“Fasten Your Seatbelts – We’re Ready for Takeoff”

An In Depth View Of Global Crossing Airlines’Fair Value

In a highly detailed report brimming with charts, peer comparisons, risk assessments and aircraft delivery schedules, former investment industry analyst Ian Macqueen has taken a magnifying glass to various growth scenarios for GlobalX through 2024. This culminates in his views on “fair value” and the potential for significant share price appreciation.

First, let’s cut to the chase on a fair value per share range and then we’ll come back to multiple observations by Mr. Macqueen of Bancroft Capital.

Per share:

Base Case: $1.43 US / $1.94 CN

Upside Case: $5.13 US / $6.93 CN

This is based on: “Applying the 5.5x peer average 2024 EV/EBITDAR multiple to our base and upside 2024 EBITDAR estimates.”

Mr. Macqueen’s note on EBITDAR (Earnings Before Interest Taxes Depreciation Amortization Rent) is important with peer comparisons contained in the full report: “Peers both own and rent aircraft while GlobalX rents all of its aircraft. In order to have a metric that allows us to compare these airlines using different mixes of operating and finance leases, we need to add back rent expense on operating leases to EBITDA so that we’re comparing “apples to apples”.”

Below are the key numbers that underpin the fair value per share range, which takes into account extensive analysis covered in the report on fleet growth, aircraft delivery schedules, block hours and contributions from passenger (PAX) aircraft and cargo aircraft.

As a point of clarification, in early May, GlobalX management re-stated its 2023 forecast of $140 million US revenue + positive EBITDAR, which is based on 9 PAX and 2 cargo aircraft at year end BUT it also released an updated delivery schedule that sees the year end fleet at 12 PAX and 6 cargo aircraft.

It should be noted that management’s current 2023 aircraft delivery schedule equates to the report’s 2024 base case, which in itself sees significant forecast revenue and EBITDAR growth. In fact, the $45 million EBITDAR figure is within a stone’s throw of GlobalX’s current market capitalization of $50 million US as of this writing.

To another important point, early in the report Mr. Macqueen addresses the strength of GlobalX’s business model and how it mitigates risk compared to the way people typically think of the airline business.

“GlobalX was designed as a service company that can fill the need for air travel when existing carriers cannot. Through ACMI, charter and supplemental lift, GlobalX provides aircraft operations without fuel, load factor or ticket price risk. It sells a whole plane, gets paid 10 days in advance and passes any fuel price adjustments on to the customer. Ultimately it takes what is typically a fixed-cost business and turns it into a cost-plus business – which means that each of its flights generates profit with little to no risk.”

Without doubt, there’s been a lot of head shaking when it comes to GlobalX’s current market valuation compared to an impressive list of achievements. This item is not ignored in the report.

As a side note and for some context, just one of the peer companies in the report being Sun Country Airlines, has seen its market capitalization fall to under $1 billion US, which is less than half its valuation in the summer of 2021. It’s not alone amongst airline stocks.

“We believe the discount results from 1) an expectation for continued delays to aircraft deliveries and 2) a need for the company to raise capital. We expect positive developments on both fronts in 2023 and assume such in our models. With some good news on aircraft deliveries and a resolution on the financing uncertainty, we believe GlobalX management will finally see some of the credit it deserves via share price appreciation.”

All of these conclusions make us that much more optimistic for GlobalX’s future. We believe that the market is myopically focused on the near-term challenges the company has experienced and is failing to recognize the platform that management has built.

Yes, there have been innumerable delays to both passenger and cargo aircraft deliveries and yes, it has been very frustrating for shareholders (including company insiders who own ~40% of the outstanding shares) but the company has continued to grow its business and its revenues regardless of the delays. Despite only adding three new aircraft in the last 17 months, it has:

  • Added key certifications and accreditations in Q1/23 (cargo, IOSA, EASA-TCO and DOD),
  • Grown its block hours per month by 110% between March 2022 and March 2023 (Figure 8)
  • Grown its average block hrs per aircraft by 40% between March 2022 and March 2023 (Figure 8)
  • Launched its cargo operations which has given a glimpse of the potential of the A321F
  • Added to its pilot pool in order to be able to service a very busy 2H23 schedule (Figure 8)

Readers of this commentary and Mr. Macqueen’s report should understand the following, which in part reads:

This report has been commissioned by Global Crossing Airlines Group Inc. (GlobalX) and prepared and issued by Bancroft Capital Corp. in consideration of a fee payable by GlobalX. This report is published for informational purposes only.

We do want to point out that Mr. Macqueen is not new to the GlobalX story. He first reviewed the company in early 2021 and based on his “vote of confidence” in management’s strong backgrounds, he saw merit in becoming a shareholder of size.

We’ll explore that topic amongst many others when we sit down with him for a “fireside chat”, which will be released in the next couple of weeks.

Ian Macqueen’s bio:

Mr. Macqueen has over twenty years of varied capital markets experience. He currently runs a consultancy service assisting clients with corporate planning and investor relations. Originally a Professional Geologist by training, Mr. Macqueen worked as an equity analyst focusing on the energy sector for a number of different banks between 2005 and 2020. Prior to that, he spent five years evaluating and marketing oil and gas assets.

To read his report, click here: