TWST: Please begin with a brief historical sketch of the company and a picture of the things you are doing at the present time.
Mr. Santo: Avantair is a five-year-old company. It became a public company in February. It's a fractional aircraft company in which we sell time-shares in aircraft. What we do is we divide interests in an aircraft into 16 units and we sell each of those units to a fractional owner. The fractional owner has the right to fly 50 hours a year of occupied flight time, meaning time they are actually on the aircraft and it's flying. They also at this very same time sign a five-year maintenance and management agreement that covers the cost of operating the aircraft and the economics of the deal are a fledging $15,000 to buy a fractional unit. It's $9,400 a month on the management fee side, and just to put that in perspective, the whole goal of the company was to bring value to the fractional market. We are 30% to 40% less than any of our competitors with what we believe is a far superior product.
TWST: How does the current state of the economy play into what you're doing?
Mr. Santo: We think we have a real chance to gain market share because of where we are priced. We are by far the lowest in terms of cost and we offer the greatest value. We don't think we will be as affected by the economic slowdown if some of the other fractionals were up. I can tell you, when we started the company, it was just before 9/11 and the first purchasers were really folks who were looking to save some money. We're just a great value and in times like this, people are even looking harder for values, so we think it will really help us.
TWST: What lies ahead? What are the main opportunities for Avantair? What are the main strategies that you have been employing in pursuit of them?
Mr. Santo: We are continuing to sell and add management fee revenue and our strategy right now is really to go after market share. We're planning on doing more advertising, increasing our sales force and getting as many airplanes as we can from the manufacturer and continuing our strong sales and growth. We've also added a travel card to our program — The Edge Card — where a person can actually buy block time instead of having to buy a fractional share. The upfront cost is lower and we think that's the way to attract people to our industry and convert them into future fractional owners.
TWST: What would be the two or three best reasons for the long-term investor to look very closely at Avantair?
Mr. Santo: It's recurring revenue and incremental gain. What I mean by that is there are basically two businesses that we're running — a sales business and a management business. The sales side is very simple; we are selling interest in aircraft. On the management side, which is really what the business is built around, it is built around this management fee revenue, which is recurrent for a five-year term. Once the company breaks even operationally, there is large incremental gain in that. If you are a value investor, it really makes a whole lot of sense. The company just continues to grow in profitability based on that management fee revenue.