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File photo: VistaJet receives its first Global 7500 delivery in April 2021The doomsday scenario goes as follows: A giant on-demand private jet provider goes belly up and, as it does, hundreds of aircraft hit the preowned market like a tidal wave; the ripple effect pushes prices down in an already softening market leaving a crater of carnage in its wake.
While a Wall Street Journal column published on Monday paints such a speculative scenario for VistaJet, the company itself and others who spoke to GlobalAir.com do not believe such a demise is as imminent as writer Jon Sindreu forecasts.
"I didn't really see anything new in it besides the point of what the bonds are trading for today," said Doug Gollan, a veteran reporter who covered the airline industry and founded Private Jet Card Comparisons.
It is well established that VistaJet issued a $500 million bond in May at a 9.75% yield to repay existing debt. Sindreu wrote that the yield closed on Friday at 17.23% and that "investors are getting increasingly worried."
Asked about the Wall Street Journal article, a third-party spokesman for VistaJet responded by email to GlobalAir.com with one sentence: "We do not comment on inaccurate and ill-informed articles."UPDATE: Gollan published an article on Tuesday afternoon that says VistaJet executives told him the WSJ article was "wrong on multiple fronts." The point of contention centers on the WSJ article's claims that a VistaJet bond of $150 million matures in June.Charlotte Colhoun, CFO of Vista Global - the parent company of VistaJet, said the bond in question was refinanced at the beginning of 2022 at a rate of just under 6.4% compared to the original 10.5% - and that it doesn't mature until 2030 as part of a $1 billion note. Two other bonds of $500 million each mature in 2027 and 2028.
"I did it prior to rates starting to rise - actually, I am pretty proud of my achievements there," she told Private Jet Card Comparisons.Gollan reported that he tried to reach Sindreu for comment but he had not replied as of Tuesday afternoon.Read the full article from Private Jet Card Comparisons here.
In his article published Monday, Sundreu noted that ratings companies have not downgraded the bond from its B-minus grade. However, he did go as far as speculating what a fleet selloff would mean for Bombardier since VistaJet has been a big buyer from its lineup of Global aircraft models.
"Were VistaJet to sell some of its Bombardier jets to reduce debt, it would put pressure on used prices," his article states. "If, in the worst case, the company suddenly collapsed, the impact on the market could be nearly unprecedented."RELATED STORY: VistaJet takes delivery of 100th Bombardier Global 7500, becomes largest operator
Sindreu goes on to note that VistaJet's fleet of Challenger aircraft nearly equals the number currently on the market, while its 18 Global 7500 aircraft more than doubles the number currently available for sale.
Gollan said that this is far from the first time that someone speculated on the impending fall of VistaJet or similar companies that have more flexible price points and contracts for shorter terms, providing access to private air travel that is not offered by companies such as NetJets.
"If not VistaJet, what are the other options?" he asked hypothetically. "It's a very specialized product. Whether it's Wheels Up or VistaJet, why are people buying it? In most cases, it's the best product."
Gollan and Bryan Comstock, cofounder and president of the aircraft brokerage Jeteffect, told GlobalAir.com that, given that every private jet manufacturer faces a backlog of two years or longer, it's unlikely that even in such a doomsday scenario would grind the preowned market to a halt.
"If all of a sudden a bunch of ultra-long-range aircraft come on the market, somebody could see that as a fleet opportunity," Gollan said.
He noted that a luxury brand like LVMH or a competitor such as NetJets could be interested in buying into a fleet with standardized interiors and components.
"This would all be turn-key," he said.
Comstock noted, though, that individual customers would prefer their own cabin layouts and paint schemes. Further, he said, large players such as Berkshire Hathaway, parent company of NetJets "can already get great deals on aircraft."
"I don't know who has the need for that much additional lift," he said.
After reading the Wall Street Journal on Monday, VistaJet might be feeling a lot like Mark Twain did when he read his mistakenly published obituary and said, "the reports of my death are greatly exaggerated."
But even if a major selloff were to happen, whatever waves it created would ultimately calm, as sure as what goes up must come down: For every seller there is an eager buyer and that's what drives capitalism.