Q1 2025 Surf Air Mobility Inc Earnings Call
Paul.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question Press Star one again.
Sam Levenson: I'd now like to turn the call over to Sam Levenson Investor Relations. Please go ahead.
[inaudible]
Speaker Change: Thank you operator, welcome to <unk> first quarter 2025 earnings call.
Speaker Change: I'm joined today by Diana Laing, Chief Executive Officer, and Chief operating Officer.
Dave Storms: Your next question comes from the line of Dave Storms with Stonegate. Please go ahead. Good evening, and thank you for taking my questions. I just want to start with the service interruption that and other prior remarks. Was any part of this planned downtime considering you were still well within your guidance? The service interruption that we had was in the second week of January this quarter. It was not something that was planned and had to do with maintenance around corrosion and interiors where we did not have the proper NEF, they call it, NEF program with the FAA.
Speaker Change: And Oliver Reeves Chief Financial Officer.
Speaker Change: Our earnings release can be found on the SEC Edgar website.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Speaker Change: And on our surf Air mobility Investor Relations page at investors <unk> Dot com.
Speaker Change: During this call, we will discuss our outlook and expectations for future performance.
Speaker Change: These forward looking statements may be preceded by words, such as we expect we believe we anticipate or other similar statements.
Speaker Change: These statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
Speaker Change: Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC.
Speaker Change: During today's call, we will present, both GAAP and non-GAAP measures.
Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures are included in the earnings release, we issued earlier today.
Deanna White: We had a number of hours in the system that we had to reduce our schedule, and the FAA worked very closely with us to get us updated onto that program so that we could safely and legally fly under that program.
Speaker Change: Posted on the surface mobility Investor relations website and in our filings with the SEC.
Speaker Change: I will now turn the call over to <unk> CEO Diana why Sienna.
Diana Laing: Thank you Sam and thank you to everyone, who has joined our call today.
Dave Storms: But it was something that was not planned. That's very helpful. Thank you. And then just one more.
Diana Laing: Before I review, our first quarter financial and operational results I would like to take a moment to discuss the substantial changes in the economic regulatory and political environment since the New administration took office.
Deanna White: Congrats on the partnership with Japan Airlines. When you're thinking about the potential for more of these to come, are there any geographic geographies that you would be targeting? Would you look at, you know, more East Coast operators? So we're excited about the Japan Airlines interline agreement because it's our first international agreement with someone that is flying specifically into one of our largest revenue generating regions.
Diana Laing: Changing trade policies tariffs and funding for various governmental functions has wide ranging implications for the regional air mobility sector, particularly as it relates to areas regulated by the Doj and the FAA.
Diana Laing: Fortunately trade policy and tariffs are expected to have minimal impact for sure fair mobility. We are an American company that operates almost exclusively in the U S primarily flying aircraft manufactured domestically.
Deanna White: You know, we would be looking to expand to other carriers, not just in the United States, but also potentially globally too, as Japan Airlines is our first experience at trying to do that.
Speaker Change: S Company Textron aviation.
Speaker Change: Textron Aviation has publicly stated terrorists will have little impact to its business.
Speaker Change: Specific to our supply chain and he worked on outside the U S. Such as engine overhauls is not subject to tariffs.
Speaker Change: The essential Air service program, which represents approximately 40% of our revenue is part of the budget reconciliation process currently being reviewed by Congress.
Deanna White: I would now like to turn the call back over to Deanna White for closing remarks. Please go ahead. Yes, thank you. Thank you all who joined the call.
Speaker Change: Well nothing has been decided or implemented at this time, we believe that is the lowest cost provider, we have a competitive advantage.
Appreciate your interest in our company, and hope to report in the future more progress on our transformation plan, the various phases, more progress on all the goals we've set for ourselves, and our technology initiatives, both on the electrification side and on our software side, and hoping to have exciting news on that front in the future. But thank you for your interest, and thank you for joining us today.
Speaker Change: The committee on transportation and infrastructure will be meeting this week to review the effectiveness.
Speaker Change: The FAA Reauthorization Act that was passed last may.
Speaker Change: One important aspect of that act requires a D O T to give equal consideration to cost when selecting the winning bid for E. S routes.
Speaker Change: This change provides a significant advantage for surf our mobility and we are often the lowest cost provider on routes below 500 miles.
Speaker Change: We were recently awarded renewal bids for the boys, Pennsylvania, and Cala, Papa, Hawaii, representing $7 $6 million annually in subsidy revenue.
Speaker Change: We are monitoring all of these issues very closely.
Speaker Change: We are engaging with the federal government and are taking proactive steps to mitigate potential negative impact on our business.
Speaker Change: Now, let me turn to the results of the quarter.
Speaker Change: I am pleased to share our financial and operational achievements in the first quarter as we continued to execute strongly against each of the phases in our transformation plan.
Speaker Change: Turning first to our financial results first quarter revenue was $23 5 million at the high end of our expected range of 21% to 24 million keeping.
Speaker Change: Keeping us on track to meet our full year expectation of over $100 million in revenue.
Speaker Change: Adjusted EBITDA loss in Q1 was $14 4 million.
Speaker Change: In the expected range, we provided in our last earnings release.
Speaker Change: I am pleased to share our financial and operational achievements in the first quarter as we continued to execute strongly against each of the phases in our transformation plan.
Speaker Change: Despite being capital constrained for much of the time since our listing we have repeatedly met or exceeded our guidance.
Speaker Change: We continue to actively manage our balance sheet and liquidity and just subsequent to the end of Q1, we raised an incremental $5 million in funding.
Speaker Change: Turning first to our financial results first quarter revenue was $23 5 million at the high end of our expected range of 21 to 24 million.
On the operational front, we had numerous achievements across all three categories within the optimization phase of our transformation plan.
Speaker Change: Keeping us on track to meet our full year expectation of over 100 million in revenue.
Speaker Change: Adjusted EBITDA loss in Q1 was $14 4 million within the expected range, we provided in our last earnings release.
Speaker Change: Under optimization of airline operations, we completed the relocation of the Companys systems operations Center to the Dallas Fort Worth area, and we are attracting top aviation talent to our management ranks.
Speaker Change: Despite being capital constrained for much of the time since our listing we have repeatedly met or exceeded our guidance.
Speaker Change: Amy ever lose has recently joined as our Chief administrative officer responsible for people in IC operations and customer experience and brings extensive aviation experience from her tenure at Sabre and Flexjet.
Speaker Change: We continue to actively manage our balance sheet and liquidity and just subsequent to the end of Q1, we raised an incremental 5 million in funding.
On the operational front, we had numerous achievements across all three categories within the optimization phase of our transformation plan.
Speaker Change: Additionally, Bob Walter joined as Vice President of flight operations coming from Southwest Airlines, and Sun country, and Daniel Ho has joined as Vice President of technical operations and director of maintenance coming from Amazon Air.
Speaker Change: Under optimization of airline operations, we completed the relocation of the company's systems operations Center to the Dallas Fort Worth area, and we are attracting top aviation talent to our management ranks.
Speaker Change: We also continue to adjust the composition of our aircraft fleet by returning or selling unneeded aircrafts and simplifying our fleet to focus on the operationally efficient Cessna Grand caravan.
Speaker Change: He never lose has recently joined as our Chief administrative officer responsible for people in IC operations and customer experience and brings extensive aviation experience from her tenure at Sabre and Flexjet.
During Q1, we returned five older aircraft to their lessors.
Speaker Change: Through our re fleeting work, we expect to significantly rightsize, our fleet and lower both operating and carrying costs.
Speaker Change: Additionally, Bob Walter joined as Vice President of flight operations coming from Southwest Airlines, and Sun country, and Daniel Ho has joined as Vice President of technical operations and director of maintenance coming from Amazon Air.
Speaker Change: These efforts are in advance of accepting additional new aircrafts from our Textron aviation order that will provide the capacity necessary to support our expansion into new tier one routes in 2026 and beyond.
Speaker Change: We also continue to adjust the composition of our aircraft fleet by returning or selling I needed aircraft and simplifying our fleet to focus on the operationally efficient chesnut Grand caravan.
Speaker Change: During Q1, we also made substantial progress towards clearing aircraft maintenance backlogs.
Speaker Change: During Q1, we returned five older aircraft to their lessors.
Speaker Change: The combination of clearing backlogs and utilizing our more efficient aircrafts has begun to positively impact our flight completion factor.
Speaker Change: Through our re fleeting work, we expect to significantly rightsize, our fleet and lower both operating and carrying costs.
Speaker Change: We experienced a brief service interruption in the first quarter related to maintenance issues, which we successfully addressed who returned to more effective operational levels.
Speaker Change: These efforts are in advance of accepting additional new aircraft from our Textron aviation order that will provide the capacity necessary to support our expansion into new tier one routes in 2020 six and beyond.
Speaker Change: This positive momentum has continued in the first six weeks of the second quarter with completion factors now above 92%.
Speaker Change: During Q1, we also made substantial progress towards clearing aircraft maintenance backlogs.
Speaker Change: With continued investment in maintenance the execution of our re fleeting efforts and the implementation of changes enacted by our strengthened operational leadership team. Our objective remains to return to 96% completion factors prior to initiating our route expansion program.
Combination of clearing backlogs and utilizing our more efficient aircrafts has begun to positively impact our flight completion factor.
Speaker Change: We experienced a brief service interruption in the first quarter related to maintenance issues, which we successfully addressed you returned to more effective operational levels.
Speaker Change: Our improved flight completion factor is also driving improvement in customer satisfaction, which is important to our ambition tumors as a premier branded regional air mobility carrier and platform.
Speaker Change: This positive momentum has continued in the first six weeks of the second quarter with completion factors now above 92%.
Speaker Change: We are already noted improvements in southern Airways post flight <unk> scores in Q1 compared to the second half of last year.
Speaker Change: With continued investment in maintenance the execution of our re fleeting efforts and the implementation of changes enacted by our strengthened operational leadership team. Our objective remains to return to 96% completion factors prior to initiating our route expansion program.
Speaker Change: Turning to more recent achievements, we announced that our local area airline operation has entered into an interline agreement with Japan Airlines.
Speaker Change: There is a large travel market between Japan, and Hawaii, and our new agreement with Japan Airlines will enable their passengers to book travel on local aley to more destinations within Hawaii.
Speaker Change: Our improved flight completion factor is also driving improvement in customer satisfaction, which is important to our ambition to emerge as a premier branded regional air mobility carrier and platform.
Travelers will be able to book connecting flights through Honolulu International Airport to airport served by local Aley Airlines.
Speaker Change: We are already noted an improvement in southern Airways post flight. She sat scores in Q1 compared to the second half of last year.
Speaker Change: Similarly, local Italy passengers will have the ability to book connecting international flights to Japan via Japan Airlines.
Speaker Change: Turning to more recent achievements, we announced that our local every airline operation has entered into an interline agreement with Japan Airlines.
Speaker Change: The interline agreement with J Al is our fifth Interline agreement, joining American, Alaska, Hawaii, and United and expanding our potential access to over $435 million of their customers.
Speaker Change: There is a large travel market between Japan, and Hawaii, and our new agreement with Japan Airlines will enable their passengers to book travel on local Wally to more destinations within Hawaii.
Speaker Change: The next initiative in our optimization phase is recalibrating, our on demand business.
Speaker Change: Travelers will be able to book connecting flights to Honolulu International Airport to airport served by local Aley Airlines.
Speaker Change: We exited several charter products to focus on profitability over near term market penetration and launched a new jet card in Q1 to simplify pricing options and broaden our product offering.
Speaker Change: Similarly, local alley passengers will have the ability to book connecting international flights to Japan via Japan Airlines.
Speaker Change: We recently signed volume purchase agreements to improve margins with two operators, who are also beta users of the <unk> platform.
Speaker Change: The interline agreement with J Al is our fifth Interline agreement, joining American, Alaska, Hawaii, and United and expanding our potential access to over 435 million of their customers.
Speaker Change: In an effort to integrate our on demand offering under the umbrella of our branded regional air mobility experience.
Speaker Change: The next initiative in our optimization phase is recalibrating, our on demand business.
Speaker Change: We have invested in rebranding this business.
Speaker Change: Our future regional air mobility customers will benefit from a seamless experience whether they choose to fly our point to point scheduled service or fly a more bespoke offering through operator partners in our on demand service.
Speaker Change: We exited several charter products to focus on profitability over near term market penetration and launched a new jet card in Q1 to simplified pricing options and broaden our product offering.
Speaker Change: The third category under the optimization phase is driving efficiencies from serco as.
Speaker Change: We recently sign volume purchase agreements to improve margins with two operators, who are also beta users of the survey last platform.
Speaker Change: In our earnings release, we provided a comprehensive list of achievements, including the launch of self service flight changes and cancellations via chat, which have reduced the company's call center traffic volume by approximately 20%.
Speaker Change: In an effort to integrate our on demand offering under the umbrella of our branded regional air mobility experience.
Speaker Change: We have invested in rebranding this business.
Our future of regional air mobility customers will benefit from a seamless experience whether they choose to fly our point to point scheduled service or fly a more bespoke offering through operator partners in our on demand service.
Speaker Change: Our investment in software is creating other opportunities for the company last week D. O T Secretary Shawn Duffy submitted a plan to replace the aging ACC infrastructure in the U S.
Speaker Change: This presents an opportunity for <unk> favorability to leverage the capabilities of our surf OS system to improve the air traffic control system.
Speaker Change: The third category under the optimization phase is driving efficiencies from serco as in.
Speaker Change: In our earnings release, we provided a comprehensive list of achievements, including the largest self service flight changes and cancellations via chat, which have reduced the company's call center traffic volume by approximately 20%.
Speaker Change: We have recently met with the D O T and the FAA to showcase our proprietary surf OS software suite.
Speaker Change: Focusing on for potential applications.
Speaker Change: First tower O S, which is a data system and AI layer that would impact atc's decision, making by providing tower operators with critical aviation data and safety related insights to optimize aerospace management.
Speaker Change: Our investment in software is creating other opportunities for the company last week D. O T Secretary Shawn Duffy submitted a plan to replace the Aegean Hec infrastructure in the U S.
Speaker Change: This presents an opportunity for surf our ability to leverage the capabilities of our surf O S system to improve the air traffic control system we.
Speaker Change: Second resource planning, a dynamic scheduler using talented foundry platform, a workload distribution tool for smart scheduling to help ensure peak efficiency without overloading staff.
Speaker Change: We have recently met with the D O T and the FAA to showcase our proprietary surf OS software suite.
Speaker Change: Sir for mobility is currently utilizing dynamic schedulers within its own operations.
Speaker Change: Focusing on for potential applications.
Speaker Change: First tower O S, which is a data system and AI layer, there would impact Hec decision, making by providing tower operators with critical aviation data and safety related insights to optimize aerospace management.
Speaker Change: Third safety had an AI risk assessment tool, which ingest all flight risk assessment reports incident reports aviation safety accident reports and anonymous near Miss reports across all operators.
Speaker Change: Second resource planning, a dynamic scheduler using Pal interiors foundry platform. It workload distribution tool for smart scheduling to help ensure peak efficiency without overloading staff.
Speaker Change: Sure for a mobility is also using this feature.
Speaker Change: Finally crew out a full service management system that automates and streamlines common required task lighting pilots focus on their core task, while ensuring the data is reliable and actionable.
Speaker Change: Sir from ability is currently utilizing dynamic schedulers within its own operations.
Speaker Change: This application can be applied to the work activities of an air traffic controller similar to house surf Air mobility as pilots are currently using the crew out today.
Speaker Change: Third safety had an AI risk assessment tool, which ingest all flight risk assessment reports incident reports aviation safety accident reports and anonymous near Miss reports across all operators.
Speaker Change: The a T C opportunity illustrates the versatility of surf O S.
Speaker Change: The power of data and insight available from <unk> platforms.
Speaker Change: And the ways in which the software and data that can be leveraged into specific modules that can be adapted to meet industry needs at speed.
Speaker Change: Sure for a mobility is also using this feature.
Speaker Change: Finally crew out a full service management system that automates and streamlines common required tests letting pilots focus on their core task, while ensuring the data is reliable and actionable.
Speaker Change: Looking beyond our air mobility operations and our service initiatives I would also like to note that we continue to make substantial progress on the electrification initiatives under the acceleration phase of the transformation plan.
Speaker Change: This application can be applied to the work activities of an air traffic controller similar to how surf air mobility pilots are currently using the crew up today.
Speaker Change: At this time I can report that we are in late stage discussions with key partners to advance our work and we look forward to sharing details on the electrification plan in the near future.
The a T C opportunity illustrates the versatility of surf O S.
Speaker Change: The power of data and insight available from passengers platforms and the ways in which the software and data that can be leveraged into specific modules that can be adapted to meet industry needs at speed.
Speaker Change: So in summary, we delivered on our financial guidance in Q1 with revenues near the top end of our range and adjusted EBITDA within our guided range.
Speaker Change: Looking beyond around mobility operations in our survey with initiatives I would also like to note that we continue to make substantial progress on the electrification initiatives under the acceleration phase of the transformation plan.
Speaker Change: And as you can see from the operational achievements in the first quarter. The improvements we are implementing the efficiencies that we're gaining and from the team that we're building we have strong operating momentum.
Speaker Change: At this time I can report that we are in late stage discussions with key partners to advance our work and we look forward to sharing details on the electrification plan in the near future.
Speaker Change: Clear vision of where we're going in a tangible strategic plan to become a premier regional air mobility platform the.
Speaker Change: The investments that we've made in our airline operations in Q1 continue to drive improvements and we remain committed to our goal of achieving positive adjusted EBITDA in our airline operations in 2025.
Speaker Change: So in summary, we delivered on our financial guidance in Q1 with revenues near the top end of our range and adjusted EBITDA within our guided range.
Speaker Change: With that let me now turn the call over to Oliver to discuss our Q1 results and our outlook for Q2.
Speaker Change: And as you can see from the operational achievements in the first quarter. The improvements we are implementing the efficiencies that we're gaining and from the team that we're building we have strong operating momentum.
Speaker Change: Oliver.
Oliver Reeves: Thank you Dan I would like to start my comments by reiterating what Deanna mentioned earlier in her remarks.
Clear vision of where we're going in a tangible strategic plan to become a premier regional air mobility platform the.
Speaker Change: Yes, I remember that you anticipate minimal impacts as it relates to potential tariffs.
Speaker Change: Today <unk> is a domestic operator flying domestically produced crop.
Speaker Change: Investments that we've made in our airline operations in Q1 continue to drive improvements and we remain committed to our goal of achieving positive adjusted EBITDA in our airline operations in 2025.
Speaker Change: Among business specializes in point to point domestic leisure travel.
Speaker Change: The future opportunities, we are pursuing to establish <unk> as a next generation branded regional and mobility platform are largely focused on the U S market in adults are a more global footprint.
Speaker Change: With that let me now turn the call over to Oliver to discuss our Q1 results and our outlook for Q2.
Speaker Change: Alright, yes business, which represents approximately 40% of our revenue is driven by long term up to those contracts to provide underserved domestic market with connectivity to hubs from which our customers can access the broader U S commercial aviation network.
Speaker Change: Oliver.
Oliver: Thank you Dan I would like to start my comments by reiterating what Deanna mentioned earlier in her remarks.
Speaker Change: Yes, I remember that he anticipates some minimal impacts as it relates to potential tariffs.
Speaker Change: Today, Seth and mobility as a domestic operator flying domestically produced aircraft.
Speaker Change: Ultimately these long term contracts containing price escalators, the actors mitigation to inflationary pressures.
Speaker Change: <unk> business specializes in point to point domestic regional air travel.
Speaker Change: From a cost perspective, our supply chain is unaffected by tariffs on foreign produced across all parks and while we do overhaul some of our engines abroad. We are confident that these services are not within the scope of imposed tariffs.
Speaker Change: The future opportunities, we are pursuing to establish <unk> as a next generation branded regional and mobility platform are largely focused on the U S market in advance of a more global footprint.
Speaker Change: Oh, yes, yes business, which represents approximately 40% of our revenue is driven by long term subsidized contracts to provide underserved domestic market with connectivity to hubs from which our customers can access the broader U S. Commercial aviation network importantly, these long term contracts containing price.
Speaker Change: In addition, we have made substantial investments in maintenance and the average number of hours on the engine remains low.
Speaker Change: In addition, the current economic environment has created some benefit for us, particularly with regard to lower fuel costs.
Speaker Change: The direct cost of fuel is hard to predict we look forward to the day when reasonable and mobility unit economics are free from the unpredictable nature of the hydrocarbon markets as electric powertrains enter service.
Speaker Change: <unk> the active mitigation to inflationary pressures.
Speaker Change: From a cost perspective, our supply chain is unaffected by tariffs on foreign produced across all parts of <unk>.
Speaker Change: As a reminder, we estimate that our electric powertrains will discuss the carbon will potentially reduce the direct cost of flying by 50% on a hybrid electric powertrains will potentially reduce the direct cost of flying by 25%.
Speaker Change: We do overhaul some of our engines abroad. We are confident that these services are not within the scope of imposed tariffs.
Speaker Change: In addition, we have made substantial investments in maintenance and the average number of hours on the engine remains low.
Speaker Change: Another area that we continue to watch closely is the volatility of the equity market and the availability of equity financing for our business.
Speaker Change: In addition, the current economic environment has created some benefit for us, particularly with regard to lower fuel costs.
Speaker Change: As part of our transformation plan, we announced last November that we successfully extended the maturity of our secured debt obligations to the end of fiscal year 2028 were leaving us with the near term pressures of debt repayment.
Speaker Change: The directional cost of fuel is hard to predict we look forward to the day when regional and mobility unit economics are free from the unpredictable nature of the hydrocarbon markets as electric powertrains and to service.
Related: Related commented that we would raise further capital limiting advances under our German facility to $50 million per year.
Speaker Change: As a reminder, we estimate that our electric powertrains for the Cessna caravans will potentially reduce the direct cost of flying by 50% and a hybrid electric powertrains will potentially reduce the direct cost of flying by 25%.
After the close of the first quarter, we completed a registered direct offering which provided $5 million of equity capital to the business and competing this offering we waived the opportunistic nature of the transaction given economic and market conditions, the dilution to our investors the anticipated returns on capital and the attractiveness of alternatives, we will continue to <unk>.
Speaker Change: Another area that we continue to watch closely is the volatility of the equity markets and the availability of equity financing for our business.
Speaker Change: As part of our transformation plan, we announced last November that we successfully extended the maturities of our secured debt obligations to the end of fiscal year 2028 were leaving us in the near term pressures of debt repayment.
Related: Most of the markets for opportunities to raise capital for investments that will create value for our long term shareholders.
Related: During Q1, we continued to thoughtfully deploy capital and invested significantly in the infrastructure that will lay the foundation for profitable growth.
Speaker Change: Related commented that we would raise further capital limiting advances under our German facility to $50 million per year.
Related: These investments are already serving to improve our completion factor a key driver of our goal to make the airline operations profitable this year.
Speaker Change: After the close of the first quarter, we completed a registered direct offering which provided $5 million of equity capital to the business and competing this offering we weighed the opportunistic nature of the transaction given the economic and market conditions, the dilution to our investors the anticipated returns on capital and the attractiveness of alternatives, we will continue to <unk>.
Related: Additionally, our work to separately capitalize both our software initiatives in our electrification initiative continues we are making excellent progress and on the electrification initiatives. In particular, we are in late stage discussions to move forward with the perspective partners.
Speaker Change: The market for opportunities to raise capital for investments that will create value for our long term shareholders.
Related: We will keep you apprised as those developments unfold.
Related: Now turning to Q1 results.
Speaker Change: During Q1, we continued to thoughtfully deploy capital and invested significantly in the infrastructure that will lay the foundation for profitable growth.
Related: For the first quarter 2025 revenue was $23 5 million at the high end of our expected range of 21% to $24 million.
Speaker Change: These investments are already serving to improve our completion factor a key driver of our go to make the airline operations profitable this year.
Related: Revenue in the first quarter of 2025 was lower than the prior year as expected as we have exited unprofitable routes.
Speaker Change: Additionally, our work to separately capitalize both our software initiatives in Rx vacation initiative continues we are making excellent progress and on the electrification initiatives. In particular, we are in late stage discussions to move forward with the prospective partners.
Related: Service revenue decreased by 23% year over year, primarily driven by the elimination of unprofitable routes and a brief interruption of service in January.
Related: On demand service revenue decreased by 25% year over year over the comparable period, driven by a mix of lower sales in flight completion and as the company continues to focus on charter profitability.
Speaker Change: We will keep you apprised as those developments unfold.
Speaker Change: Now turning to Q1 results.
Speaker Change: For the first quarter of 2025 revenue was $23 5 million at the high end of our expected range of $21 million to $24 million.
Related: Adjusted EBITDA loss in Q1 was $14 4 million within the expected range. We provided on our last earnings release as we move forward, we continue to aggressively execute the optimization phase of our transformational time in preparation for our expansion and acceleration phases, which will see the company returned to growth.
Speaker Change: Revenue in the first quarter of 2025 was lower than the prior year as expected as we have exited unprofitable routes sketch.
Speaker Change: Scheduled service revenue decreased by 23% year over year, primarily driven by the elimination of unprofitable routes and a brief interruption of service in January.
Related: Now, let me turn to our outlook for the second quarter and full year.
Related: For the second quarter, we are guiding to revenue of 23, and a half to $26 5 million and adjusted EBITDA loss in the range of 10 to 30 minutes. These estimates considered the exiting of unprofitable scheduled routes increased focus on profitability in the on demand business and our continued investment in our technology initiatives.
Speaker Change: Demand service revenue decreased by 25% year over year over the comparable period, driven by a mix of lower sales in flight completions as the company continues to focus on charter profitability.
Speaker Change: Adjusted EBITDA loss in Q1 was $14 4 million within the expected range. We provided on our last earnings release as we move forward, we continue to aggressively execute the optimization phase of our transformation plan in preparation for our expansion and acceleration phases, which will see the company returned to growth.
Related: Our guidance reflects our current expectation that tariffs as they currently exist will not have a significant impact on our business.
Related: For the full year, we continue to expect the transformation initiatives to positively impact our financial results. We are reiterating our expectation of at least $100 million in revenue as well as achieving profitability in our airline operations for the full year of 2025.
Speaker Change: Now, let me turn to our outlook for the second quarter and full year.
Speaker Change: For the second quarter, we are guiding to revenue of 23, and a half to $26 5 million and adjusted EBITDA loss in the range of $10 million to $13 million. These estimates considered the exiting of unprofitable scheduled routes increased focus on profitability in the on demand business and our continued investment in our technology initiatives our.
Related: Now, let me turn the call back to Donna for some brief closing thoughts before we take your questions.
Donna: Thank you Oliver the.
Donna: The results from the first quarter demonstrate our continued strong execution against our transformation plan.
Speaker Change: Our guidance reflects our current expectation that Paris as they currently exist will not have a significant impact on our business.
Donna: Keeping us on track for our stated goals for this year.
Donna: Well, we are navigating a challenging economic regulatory and funding environment.
Speaker Change: For the full year, we continue to expect the transformation initiatives to positively impact our financial results. We are reiterating our expectations of at least $100 million in revenue as well as achieving profitability in our Atlanta operations for the full year of 2025.
Donna: We are aggressively managing our operations, improving our cost structure, driving efficiencies and proactively mitigating potential impacts to our business.
Speaker Change: Now, let me turn the call back to Donna for some brief closing thoughts before we take your questions.
Donna: This is a dynamic environment and our team is working diligently to anticipate changes take appropriate actions and pivot where necessary.
Donna: Thank you Oliver.
Donna: The results from the first quarter demonstrate our continued strong execution against our transformation plan keep.
Donna: With our unique and exclusive relationships with talented <unk>.
Donna: Keeping us on track for our stated goals for this year.
Speaker Change: Textron aviation and others.
Donna: Well, we are navigating a challenging economic regulatory and funding environment.
Donna: We alongside our future partners have three clear growth vectors.
Speaker Change: The expansion of our air mobility operations.
Donna: We are aggressively managing our operations, improving our cost structure, driving efficiencies and proactively mitigating potential impacts to our business.
Speaker Change: The commercial rollout of our regional air mobility software platform.
Speaker Change: And the sale and marketing of electrified powertrains for the Cessna caravan.
Donna: This is a dynamic environment and our team is working diligently to anticipate changes take appropriate actions and pivot where necessary.
Speaker Change: We will continue to pursue these SaaS opportunities and keep you apprised of our progress we look forward to presenting at the Jefferies Easy Tal conference on May 28.
Donna: With our unique and exclusive relationships with talented <unk> Textron aviation and others.
Speaker Change: With that we now like to open it up to questions and turn it over to the operator.
Donna: We alongside our future partners have three clear growth vectors.
Speaker Change: At this time I would like to remind everyone in order to ask a question.
Donna: The expansion of our air mobility operations.
Speaker Change: Then the number one on your telephone keypad participants.
The commercial rollout of our regional air mobility software platform.
Speaker Change: Participants will be allowed one question and one follow up question.
Donna: And the sale and marketing of electrified powertrains for the Cessna caravan.
Speaker Change: Your first question comes from the line of Austin Moeller with Canaccord Genuity.
Donna: We will continue to pursue these vast opportunities and keep you apprised of our progress we look forward to presenting at the Jefferies EV talk conference on May 28.
Speaker Change: Please go ahead good morning.
Speaker Change: Hi, Good afternoon, I was just wondering what you thought about the changes to the essential air service budget around the $308 million reduction in subsidies I guess, you had mentioned that.
Donna: With that we now like to open it up to questions and turn it over to the operator.
Speaker Change: Thank your lower cost off.
Donna: At this time I would like to remind everyone in order to ask a question press star.
Speaker Change: Auction increases your competitive advantage on future contracts.
Then the number one on your telephone keypad participants.
Deanna: Austin. Thank you for that question this is deanna.
Donna: Participants will be allowed one question and one follow up question.
Deanna: Yes, we are looking at that it's a part of the budget reconciliation process. There was an announcement I think last week about cutting that budget. The it's a $570 million budget. They are looking at along with a lot of other budget items cutting significantly.
Donna: Your first question comes from the line of Austin Moeller with Canaccord Genuity.
Donna: Please go ahead good morning.
Speaker Change: Hi, good afternoon.
Speaker Change: I was just wondering what you thought about the changes to the essential air service budget around the $308 million reduction in subsidies I guess, you had mentioned that.
Deanna:
Deanna: However in that in that there's a lot of other operators that are higher cost operators get operators that are receiving much larger subsidies than we are in and our communities that we service that I would believe would be more at risk necessarily than us.
Speaker Change: Do you think your lower cost off.
Speaker Change: Option increases your competitive advantage on future contracts.
Speaker Change: Austin. Thank you for that question. This is Diana yes, we are looking at that it's a part of the budget reconciliation process. There was an announcement I think last week about cutting that budget. The it's a 570 million dollar budget there.
Deanna: For a reduction in.
Deanna: There's also you know we're following it very closely we are looking at you know the strategies are including.
Speaker Change: Well looking at along with a lot of other budget items cutting significantly.
Deanna: In those labs that we do receive subsidies if there's other options too for us to stay in those if for some reason we were to lose the subsidiary subsidy via the budget reconciliation process, we're watching it very closely but our low cost being one of the lowest cost operator.
Speaker Change:
Speaker Change: However in that in that there's a lot of other operators that are higher cost operators jet operators that are receiving much larger subsidies than we are in and our communities that we service that I would believe would be more at risk necessarily than us.
Deanna: <unk>, we do have that competitive advantage.
Speaker Change: For a reduction.
Deanna: Okay.
Deanna: And can you discuss what of the schedule and charter flights.
Speaker Change: There's also you know where we're following it very closely we are looking at you know the strategies, including.
Deanna: You consider to be I guess core versus some of the ones that you're reducing activity on are there examples of potential routes or regions that you consider be more core than others.
Speaker Change: In those labs that we do receive subsidies if there's other options too for us to stay in those if for some reason we were to lose the subsidiary subsidy. The the budget reconciliation process, we're watching it very closely but or low cost or being one of the lowest cost operator.
Deanna: Sure Hawaii is the most core of our areas and are a S routes and a lot of the traffic that we service. There we are a local a commuter airline there and we are providing commuters.
Speaker Change: We do have that competitive advantage.
Speaker Change: Okay.
Speaker Change: And can you discuss what the schedule and charter flights.
Deanna: All the inter island flying that happens there folks have to get where we're the only way off the island. So we.
Speaker Change: But you consider to be I guess core versus some of the ones that you are reducing activity on there are there examples of potential routes or regions that you consider be more core than others.
Deanna: Do a lot of of traffic there that is not necessarily travel related but involves commuting folks to live their lives there.
Deanna: In our E. I S routes and communities that we do have we don't have a competitor a direct competitor like you would have with a larger hub in the larger airlines.
Speaker Change: Sure Hawaii is the most core of our areas and are a S routes and a lot of the traffic that we service. There we are a local commuter airline there and we are providing commuters.
Deanna: And so you can't necessarily apply the same Ian.
Deanna: Economics to ours, our view of our our traffic as you would.
Speaker Change: All the inter island flying that happens there are folks have to get where we're the only way off the island. So we.
Deanna: Our larger commercial a regional airline.
Speaker Change: Do a lot of of traffic there that is not necessarily travel related but involves commuting folks to live their lives there.
Deanna: In addition, we have a couple of other clusters.
Deanna: Central region, so that some clustered in the east East Coast.
Deanna: We're always looking to as we choose which routes to <unk>.
Speaker Change: U N R E I S routes and communities that we do have we don't have a competitor a direct competitor like you would have with a larger hub in the larger airlines.
Deanna: Neither exit or enter always looking at profitability always looking at how they fit within our existing footprint.
Speaker Change: And so you can't necessarily apply the same Ian.
Speaker Change: Your next question comes from the line of Amit Dayal with H C. Wainwright. Please.
Speaker Change: Economics to ours, our view of our our traffic as you would you know a larger commercial our regional airline.
Speaker Change: Please go ahead.
Amit Dayal: Thank you and good afternoon, everyone. Thanks for taking my questions.
Speaker Change: You know it looks like you're maybe close to or maybe talking about exiting these unprofitable routes.
Speaker Change: In addition, we have in a couple of other clusters.
Amit Dayal: So as long as they're seeing how proactively.
Speaker Change: Entre region, so that some clustered in the east East Coast.
Amit Dayal: The new routes new profitable goes or is the goal for this segment.
Speaker Change: We're always looking to as we choose which routes to either exit or enter always looking at profitability always looking at how they fit within our existing footprint.
Amit Dayal: To maximize profitability.
Ed: Thank you Ed.
Ed: Where we have targeted drops to ask it how are you.
Amit Dayal: Your next question comes from the line of Amit Dayal with H C. Wainwright.
Speaker Change: Yes routes that we have some of them we have been asked to be held in by the D. O T longer than we originally requested the the good pieces of that we are getting an additional subsidy from the D. O T to do that so we do have a number of routes that we had planned to have exited by now, but we're not we're being held in.
Speaker Change: Please go ahead.
Amit Dayal: Thank you good afternoon, everyone. Thank you for taking my questions.
Speaker Change: You know it looks like you're maybe close to or maybe doing with exiting these unprofitable routes.
Amit Dayal: Questions around seeing how proactively.
Amit Dayal: The new routes new profitable growth or is the goal for this segment.
Speaker Change: Some as late as the fall of this year.
Amit Dayal: To maximize profitability.
Speaker Change: As far as entering into it to a new tier one route our current plan does not have us.
Speaker Change: Thank you and then.
Starting that until next year.
Speaker Change: We are we have targeted routes to exit Javier.
Speaker Change: Okay.
Speaker Change: Yes routes that we have some of them we have been asked to be held in by the D. O T longer than we originally requested the the good pieces of that we are getting an additional subsidy from the D. O T to do that so we do have a number of routes that we had planned to have exited by now, but we're not we're being held in.
To John's comment there I just wanted to give you some commentary on the on demand side. One of the things you will note from our script is that we are contemplating some pre buys of capacity and that's that's important to us because obviously in regards to shifting that business towards a more profitable base I'm having those.
Speaker Change: Some as late as the fall of this year.
Speaker Change: Pre buys does give us the ability to to increase our profitability.
Speaker Change: As far as entering into it to a new tier one route our current plan does not have us starting that until next year.
Speaker Change: That's one of the key parts of a recalibration of our business.
Speaker Change: This makes sense. Thank you.
Speaker Change: Please go ahead.
Speaker Change: Next question is Mr. Morton.
Speaker Change: Okay.
Speaker Change: You know the software side of things.
Speaker Change: Hey, John this comment there I just wanted to give you some commentary on the on demand side. What are the things you will note from our script is that we are contemplating some pre buys of capacity and that's that's important to us because obviously in regards to shifting that business towards a more profitable base I'm, having those pre.
Speaker Change: It looks like this disease.
Speaker Change: <unk> is starting to get into the hands of potential customers.
Speaker Change: How much more work needs to be done before you guys get more aggressive about marketing all of these.
Amit Dayal: So amit thanks for that question.
Speaker Change: <unk> does give us the ability to increase that profitability.
Amit Dayal: As you can imagine where we were anticipating the feedback from our beta users and integrating that feedback into.
Speaker Change: That's one of the key parts of the Recalibration of our business.
Speaker Change: Yes makes sense. Thank you.
Amit Dayal: What we hope to be the commercial product that we will rollout in 2026.
Speaker Change: Please go ahead.
Speaker Change: My next question is more around you know the surf Louis side of things.
Amit Dayal: That is our plan as it stands.
Amit Dayal: If we are able to accelerate that we will be very pleased but.
Speaker Change: It looks like this disease.
Amit Dayal: Current plans remain to have a full commercial rollout of Cfos and certainly certain modules yourself for us for fiscal year 2026, and then an acceleration of the number of modules.
Speaker Change: This product is starting to get into the hands of potential customers just wondering how much more work needs to be done.
Speaker Change: Before you guys get more aggressive about marketing one of these.
Amit Dayal: For Mero now we are however, utilizing the <unk> modules and platforms within our own business.
Speaker Change: So amit thanks for that question as you can imagine where we ran just facing the feedback from our beta users and integrating that feedback into what we hope to be the commercial product that we will rollout in 2026.
Amit Dayal: On our the broker S piece of it on our <unk>.
Amit Dayal: On demand business and also in our operations and our scheduled service, where using the true up or using the dynamic scheduler. We've we've recently.
Speaker Change: That is our plan as it stands.
Speaker Change: If we are able to accelerate that we will be very pleased but the current plans remain to have a full commercial rollout of cfos and suddenly shut in modules or southwest for fiscal year 2026, and then an acceleration of the number of modules.
Amit Dayal: We recently launched a portion of the operator OS and helps with flight planning. So we're utilizing all of the features and products of this of the software first before we are.
Speaker Change: For Maryland.
Amit Dayal: Turning it over to other users.
Speaker Change: We are however, utilizing the <unk> modules and platforms within our own business.
Dave Storms: Your next question comes from the line of Dave storms.
Speaker Change: Those are the broker S piece of it on our.
Amit Dayal: Stonegate.
Amit Dayal: Please go ahead.
Speaker Change: On demand business and also in our operations and our scheduled service, where using the true up or using the dynamics scheduler. We've we've recently launched a portion of the operator O S. It helps with flight planning. So we're utilizing all of the features and products of this.
Amit Dayal: Okay.
Amit Dayal: Good evening and thank you for taking my questions.
Amit Dayal: Just wanted to start with the service interruption, but you mentioned on the prepared.
Amit Dayal: <unk> was any part of this planned downtime considering you are still well within our guidance range.
Amit Dayal: The.
Speaker Change: The software first before we are I'm, turning it over to other users.
Amit Dayal: Service interruption that we had was in the second week of January this quarter. It was not something that was planned and it had to do with maintenance around corrosion and interiors, where we did not have.
Dave Storms: Your next question comes from the line of Dave storms with Stonegate.
Speaker Change: Please go ahead.
Amit Dayal: The proper.
Dave Storms: Good evening and thank you for taking my questions.
Amit Dayal: Any as they call it and any other program.
Dave Storms: Just wanted to start with the service interruption, but you mentioned in the prepared remarks.
Amit Dayal: With the FAA, a we had a number of of ours in the system that we had to reduce our schedule and the FAA worked very closely with us to get us updated onto that program. So that we could safely and legally fly under that program, but it was it was something that.
Dave Storms: Was any part of this planned downtime, considering you're still well within our guidance range.
Dave Storms: The service interruption that we had was in the second week of January this quarter. It was not something that was planned and it had to do with maintenance around corrosion and interiors, where we did not have.
Amit Dayal: Was not planned.
Amit Dayal: Understood. That's very helpful. Thank you and then just one more the congrats on the partnership with Japan Airlines.
Amit Dayal: When you're thinking about the potential for more of these to come or are there any geographic geographies that that you'd be targeting when you look at a more east coast operators are which are sticking.
Dave Storms: The proper.
Dave Storms: They call it and any F program with the FAA, we had a number of of ours in the system that we had to reduce our schedule and the FAA worked very closely with us to get us updated onto that program. So that we could safely.
Amit Dayal: The.
Amit Dayal: Pacific region.
Amit Dayal: So we're we're excited about the Japanese Japan, Japan Airlines Interline agreement because it's our first international agreement with someone that is flying specifically into one of our largest revenue generating region.
Dave Storms: Legally fly under that program, but it was it was something that was not planned.
Dave Storms: Understood that's very helpful. Thank you.
Dave Storms: And then just one more the congrats on the partnership with Japan Airlines.
Amit Dayal: You know where we're at.
Dave Storms: When youre thinking about the potential for more of these to come or are there any geographic geographies that that you would be targeting would you look at our you know.
Amit Dayal: It would be looking to expand to other carriers not just in the United States, but also potentially globally too as Japan Airlines as our first experience at trying to do that.
Dave Storms: More east coast operators or would you still can.
Dave Storms: The Pacific.
Dave Storms: Pacific region.
Speaker Change: So we're we're we're excited about the Japanese job at Japan Airlines Interline agreement, because it's our first international agreement with.
Amit Dayal: I would now like to turn the call back over to D. N. A wait for closing remarks. Please go ahead.
Speaker Change: Someone that is flying specifically into one of our largest revenue generating regions.
Speaker Change: Yes. Thank you. Thank you all who joined the call I appreciate your interest in our company and hope to report in the future.
Speaker Change: Where it would be looking to expand to other carriers not just in the United States, but also potentially globally too as Japan Airlines as our first experience at trying to do that.
Speaker Change: More progress on our transformation plan the various phases more progress on all of the goals, we set for ourselves and our and our technology initiatives. Both on the electrification side and on our software side and hoping to have exciting news on that front in the future, but thank you for your interest in <unk>.
Deanna: I would now like to turn the call back over to Deanna wait for closing remarks. Please go ahead.
Speaker Change: Thank you for joining us today.
Yes. Thank you. Thank you all who joined the call I appreciate your interest in our company and hope to report in the future.
Deanna: More progress on our transformation plan and the various phases more progress on all of the goals, we set for ourselves and our and our technology initiatives. Both on the electrification side and on our software side and hoping to have exciting news on that front in the future, but thank you for your interest and thank you.
Deanna: For joining us today.
Deanna: Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.
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