You don’t see this very often…
In this post:
Northern Pacific Airways looking to public for funding
We’ve seen quite a few airline startups recently, and Northern Pacific Airways is among those. Northern Pacific wants to turn Anchorage into a transpacific hub connecting the United States and Asia using Boeing 757s.
Essentially Northern Pacific hopes to replicate what Icelandair has done for transatlantic flights, and what Copa has done for flights in Latin America. Now, while those airlines have had success with the concept, I think the Northern Pacific business model is much more challenging.
If I didn’t know any better I’d almost say that the people behind the airline aren’t serious, but that’s not the case — the people behind this airline are the same people behind Ravn, a regional airline in Alaska.
Anyway, Northern Pacific claims that it’s going to launch operations this fall, as the airline already has several planes in its fleet, and has allegedly worked out a wet lease agreement with Icelandair as well.
Nonetheless, Northern Pacific has sent out an email to those who wanted to get updates about the carrier’s launch, asking for money.
As the email describes this opportunity:
As a valued supporter of Northern Pacific, we wanted you to be among the first to know that we are now raising a Community Round on Wefunder in support of the launch of our international airline!
This means we’re letting our biggest supporters – you, our soon to be customers – become investors in the company.
You can invest as little as $100 by clicking this link.
The airline claims to have a $350 million valuation, though for the first $1 million invested, a 20% discount will be applied to the valuation, bringing it to “only” $280 million. Currently this is being marketed as a “friends invest first” opportunity, before it opens to the public on June 3, 2022.
The airline is offering incentives to those who invest, with reward thresholds all the way from $250 to $5 million:
- Invest $250+ and you’ll get free drinks on Northern Pacific through 2023
- Invest $500+ and you’ll get Northern Pacific and Ravn “1K” elite status through 2023
- Invest $1,000+ and you’ll get $1,000 in Northern Pacific flight vouchers
- Invest $5,000+ and you’ll get an invitation to the Anchorage north terminal launch party for Northern Pacific
- Invest $10,000+ and you’ll get $10,000 in Northern Pacific flight vouchers
- Invest $50,000+ and you’ll get Northern Pacific and Ravn “#1” elite status through 2025
- Invest $100,000+ and you’ll get tickets for Northern Pacific’s inaugural flight
- Invest $500,000+ and you’ll get to name a Ravn DHC 8
- Invest $1,000,000+ and you’ll get to name a Northern Pacific Boeing 757
- Invest $5,000,000+ and you’ll get to paint a Northern Pacific Boeing 757 with your custom design
The airline makes quite some claims in its pitch to investors, including that by 2026 the airline will have 50 aircraft, $1.3 billion in annual revenue, and $120 million in annual profit. The airline claims that the total addressable market for transpacific air travel is $20 billion, so if the airline thinks it’s getting $1.3 billion of that market (~6.5%), that’s highly optimistic, to put it mildly.
Is this cute or concerning?
There are all kinds of airline startups out there, some more legitimate than others. On end of the spectrum you have Avelo Air and Breeze Airways, both of which were founded by respected industry veterans, and have a combined hundreds of millions of dollars in funding.
On the other end of the spectrum you have Global Ghana Airlines. The founder repeatedly claimed the airline was within weeks of launching, even though the company had no funding and no planes.
But when it comes to crowdsourcing funding and selling people on the dream of a successful airline, Baltia comes to mind. Baltia is a company that existed for over 30 years, and the airline even had a 747-200 for over 20 years, which never operated a single commercial flight.
The company’s plan was allegedly to launch flights between the United States and Russia using Boeing 747s. I’m sure it’s “Golden Rooster Club” frequent flyer program was going to be a big money maker too. The airline never launched, but the people behind the company kept selling the dream, and people kept believing it. Baltia didn’t finally “die” until an SEC suspension in 2018, and even then, many people still believed the airline was serious.
I’m by no means suggesting that Northern Pacific is anything like Baltia in terms of intent. I think the people behind Northern Pacific are serious. While I don’t believe in the business model, I think they do, and that’s totally fine.
But the concept of having picked up some old planes for next to nothing, claiming a $350 million valuation, and asking people to invest, does feel a bit Baltia-esque.
Maybe this is partly my bias here based on my impression of the company’s business model. Because if Breeze’s David Neeleman opened up a round of funding to the public and you could invest $100+, I’m sure many people would find that to be interesting. But perhaps it’s also telling that he doesn’t need to offer people free drinks on an airline for a year in order to raise $100. I dunno…
Bottom line
Northern Pacific is looking to the public for funding. The airline claims to have a $350 million valuation, but if you invest now, you can “buy-in” at a $280 million valuation. While there have been a lot of airline startups lately, it’s not often you see an airline take this approach.
What do you make of Northern Pacific looking to the public for funding in this way? Anyone investing?
I think it's a good plan. My grandfather was a pilot, and he made quite a few nonstop flights from Alaska to Japan. Of course, that was a long time ago, they were never happy to see him and he didn't land.
Just hoping the smaller communities of Alaska do not suffer again, in some unexpected disruption, dysfunction, or insolvency this organization seems to have potential for.
Just getting the remnants of RAVN Alaska, back in the air and to not anywhere near all the communities if formerly served in the past seems challenge enough at a company rediscovering its new wings.
Small communities in Alaska are the real real concern of this decidedly optimistic business plan.
This screams of a scam. At least it's not the EV company I saw last week fishing for investors through ads. Do they not realize how expensive running a company is?
I like the idea. I am biased living in Anchorage as I want another easy route for travel. Asian travel to Alaska is huge. It's thought conceiving under the northern lights will make your child lucky or something. Asian money already visits Alaska at odd times of the year in droves. Looking at the current state of no fly zones with Russia and the lifting of COVID restrictions in Asia I'm liking the first mover...
I like the idea. I am biased living in Anchorage as I want another easy route for travel. Asian travel to Alaska is huge. It's thought conceiving under the northern lights will make your child lucky or something. Asian money already visits Alaska at odd times of the year in droves. Looking at the current state of no fly zones with Russia and the lifting of COVID restrictions in Asia I'm liking the first mover advantage here. Alaska also has a large workforce of aircraft mechanics / pilots / aviation industry and a college geared towards the industry. This might actually work.
I was in my early 20s when I first heard the terms "long and skinny" and "hub and spoke" with respect to airline route-structures, and the thing I noticed way back then, is that these terms were always used as if they aligned as a natural dichotomy. And even at the time I thought that was madness. The future of air travel, it seemed to me, was with a route structure that was *both* long-and-skinny...
I was in my early 20s when I first heard the terms "long and skinny" and "hub and spoke" with respect to airline route-structures, and the thing I noticed way back then, is that these terms were always used as if they aligned as a natural dichotomy. And even at the time I thought that was madness. The future of air travel, it seemed to me, was with a route structure that was *both* long-and-skinny *and* a hub-and spoke. You'd never fill even a small plane from Dayton to Wuhan, but you'd have a lot less trouble filling a plane from Dayton to Anchorage if everyone on it was connecting to some different Dayton on the other side of the world. And the best part is that your competition wouldn't really be established carriers; it would be the extra two-hours of drive time to get from Dayton (e.g.) to a bigger airport like Cincinnati.
That's reasonable. The issue is predicting what cities on both sides of the oceans.
You think too much about finding a Dayton or a Wuhan (which is actually larger than NYC).
At the end of the day, airlines like this can only compete on only 1 thing, Price.
Norwegian, WOW couldn't maintain that advantage and becomes history.
I'm not saying this airline will fail. There are still slim chances and only if they play their hands correctly. But so far what I'm seeing, I'd rather buy PowerBall.
I personally think there is an opportunity for a transpacific airline based in Alaska.
Given the unique geography, it is impossible for any narrow body aircraft to operate given the vast expanse of the Pacific Ocean and no mid-points.
Alaska offers minimal back-tracking and can potentially link secondary cities in Asia to those in the US/Canada.
That being said, Northern Pacific’s 757 are not the right aircraft for this mission- given their...
I personally think there is an opportunity for a transpacific airline based in Alaska.
Given the unique geography, it is impossible for any narrow body aircraft to operate given the vast expanse of the Pacific Ocean and no mid-points.
Alaska offers minimal back-tracking and can potentially link secondary cities in Asia to those in the US/Canada.
That being said, Northern Pacific’s 757 are not the right aircraft for this mission- given their fuel efficiency. It would be quite different if they had access to A220s or A321 XLRs that I assume are part of the plan.
If Northern Pacific can stay afloat for the next few years- they may just make it!
Reward based crowd funding is more of a marketing tool particularly for larger capital intensive businesses like airlines. It is not serious investing! I see it as closer to gamification!
As cash strapped as they may be, Northern Pacific probably knows that 100 dollars isn’t going to change their fortunes!
What it may do however is to create a community of brand loyalists and captive clients who are more likely to patronise the airline and refer others- not just because of the few drinks but because they are part of a start up story and feel a sense of ownership.
Is it a publicity stunt? Absolutely- however it is smart strategically, ground breaking and has got people talking- they have earned organic real estate on your portal as well. ;-)
They should just change the name to "Prestige Worlwide Airways."
Richard Branson once said how do you become a millionaire in the airline business? Start as a billionaire.
I thought it was funny at the time, until he sold Virgin America to Alaska for $4B.
At least they’re not asking for the funds in crypto.
Raising money via Wefunder for this sized deal when the world is awash in institutional money? A quarter billion dollar+ valuation for a company with a claimed run rate of $90M and no mention of profitability? I can imagine how the smart money might think these guys have a very high opinion of themselves so management decides maybe the public will be more forgiving.
They are definitely targeting amateur investors. aka. Robinhood people, or to the moon crypto and NFT.
The pitch deck screams tech startup valuation not airline valuation.
15x in 5 years, LOL!!!
And somebody please explain this statement? I can't really B/S or spin this one as a positive.
"3. High fuel prices increase Northern Pacific's cost advantage."
The only thing I can imagine is that since they are flying short legs due to the stop in Alaska they are claiming they don't have to carry as much fuel as a long flight so they don't have to burn the fuel to carry the weight of that fuel.
More red flags: Their frequent flyer model. Google "flycoin"
Personally I don't see this as a big red flag but rather dinosaurs being pitched by millennials on crypto and trying to be cool. It does show that they have no clue on what they are doing.
Flycoin kids on the other hand, nice sell. You sold frozen meat to a dinosaur. You either disrupt or scam the dinos, but you already pocket the dough.
And for the love of energy waste, not everything...
Personally I don't see this as a big red flag but rather dinosaurs being pitched by millennials on crypto and trying to be cool. It does show that they have no clue on what they are doing.
Flycoin kids on the other hand, nice sell. You sold frozen meat to a dinosaur. You either disrupt or scam the dinos, but you already pocket the dough.
And for the love of energy waste, not everything can or should be on a blockchain. It doesn't make you look cool, it makes you look fool.
Free drinks for a year for $100 sounds like a great deal ! Except if they never actually fly anywhere! You'd think they could find regular investors if they have a great business plan, so asking the public to fill the gap seems worrisome.
Not just a fake airline with no business model, it’s a Ponzi scheme too!
touche.