Two months ago, we would have reported about an outlandish endeavour called Avatar Airlines. The company which has been in the making since September 1992, issued a letter of intent to purchase 30 Boeing 747-8is with the intention of operating ultra low cost flights across the United States.
Besides the company’s very far fetched plans, the owners have found themselves in a string of legal problems in the past, preventing them from obtaining their Air Operator’s Certificate (AOC). With no approval to fly and no aircraft behind their name, you would think they would be basically unaffected by the outcome of the current pandemic. That’s where you’re wrong.
As part of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) act, the airline industry as a whole will be entitled to $50 billion in funding to help support the industry during the economic downturn. The money will be mainly split between loans and payroll grants. Many U.S. airlines have already applied for funding, with some of the bigger names including Alaska Airlines, American Airlines, Delta Air Lines, JetBlue Airways, Southwest Airlines and United Airlines already agreeing on the basic terms with the treasury department.
I guess what’s good for one is good for all? OMAAT came across a letter from Avatar Airlines which was sent to the U.S. Department of Treasury, requesting funding from the CARES act. The “airline” is applying for $15 million in funding to continue paying its staff members, and to ensure that “Avatar will meet its ongoing responsibilities to the regulatory agencies that govern certification.”
If you haven’t already heard of Avatar Airlines, I would like to introduce you to our company and where we are in our evolution. Further, I would like to explain why this airline, in our opinion, is critical to the future of the aviation/transportation industry.
Avatar is a start-up business with a unique approach to the industry offering everyday low-fare flights as our primary strategic approach to the aviation sector. We have made significant progress for a company that, to date, has not had any significant capital infusion. Our team of executives and management have led us to the point of producing a comprehensive Private Placement Memorandum (PPM) for qualified investors and subsequent submission of our application to the DOT/FAA for full certification.
With the out-break of COVID-19, and despite the efforts of the Stimulus package, there will, unfortunately, be casualties in an industry currently characterized both by high debt and high breakeven load factors. As the coronavirus essentially shuts down one carrier after another, Avatar continues to move forward as it is not and will not be impacted by COVID 19 given our current plans to be fully operational by mid-2021.
As a start-up, we have no flights, no overhead, administrative expense, or fixed costs at the present time, and when we are fully operational anticipate adding 2000-3000 full time employees. Our plan is to work our way through the five phase DOT/FAA certification process that normally takes approximately 12 months to complete. We are presently in Phase 1 with the initial in-brief meeting with the DOT/FAA tentatively scheduled for the end of May of this year.
As reflected in the PPM, Avatar is clearly poised to present a paradigm shift to the aviation industry when it commences operations next year. Thus, we have arrived at a stage today where the timing for a significant capital infusion could not be more opportune and we invite you to review the PPM, which can be found at https://avatarairlines.com/investor-information/, to determine for yourself that Avatar Airlines will be the new standard by which others will be measured.
Please see our enclosed application to be included in the Class of Passenger Airlines within the United States entitled to Emergency Financial Assistance in the form of Grants or Loans.
Further down into the request, they say:
A critical component to compensate Avatar’s existing executives and those executives required by the Company to become flight-operational, was dependent on funds to be received out of Avatar’s SEC Reg D 506(c) $300 mm offering. However, the presence of the corona virus and its crippling effect on the stock market and the nations economy as well as the fiscal and psychological state of its prospective investors, has left Avatar in an uncapitalized state, with no clear path to compensating its employees during its most critical phase of development.
For this reason, Avatar is seeking government funds of $ 15 mm in the form of grants or loans to compensate its employees to insure that Avatar will meet its ongoing responsibilities to the regulatory agencies that govern certification.
With the Coronavirus outbreak forcing many airlines to downsize its growth strategy, many top names have cancelled or modified orders, with plans of operating smaller schedules. It’s unclear how long it will take for the aviation sector (and travel industry as a whole) to recover, but it’s surprising that the founders at Avatar still think it makes sense to go big after COVID-19.