financials, they're great NetJets clients; people who are... 20:33 could be the same, by the way, still a billionaire, millionaire, but so tight they probably wouldn't like to buy you a coffee without giving you an invoice for it, they're charter clients. 20:42 So I d- I have been in this game since 19, I'm 44 now, and I cannot look you or anyone in the eye and say this is a service-driven industry. It's price. Absolute price. 20:53 It helps, by the way, if your service is great, if your carpet's fresh, if your leather smells of leather, if the, uh, wood is clean. Yes, of course. But that might n- knock you up a few points. 21:05 But ultimately, doesn't matter how big your legacy is in aviation or how big you think you are, you're always pitted against someone that you probably wouldn't even put your family with sometimes because you think, "Hang on a minute here. 21:17 They've had five EASA warnings, they've nearly been struck off the OC, they've had one mayday for fuel, and, and you-- what? You want me to come down and beat them?" So it's price driven. It is nonsensical, price driven. 21:30 That's my view. Uh, there was an accident in the US here last week, a very high profile person. The aircraft is 36 years old. I'm like, "Why, why is a person..." 21:40 And I don't know what their net wealth is, and I-- we don't know what the cause of the accident is or anything else, but I'm looking at the situation going, "I wouldn't get on a 36-year-old aircraft. 21:51 Why is, why is anyone being convinced of this?" And we've seen this with, with multiple celebrity crashes. I look at the Kobe Bryant incident, that was a very old helicopter, single pilot. 22:00 They could have afforded the safety. They could have afforded the newer technology. 22:05 I scratch my head sometimes that's, you know, cutting your nose to spite your face in situations where it just, you have the money, spend it on safety, spend it on technology. 22:14 And I don't ever-- I will never understand that relationship divorce when we're going around a well-known Swiss airport because we can't descend below the cloud line due to reasons of granite and mountains, and then you see a private aircraft suddenly find a hole in the cloud and manages to get in. 22:31 That ultra high-net-worth views that captain as a hero, when in fact, that captain's just jeopardized the entire safety of the future of his probably five generational line in front of the aircraft. 22:42 It is mad if you were to put it onto an Excel sheet of risk, what people are willing to do to save a two-hour drive because it's safer to divert. I've never really understood that. I, I've never understood 22:55 that kind of relationship between I can squeeze, I can squeeze, I can squeeze, I can squeeze. It, it's, it's-- I don't know. It must be a risk. Yeah. 23:03 Well, and people in these businesses, they probably wouldn't be doing it in their own business, you know- No way... much less. You know? Yeah. 23:07 I think if they had a chance to, to sit and understand it, they wouldn't be doing it. 23:10 The cowboy, the cowboy pilot that, uh, does things that nobody else can do, uh, can seem attractive, but when you dig under the surface a little bit, it's, it's very scary. Yeah. 23:18 And if you look at the ratio of hero to zero, and you, you tally the accidents, in the private category especially, it's, uh, quite a worrying ratio, to be perfectly honest with you. 23:28 It's, you know, like, hang on a minute, hasn't got that much experience, old aircraft, privately maintained, smashes into the hangar, takes off and ends up in a field, kills everyone on the... 23:37 When it- it's, it's such a strong link between that hero to zero and it's, and it's, um... I can't see that going anytime soon. No. I, I think a lot of people, you know, care about it. 23:47 I think the industry is trying to come together. 23:50 You know, it's, it's all, all, all ships rise with-- rise and fall with the tide, so if we don't hold each other accountable and we don't help each other in the process, you know, it's not gonna change. 23:59 But unfortunately, you're always gonna have those who can cut corners when the regulations just aren't strong enough to, to stop them from doing so, unfortunately. 24:06 Well, what, you know, what else have we, have we not covered on this story and, you know, something that you wanna get out there? 24:13 I don't really know what there is to say other than that I truly believeThat we're at a point in this sector that the unpaid creditors combined with prepaid jet cards linked to cash to hand 24:30 cannot mathematically equate that everyone makes it through. It's just our sector on Wall Street is burning $15 million a week of investors' money, and conferences are held discussing sustainable fuel. 24:45 You know, I, I'm, I'm a bit confused with the sector that I exist in, and I feel like 24:51 I'm reading papers that I'm guessing less than five percent of the industry must be, which are publicly available, and coming to conclusions where I'm thinking, "Crikey, something's really worrying here." 25:01 So my message is that I think there's gonna be reckoning. I'm four years late in that call, so let's be clear here. I've been wrong for four years in a row. 25:10 It has as- astonished me how much unsecured debt can be poured into our sector. But when I read the investment notes, I then kind of understand why everyone's saying that they've got access to 3,000 aircraft. 25:22 Well, that's just have a note that they've got an API with. Everyone's saying that they, they've got the app that changes everything to the, the Uber of aviation, 25:33 and everyone's claiming that, "If you just bear with us, this rate's going to just increase through the roof." 25:38 And, you know, the overall major lines in this sector is creditors up, unpaid taxes up, deferred revenue jet card up, revenue down, gross margins down. That, those five do not point in a great direction. So let's see. 25:56 But how can consumers protect themselves? What are the questions that they can ask? 26:01 What are the things that they can do to make sure they're working with someone reputable versus someone that's just gonna, you know, take the money and run? Do you just hang onto your cash? 26:09 Do you not put it into a company? You know, how do you, how do you protect it? I think the market's big enough to pay as you go. And I think that anyone who says, "Ah, but hang on, you might pay over the odds 26:20 for a flight tomorrow." Yeah, you might, but if you're risking losing a minimum of 25 hours up to 100, up to 700 hours, well, pay over the odds if you claim to like money that much. Take a risk decision. 26:35 But if you are sucked into this, all is well, put your money in our bank account, and we're gonna spend it tomorrow on our losses, and then give you a voucher for flying, I think you should ask three things. 26:46 One, how much money do you have today, cash to hand? That's the first question. Two, how much money have you taken and burned and promised people in flying? And three, 27:00 how much of your unpaid tax and creditors do you have? And if that number is 1.2 billion, and your cash to hand is 60, 50 million, you have a real fundamental problem with your business. 27:13 And that's what consumers should be saying. Brokers should be snippeting some of this, uh, video and sending that bit to their clients out to say, "Ad hoc, ad hoc, ad hoc." 27:24 The Titanic bell is starting to ring, and it doesn't matter how much we say, "No, we love icebergs, it's fine." No, there's a problem. It's, uh, you know, no good PR can get over the fact the numbers talk for themselves. 27:39 And the consumers, I don't think know this. 27:41 In the same way the consumers don't know the related party transactions, in the same way the consumers don't really understand how some of the executive management within these number of companies have given themselves share options based on revenue targets. 27:54 I mean, what's that about? I mean, you increase the losses, and then you take out more shares, and on the small stock you've created of liquidity, you're the first selling out while the public are sinking their debts in. 28:06 It's got [audio cuts out] damage. People still continue to put money into these publicly traded companies. Yeah. It blows my mind. But I have to say, it's slowing. Mm-hmm. And you can see it's becoming tougher. 28:20 And you know, I can refer to this because it's available on Google, so this isn't legally privileged. We can see Vista's going for pref shares. Well, what does that tell you? 28:28 That tells you that the balance sheet has no more assets in that you can leverage. So you're starting now to put your shares in the kitchen sink on the table to try and leverage it. 28:37 You can see Wheels up when it does a money round, starting to pay a bit more, starting to work a bit harder. 28:43 You can see these companies now having to put more effort into raising cash, and that's a good thing, by the way. That shows that the market intelligence is growing. Mm-hmm. 28:52 So there are more people sitting across the boardroom thinking, "Hang on a minute, I don't get this." 28:56 Your loss is down, your GP margin's down, your revenue's down, your creditors are up, and you want me to put in more money. I think it's starting-- the awareness is starting to grow, which is good and bad, by the way. 29:09 We're gonna have to go through a bit of pain- Mm-hmm... because we like it or not in this sector, we all own the results of what they're doing because we're in the same sector. 29:17 My favorite speech is when I present is, "I'm about to present you private aviation. For God's sake, don't put me in the following buckets." So I have to make sure I'm separate from that. 29:26 Um, but we're gonna have to go through a bit of embarrassing pain in order to get things right. And in some ways, if you look at national debt, you could argue the same, that we never really had a 2008 recession. 29:38 Now, I appreciate there might be many viewers of your, of your show say, "Well, actually I did. It was really tough." 29:44 I, I'm not saying it wasn't tough, but what I'm saying is by quantitative easing money into the economy, you kind of push the recession back, and sometimes arguably you make it worse. 29:53 You make it very long, drawn out, publicly funded. If you look at the US national debt, it doubled in one night in 2008, and it went from eight to 16. What are we up to now? 30:03 30, God knows what, and then, you know, one trillion a year in interest payments now. The point is, if you don't have that short, sharp reality, you're gonna prolong the damage. 30:13 And I think what, what private aviation's doing is it's prolonging the damage, and that's, that's tough.It's tough to watch Yeah It's a slow death of stock. Yeah. We'll have to see. 30:23 I mean, I will say, you know, uh, there was a short, there was a short-term pain with the, the crisis, but at the end of the day, the liquidity was there. 30:29 It was just the psychological, you know, house of cards that fell down and then, you know, everybody did come back in. I think overall we were okay, but there was a, a really rough patch there. 30:38 So, well, I hope we don't have anything that severe. Maybe we can have some little bumps along the way, uh, but- I don't think so... we'll have to see. I think it will be severe. Yeah. 30:47 And the reason I think it'll be severe is because if you look at Lehman Brothers who got rid of God knows how many Gulfstreams, it wasn't much, but they had their own little... 30:53 Like all good banks, they needed a private jet airline. But anyway, um, if you have a failure event in this sector, you'll have an uncontrolled addition of aircraft to the global market. 31:05 And if you stop and think about this, in the last 12 to 18 months, 1,200 aircraft have gone to the global market for sale, 100 additional aircraft without buyers. 31:16 So if you open up Jetnet now on the other screen and you look at these Falcon 7Xs hitting, Gulfstream 550s, Global 7500s, something's not right. The days on market is extending. The global inventory is growing. 31:31 Now, the way that Noctamiss gets around that, it says, "Oh, well, hang on a minute. Stop looking at the numbers. Turn it to a percentage of total aircraft built. 31:39 That way we can avoid the overproduction of private jets, and we can say it's always been normal." No, look at it in numer- number terms. In number terms, it is bad. 31:48 And I think if one of these operators doesn't make it through, it's not just them that's going to suffer. 31:55 Everyone who has a loan-to-value mortgage around the world on that type is gonna get slammed by a Blue Book coming down, and we know this Blue Book is... You know, it's crazy if you think about it. 32:04 Blue Book's unregulated, and yet all the regulated banks look to an unregulated site to get an idea of loans of value. I mean, how nuts is that when you stop and think about it? 32:13 If Blue Book can shift by two aircraft selling in a quarter, imagine what happens when 100 hit that in one Wednesday afternoon. 32:21 And that might sound fanciful from what I'm saying, but if you look at the numbers, it's not. And why I think it's gonna be an uncontrolled event is it won't come from the banks. No one, 32:35 Gulfstream, Bombardier, Embraer, Export Development Canada, Bank of America, no one wants any of those operators to fail. It's a bad day for them because they've got assets, they've got security. 32:48 It'll be the creditors who say, "I don't care what you guys want. I'm four months behind on the fuel weekly payments. My exposure's massive. Your balance sheet's toxic. The payments are slowing down. 33:00 The Bowser's being parked in front of the aircraft, and it ain't going anywhere." That's when the collapse starts. It'll start from the most overlooked, unsuspecting creditor that will start the whole thing unwinding. 33:12 Interesting theory. Why, why invest in private aviation in all this? Find a company that makes money and sink it in and make your return. 33:19 To reverse the question, and I put it to you, why, why invest in the first place to a company that wants to sell on 40 times EBITDA on the four-year e- four-year out earnings? 33:29 So there's this argument I recently had on, on LinkedIn where, well, they're dumb enough, they should lose their funds. I don't think that's right given the way that they've been misled and presented to. 33:38 I think private aviation, by the way, is a great business, and I think it's made up of great people. I think the problem is it's too passionate and less analytical. 33:46 If I had my way, I'd sit down with, uh, Alastair White of CJI, if I ever get an equity value, and say, "Right, I wanna become your partner. 33:55 Whatever you may think of me, I want 50% of your audience to be private equity and banks. I want to have a financial panel up at your events, and I want to link the financial world with private aviation at these events." 34:08 Why? Because the financial world would ask you, "No, no, no, I don't, I don't care what color the aircraft is. I don't care about your celebrity at a golf match. 34:16 Please, what's the EBITDA margin of these aircraft and why are you doing it? Where's your net cash production? Why is your creditors going up?" We need those challenging questions to be asked so that we can up our game. 34:29 That's my view. So one thing I wanted to ask about, because this was something in this dispute that would have gotten under my skin a lot, um, your employees. 34:38 So, you know, I know some employees were named in the dispute. Are they still in that, or has that kind of been rolled back at this point? 34:45 'Cause, you know, I think if you're gonna-- if I'm gonna say something, come after me. You know, I'm the, I'm the, I'm the one accountable. You know, don't go after my team. 34:53 This was a, a maneuver which, as I said in court, which is on public register on the eCourt system, 35:01 it is confusing to me how none of the UK members of the WhatsApp group got named except me, but then the Maltese ones did. 35:10 And I have to conclude the following, which I allege and I don't have proof of, that if you can't make it in the UK court because you don't have clean hands, i- you didn't get that WhatsApp group that has pictures of my children on it, that has family discussions on it, that have personal things to my life on it that's being 35:28 spread around as if it's, you know... I've got brokers sending me my own messages from this Vista WhatsApp group. I mean, imagine how that feels, for Christ's sake. But to go for the staff is absolutely un- unbelievable. 35:43 I mean, one of the members said two things in the entire group. I think one was, "Sorry I'm late," or, "Hello," or, "Goodbye," something like that. 35:52 And suddenly, this poor person sitting there, no experience of legal work, why should they? Sitting there, you know, tears rolling down their face thinking, "What's gonna happen to me?" And it's, and it's wrong. 36:03 It's- Yeah... there's this law in Malta which is really peculiar. 36:07 You can put in the claim without evidence of the damages, but then really weirdly, you can put in what's called a garnishee because you put in the claim, which actually goes to freeze someone-Without any evidence or a trial yet, and you have to wait until trial to get that kicked out. 36:25 Now, I saved up some cash and I've freed up most of the staff, uh, if not all, I don't know. But w- by putting money back in court and giving them their lives back, which was really cool to see. Um- Yeah. 36:37 That was a good feeling. But no, I, I... Look, the WhatsApp group's created by me. The research is me. I can assure you it's me in the evening reading through the prospectuses, no one else. 36:49 So this should be a, a dispute between me as John Matthews [laughs] and, uh, and I hope that our jurisdiction case is heard. Um- Yeah... and if it's not, I can't wait for trial, really. I, I... 37:01 It's a shame it takes 10 years in Malta, s- seven to 13 years, 10 years. Wow. Uh, but I, I look forward to being held accountable for what I've said because I know what I've said are facts, figures, and the truth. 37:15 What would you have done differently? [laughs] I wish I could turn around to you and say I'd never have started this. But I fundamentally believe today, as I did then, that what's happening is wrong. Yeah. 37:29 And I, I have begun a mission [laughs] and I, I'm going to complete it. And- [laughs]... I'm going to raise official awareness on the misuse of public money, in my opinion. Yes. 37:42 I, I'm afraid that perhaps I would've been a bit tighter with some of, or one of the employees. Um, but, uh, what I will say is this, that, uh, 37:53 I would caution anyone that uses the word whistleblower when they go to a competitor. Whistleblowers go to the authority, the environmental agency, the police force, the health service. They do not... 38:03 You don't have BP's whistleblower going to Esso. You know, it's, uh... This is corporate warfare and using law to try and almost put a spoke in someone's wheel. So no, I would've, um, I'd have done the same. 38:19 And I do find it rather ironic that I'm being accused [laughs] I'm being accused of manipulating world media of big numbers like Wall Street Journal and Financial Times. 38:27 I mean, I have trouble running three children, two dogs in an airline, let alone the Financial Times if I was running it. But, um, the first I found out about this case was through the media itself. 38:37 It took two weeks for the legal papers to arrive to me, so to speak. [laughs] Oh my gosh. [laughs] You can't make this story up. 38:42 I was presenting at the time the equity, and my executives went quiet all down the left of the table, and I thought, "Why have they gone so quiet? This is... We, we're smashing this. We're going great." 38:52 And the investors were saying, "And, uh, litigation. Do you have any, uh, litigation against you?" I said, "Well, I've had some angry letters from Vista, but nothing's really happened." 38:59 I mean, you know, they've got to prove data, they've got to prove this, they've got to prove damages. And then he said, um, "Just turn the laptop around." 39:07 And they said, "18 minutes ago you're being sued for 386 million." [laughs] And I was presenting at the time on the subject of litigation. I can remember going, "Christ, what's this?" 39:17 [laughs] I can remember scanning the document going, "Jurisdiction, jurisdiction, jurisdiction, jurisdiction," thinking, "If this is in the UK, he's had to prove damages, he's had to prove it's real, he's had to prove that there is a tangible link between what I've written in the WhatsApp message to occurring damages." 39:32 And then I realized it was in Malta, and I thought, "Oh, I didn't see that one coming." But yeah, I don't think I'd have changed anything. It's, um- Yeah. If anything, it brought me out on LinkedIn, which is... 39:41 I think, I think the litigation w- was there to shut me up, and it's actually put like a megaphone on LinkedIn on, on full. It's, uh, so yeah. [laughs] It, it has. 39:51 I think that's the, the hazard of, you know, sometimes you, you trying to silence someone doesn't have the intended consequences. 39:58 [laughs] The opposite of what- And, and by the way, I've offered to settle three times, so, uh, I, you know, but not pay 386 million, just to be clear, not pay anything, but pay my own lawyer's fee. 40:08 And I, I'm not, I'm not out for a per- I've never met Thomas Flohr. I've never, I've never s- spoken to him. This is not a personal vendetta. Mm-hmm. Um, so no, I, I, I think it'd be in all parties' interests to... 40:24 Uh, but I, I... This might be interesting for your viewers to, to know. It certainly shocked me. In Malta, they have something really interesting in the legal system. 40:32 Whilst you can put in the claim, as I said, without any damages until it goes to trial, you prove it. To abort the case, you have to pay a percentage of what you've claimed, but not to me, to the lawyers. So h- how... 40:44 Imagine this: for Vista to abort the case, I, I... Don't quote me on the numbers, but it's something like one to three million to their lawyer, one to three million to my lawyer, and one to something million in court. 40:58 Yeah. It, it actually costs you money to abort the court case more than it does to let it continue, which is bizarre. 41:05 It is bizarre, but I almost feel like I would love to see that in the US because the number of frivolous lawcase, like [laughs] frivolous suits would go down substantially. 41:12 I mean, think about, you know, here you can just throw a case out and, you know, uh, if it works, it works. If it doesn't, it doesn't. You know? All you have to pay is your legal fees. 41:20 There's a very good point you make there, and I think that in Malta's defense, which is strong, is saying, "Look, these numbers aren't often misused." Mm-hmm. 41:28 This is the highest case, probably one of them in the history of the country. And because of that penalitive kind of abort fee, most people aren't mindful to go and thrash out cases willy-nilly. So yes. Right. Right. 41:41 There's good and bad in all legal systems, I guess. Yes. Yeah. Well, I get it. You know, I, uh, I have my own soapbox issues. When I was an operator, one of mine was, was fatigue. 41:52 You know, we were running 24-hour crew shifts, and we had to have three sets of crew members to do it because that was the only way to legally do it. 42:00 We were doing organ transplants, so it was really, you know, heavy overnight stuff. Um, but routinely competitors didn't do the same thing. You know, they had rolling rests. They didn't actually rest them properly. 42:10 So I, I feel for you, and I understand the desire to, you know... It- We're business people, but we still have... We wanna make things right, and we wanna see- Yes... things done ethically. Yes. Level playing field. Yes. 42:22 All those pieces, so- Be proud of our sector. Yeah. Exactly.I, I have the unfortunate task of going into Wall Street offices trying to present private aviation. It's not easy- Yeah... 42:34 because the sector hasn't made it easy for us. You know, you can't say, "That's the one I want to be." And in most sectors, I think that's healthy, by the way. 42:43 I think that most companies in a sector should be able to say, "I would love to be," I don't know, "British Airways, American Air, Virgin Atlantic," or, "I would like to be British Rail. 42:52 I'd like to be this cruise company." Because if you look at the company and you admire it, it gives you inspiration. And this is how this all started. 43:00 Years and years ago, I couldn't get into my head how a 2001 converted CRJ 200 as an 850 was struggling to beat a $25 million then 850. I was thinking, "This doesn't make sense." 43:14 And it's only when I started reading the accounts, I thought, "Crikey, this is not run for, you know, profitability." And, and to quote Thomas on CNBC, "Cash generation, we do not look below EBITDA." 43:26 Well, EBITDA is not cash, and wheels up, keep referring to EBITDA. You know, guys, wake up. EBITDA is not cash. You need to go way down to get it. Right. And if they change, our sector changes, and that is exciting. 43:42 Yeah. Depreciation, gotta keep an eye on that. [laughs] That's a make or break item in this industry- Yeah... [laughs] with big assets. Well, thank you so much for coming on the show. Sure. Uh, we loved having you here. 43:54 Um, for anyone listening, you know, we also have an email newsletter, which probably won't go out this week since we focus primarily on this. Um, but c- stay subscribed. 44:02 We try to cover all the news stories that are happening quickly for you so you get your, your info for the week. Um, John, appreciate having you, and, uh- Thank you... 44:12 thanks, thanks for sharing your opinion and try- trying to be a positive voice in the industry in spite of- Thank you... the challenges. [laughs] Thank you very much. Thank you. All right, folks, we'll see you next time. 44:21 [outro music]
