POGO Issues $100M IPO, Auction Next Week

In a February 19 offering, POGO issued its initial public offering for $103,500,000 to fund the launch of operations in the second quarter of 2009 and the acquisition of 15 Eclipse 500 Very Light Jets. It ultimately plans to expand to 115 VLJs by the second quarter of 2012. In its previous filing last fall...

For immediate service; more information; and multi-user access (site license), non-profit organization, educational institute pricing, contact Karen Garner kgarner@accessintel.com at (301) 354-1612.

This story is only available to paid subscribers. Please login below with your username and password if you are a subscriber.

Username:
Password:
	What is my password?

Subscribe     Trial

In a February 19 offering, POGO issued its initial public offering for $103,500,000 to fund the launch of operations in the second quarter of 2009 and the acquisition of 15 Eclipse 500 Very Light Jets. It ultimately plans to expand to 115 VLJs by the second quarter of 2012. In its previous filing last fall, it said it planned to operate 25 VLJs by the end of 2009 year and 100 by the end of 2011. Related Story The company, expects to be able to lower the price of private travel by efficient operations and by use of the lower-cost very light jet. Having its own fleet, POGO expects to improve on current private aviation, which it says, has a number of disadvantages it intends to address.
POGO has an accumulated deficit of $6.74 million. The price per share will be determined by auction with managers WR Hambrecht + Co determining the highest price offered after the auction closes the week of March 17. However, it expects that the initial public offering price will be between $12.50 and $16.50 per share. The OpenIPO Auction for Pogo Jet, Inc. will open for bidding on or about March 3. The company is selling 7,000,000 shares of common stock. The proposed NASDAQ Global Market Symbol is POGO.
“We estimate that our net proceeds from the offering will be approximately $94.6 million, based on the midpoint of the price range,” said the company, which re-launched its website at www.flypogo.com and begins pilot recruitment early this year. “We intend to use approximately $39.4 million of the net proceeds to fund a portion of the aircraft purchase deposits, progress payments and delivery payments for the purchase of our initial fleet of Eclipse 500 aircraft and approximately $11.8 million for capital expenditures unrelated to aircraft purchases, including expenditures for the build-up and maintenance of our operating facilities. We will use remaining net proceeds of approximately $43.4 million to fund operating losses and for working capital and other general corporate purposes.” The company also plans to pay for a substantial portion of the procurement cost of our fleet of aircraft with borrowings under one or more yet-to-be-arranged aircraft financing facilities. As soon as the IPO is complete, the company will begin Department of Transportation and Federal Aviation Administration approvals. (continued below)

In addition to choosing its base at the Chicopee, Mass. dual use Air Force Reserve base at Westover and assembling its management team which includes former AMR Chair Robert Crandall, POGO has negotiated the principal terms of its initial delivery of VLJs.
Pogo Jet, Inc. will be a leading provider of private on-demand jet charter service, based on the more traditional per-aircraft, rather than the per-seat, on-demand model. It will initially serve the Northeast where scheduled and regional airline have pulled back significantly on providing air service. However it also intends to cover the Mid-Atlantic, Ohio Valley and Carolinas. This target service area includes major metropolitan markets, such as New York City, Philadelphia, Washington, DC, Boston, Cleveland, Cincinnati, Pittsburgh, Detroit, Toronto, Montreal and Charlotte, as well as the regions surrounding these markets.
It will use its extensive airline management experience, led by Crandall, to offer a service that “combines many operational practices of scheduled airlines with the convenience of personalized, on-demand jet charter operations, drawing customers who currently use private aviation and commercial airlines, as well as affluent travelers who do not currently use private aviation.” The rest of its management reflects this philosophy since it tapped Michael Stuart, who formerly served as senior vice president of flight operations at Comair, Inc., to be executive vice president, operations, and Michael Baur, formerly vice president of NetJets, the country’s largest fractional jet service provider, as senior vice president of customer service and pricing. Other members of the senior management team have over 55 years of investment banking and consulting experience focused in the aviation, aerospace and transportation industries, it said.

Market Potential
The company pointed out that 2.6 million of the 24.7 million passengers using the 76 airports in its target market area paid unrestricted coach or business fares, according to the DOT and Official Airline Guide (OAG). “These travelers represent a significant potential target market for our service,” it said. “We expect to generate additional demand from potential customers who currently use surface transportation and consumers who choose not to pursue business or leisure travel, due to the high costs of existing private aviation services or the inconvenience of existing scheduled airline travel options. When these existing travel inconveniences are considered in total, we believe consumers will seek, in increasing numbers, an effective, time-efficient alternative to existing forms of transportation.” It expects to offer lower prices than existing private aviation services and provide consumers with a lower-cost, easier-to-book, and more consistent jet charter service experience, when compared to existing private aviation service alternatives.
It also cited DOT’s Bureau of Transportation Statistics reporting that, in 2006, and, in the first six months of 2007, major U.S. commercial airlines were delayed at least 25 percent of the time, often due to airport congestion and inconveniences that would be significantly reduced through its service. POGO will also use the circuitous routes for scheduled transportation – “especially for regional travel,” to its advantage. “Less than one-third of all routes involving service between the 76 commercial airports within our target service area had non-stop service,” it said, citing the OAG. “Accordingly, air travelers whose final destination is not within the immediate proximity of a major airport hub frequently face lengthy layover delays, overnight stays and connections through crowded airport hubs.” POGO will run its three-passenger Eclipse 500s as a two-pilot operation.
It cited General Aviation Manufacturers Association statistics showing the active twin-engine private jet aircraft in use grew from 6,956 aircraft in 2001 to 10,379 in 2006. Of these totals, 813 were available for charter in 2001 and 2,489 were available for charter in 2006, an increase of 206 percent. During this five-year period, annual on-demand charter hours flown by private jet aircraft increased 245 percent, from 273,000 hours to 943,000 hours.
“We will be able to give our customers an enhanced private travel experience by deploying a fleet of new VLJs, which will provide a consistent look, feel and flying experience,” it said. “We intend to improve on common inconveniences and logistical challenges associated with many existing private aviation service providers by providing our customers with an efficient, customer-friendly flight booking process that will confirm orders immediately, not over a protracted period of time, as is common with many existing private aviation services. Unlike many existing private aviation services, we plan to offer an all-inclusive pricing structure that is straightforward and simple to understand and will avoid the multiple add-on costs charged by many other private air charter services. We believe that the high cost of current private aviation alternatives is attributable to a number of factors, including the provision of service by operators who lack scale or consistency in their operations, who utilize aircraft that are more costly to purchase new and more costly to operate than the VLJs and who frequently charge consumers additional or hidden charges. Consumers of current private aviation services also frequently face unnecessary travel complications that are attributable to the ad hoc scheduling practices employed by many existing jet charter operators, and can lead to an inability to book a desired flight itinerary or significant delays in assembling a less attractive alternative itinerary. In addition, many existing jet charter operators offer inconsistent service because they frequently do not own the aircraft they use or employ the personnel that are engaged to operate their charter aircraft.”
POGO believes its advantage lies in establishing and maintaining low operating costs from the new class of VLJs; deriving efficiencies through anticipated economies of scale and high utilization of a large fleet of aircraft; as well as its highly experienced leadership team. Its maintenance program will adopt best-practice standards similar to those employed by the scheduled airlines and will be designed to minimize maintenance down-time. This, it said, will enable it to maintain high aircraft utilization levels, serve more customers per aircraft, optimize revenue per aircraft and spread fixed costs over a greater number of revenue flights.