We're going to start. Well, good morning or afternoon, depending upon where you are. My name is Grant Howard, welcome to the second quarter financial report and webinar with CEO Ed Wegel, Global Crossing Airlines, and Ryan Goepel, the Chief Financial Officer. Exceedingly good results compared to Q2 of last year. Gentlemen, with that, would you please start the webinar?
Sure. Thanks, Grant, and good afternoon, everyone. Thanks for joining us today so that we can discuss our second quarter results. Our second quarter was a success, both in terms of the number of block hours flown, as well as the preparatory work we completed to get ready for the summer flying through the rest of this year, through the rest of 2023. During the quarter also, we negotiated our $35 million financing over the course of May and June, which we closed in July. Combination of all of those things, a very good quarter for us, setting us up for success in the future.
Like every other airline in the world today, we have been impacted by the supply chain and staffing issues at the MROs, where we do our heavy maintenance checks, as well as from the MROs who are converting our A321s to freighter. For instance, just to give you an example, our second freighter, originally scheduled for delivery in October of last year, 2022, then January this year, then March, then June, was finally delivered, and we were able to place it on our certificate to start revenue flying on June 21st. While we had built in 90 days of flying for that airplane and 90 days of revenue for the quarter, we only got 10 days, again, because of staffing issues and supply chain issues at the MROs.
The other side of that coin is that the delay in new aircraft deliveries from the OEMs, and they face the same supply chain and staffing issues that, that we face, resulted in us flying longer-term ACMI charter contracts for several airlines. We see that business to continue for us over the next few years until those issues have resolved themselves. As well, during the, the quarter, we lost the equivalent of two aircraft months because of delays in getting two of our aircraft out of their scheduled heavy maintenance checks. They went through their normal cycle of about a month that we had scheduled for these, and because of supply chain and, again, staffing issues, both of these airplanes were delayed getting out of their maintenance checks.
An airplane that's not available to us cannot generate revenue, and that slightly impacted our revenue in the quarter, which we'll discuss in a moment. We fought through those issues, we flew 3,500 block hours in Q2, a testament to the 520 team members at GlobalX, who made sure we flew every charter and maximized the efficiency in scheduling our fleet. My hats are off to them for having pulled this off in a tough environment. We've seen these supply chain issues easing over the next year to 18 months, we are working now to ensure we can cover all of our flying contracts and our aircraft delivered late to us. We expect to make some announcements soon about partnerships with European ACMI airlines to accomplish this, as well as expanding our summer European flying.
Our objective to recruit, hire, and train enough pilots to fly our summer schedule into the winter was very successful during the quarter, and we're pleased to state that we have a little over four crews per aircraft, right where we should be. We have a robust pipeline of pilots who have signed letters to start classes in September and October, and we're starting to fill the November class now. Our August class, for instance, has five captains, and our September class has eight captains already hired. The August class has started. September class will start right after Labor Day, and we continue to fill our pipeline with very qualified captains and first officers to man our schedule. As a subsequent event to the second quarter, we closed the financing with Axar Capital Management, which we will walk you through in a moment.
We finalized the financing and lease of our new maintenance facility at Fort Lauderdale International Airport, and we expect to break ground on that finally within the next 60 to 90 days. We signed leases for two more A320 aircraft, ex-Alaska A320s, which are very, very good airplanes for us, which will be delivered later this year. We will also make some announcements soon about some additional freighters that we have signed for, during the rest of this year, as well as for delivery in 2024. We have a robust pipeline of pilots, a robust pipeline of aircraft to be delivered to us, to put on our certificate, and most importantly, a very robust list of clients and charter contracts that we are signing, to utilize those pilots and those aircraft, very well.
With that, we'd like to get into a, a short presentation that we have about the quarter. And then after that, we'll answer some questions. We'll go through the Axar financing. We'll comment on the quarter and our results, give you an update on 2023, fleet update, some updates on cargo, and then an investor update in terms of our exchange listings. I'll ask Ryan Goepel, who was our main negotiator on the Axar financing, to walk us through the terms of that agreement.
Great. Thank you, Ed. With on August 2nd, we closed our financing with Axar Capital. Axar is a $2.3 billion fund, that is has experience in aviation, and we believe is going to be a great partner for us going forward. One of the key aspects of this, and one of the things we're looking to secure, is we're looking to secure not only a partner, but the capital required to execute on our growth plan. I recognize in this current interest rate environment, some of these numbers might seem high, but recognize this is the lowest cost of capital we've raised since we started as an airline. Prior to this, we were doing all equity raises. When you factored in deal fees, warrants offered, all were at significantly higher cost of capital than the cost of this capital that we've raised.
With this, with this capital, however, we believe we have enough cash to operate our business plan, to grow our fleet, and to execute what we've been basically forecasting for the last six to 12 months. The deal terms are a $35 million loan, repayable over six years, with the ability to repay, with after two years, a 15% interest rate, a 1.75% OID, and 10 million warrants priced at a dollar, with semiannual interest payments. With the proceeds of this, we refinanced $8.5 million worth of debt, which was coming due in the next 12 months.
At higher rates.
Which were at higher rates. Again, we're very excited to have Axar on part of the team. We're excited to be working with them, and we're incredibly excited to have this as this financing in place, which is gonna allow us to execute on our plan.
Yeah, let me just comment, make a few color comments on this. We're very pleased with Axar. They understand our business. They have invested in airlines before. They've invested in charter airlines before. We have a partner who speaks our language and knows what we are doing. They are also very good people to work with, and I think that, and I know that going forward, they'll be very, very good partners with us and for us, especially if other opportunities get presented to us as we grow, and other airlines may want to try to work with us. Very pleased with this.
We were able to reduce our cost of, of the interest rate on our current debt, significantly, by about 25%-30% lower interest costs on that portion of the debt. The terms are very, very good, and in this market, given this, given where we are in our life cycle as a company, as we grow, we believe that these terms are excellent for us, and shows that Axar is very, very willing to work with us, to ensure that we've got the financing that we need. Both Jefferies and Roth Capital advised us on this financing. They both agree that we got very good terms, and they both agree that we have a very, very good financing partner in Axar, to move forward with us as we execute our business plan.
Some of the highlights from Q2, which you've seen some of these in some of our press releases as we've gone through, but just to summarize, we signed LOIs for two more A320 passenger aircraft and two more A321 freighters. That was just in that quarter. In Q3, we're signing more LOIs, on which we'll be making announcements about over the next few weeks. We recruited, hired, and trained 35 pilots, with an additional 22 in training, as of the end of the quarter, and 36 flight attendants. Those 35 pilots, with the additional 22, are what we needed to fly the summer schedule, which is very, very intense.
We'll talk about that, but we're over 250 hours per aircraft per month in Q3, and so we needed to ramp up very quickly our cockpit and cabin crews to be able to fly that schedule. We were successful in doing that. Now, with the financing that's in place, we look very, very strong to the outside world. More and more pilots are coming to us saying this is where they want to come and work, so we feel very, very good about that. We received our United Kingdom Third Country Operator authorization, which is a complement to the EASA TCO Third Country Operator authorization that we received a few months ago.
We are getting a request now to fly into the U.K. and from the United Kingdom into Europe, and we will be using this TCO very soon. We're very, very pleased that we're able to put that in place. During the quarter also, we flew for Wizz, one of the leading ULCCs in Europe. We flew 250 hours in about a three-week period. They asked for a longer term on the contract, but because we're so busy here this summer, as well as two airplanes flying for TUI, we were unable to do that. We believe that we'll be getting more and more flying from Wizz and other airlines like them in Europe over the next few months. We also started flying a wet lease contract for Lynx in Canada. We've just concluded that flying in August.
We started it in the second quarter. We ended August 7th. Almost flawless performance for us, 100% completion, about a 98% on time, controllable on-time performance on that. Those are two examples of airlines that have had their deliveries delayed from the factory, their new Wizz, their new A320neos, and at Lynx, their 737 MAX aircraft. They needed to turn to an airline like us to fill in the flying for them, which they had published and had sold tickets on. They needed someone to quickly step in and assist them, and we were there with the airplanes and the crews and all of the certifications needed to be able to do that.
In a lot of ways, this is what this airline was built to do, was to provide supplemental lift, additional lift to other airlines that need it. We proved in this quarter that we can do just that, and we can react very quickly and provide them what they need. Just give you a sense of the breadth and depth of our operation. This is over the last year, since August of 2022. We've had 2,500 flights. We've visited 51 countries and 116 cities in Europe, Latin America, North America, and Canada. We feel very good about that. Certainly underlines the word Global in our name. We expect to do more and more of this.
We've been asked to put airplanes operating out of the Middle East. We've been asked to operate airplanes out of Eastern Europe. We've been asked to operate airplanes with crews out of the United Kingdom for two of the major airlines that are located there. Word about our abilities to perform, the state of our equipment, which is excellent, the performance of our crews, which is excellent. That word is spreading, and we receive, we receive calls every day from airlines around the world that would like us to fly for them. I believe at this point, we're, we're quoting about $2 million worth of business every day. That gives you a sense of the size of the market, as well as our ability to gain market share within that market.
We'll talk about Q2 a little bit. Ryan, why don't you take this?
For Q2 2023, we had revenue of $31.5 million, actual EBITDA negative $6.3 million, adjusted EBITDA negative $1.5 million. The adjustments we made were effectively for share-based comp and for pilot training and excess pilots of our current requirements. Basically, this is the investment we've made in crews, you know, as Ed talked about, the number we've hired, the number we've trained, and the number required in order to operate. We continually talk, discuss how Global is made up of three assets. Our first assets are certification, which we continue to add to. It's our aircraft, which we continue to lease and add more aircraft, and ultimately our crews. You need all three assets in order to operate and execute on this business plan.
We made a big investment in that in Q1 and in Q2, which is starting to pay off in Q3. Our actual EBITDA of $498,000 and adjusted EBITDA of $5.2 million. Some ultimate impacts to the quarter, had they not occurred, would've, would've actually increased our EBITDA, 5.1 aircraft months lost to maintenance and delivery delays impacted us on a $1.3 million basis. Freighter delivery days, obviously, the plane not being available on the first of the quarter versus the end of the quarter, had a large impact. We accelerated crew training required for the summer. That was the 4.2% There has been zero ICE work for us, you know, during this quarter. With Title 42 wrapping up, there was kind of a freeze on all of that work.
That being said, that's picking up significantly in August and September. Then again, on sales, as a small parts program, we had estimated what happened. That's been pushed to Q3. Had all of those things not happened or happened, we would've increased our EBITDA, actual EBITDA, by a significant amount. There's an opportunity there for us going forward to improve the results. We understand that some people might be disappointed with the loss, we made an investment in our future, which I think as we discuss 2023, you're gonna see the impact.
In certain of those line items, we're putting in place programs and, and procedures so that these do not impact us as much going forward. We're working with the MROs, and doing a lot of maintenance planning now, before our airplanes go into heavy maintenance, and we believe we will reduce those delays going forward. The freighter delivery delays are starting to ease up as more A321 freighters get converted, and the conversion shops are able to become more efficient in doing those conversions. Two of the freighters that we'll be getting over the next several months have already been converted to freighter, which means that we've eliminated those potential built-in delays. So we're, we're learning to adjust to this environment, where we've got difficulties getting aircraft out of maintenance or our freighters out of conversion.
We'll see these delays become significantly reduced with future deliveries of aircraft, as well as conversions of our freighters. We took a lot of pain in the quarter, as Ryan's stated, to get our enough crews on board in order to be able to fly the summer schedule. Just to give you a sense, we flew 3,500 hours in Q2. In July alone, we flew 2,500 hours. We're only able to do that because we ramped up the number of cockpit and cabin crew members that we had. That's a, that's an impact in terms of our profitability, but it is a, a asset that we now have, which is very, very valuable. The ICE work, as Ryan said, was shut down for a period of time.
It is now full, full, full force again, and we have been asked in the next few months to provide as many as 4 full-time airplanes to that program. We're looking to see how we can do that. We can eventually provide those airplanes, but we have so much other work that we've got to work all of this in, but it's a good problem to have. With that, we believe that the financial results for Q2 are in line with what we wanted in terms of the adjustments. When we look at the impacts, which were largely out of our control, we're, we feel very, very good, with what we accomplished in Q2, which sets us up for the future.
Clearly, you know, as we briefed our new financial investor, they understood all of the dynamics of this. They look forward as we do, and they see that we've built the platform, and spent the money to do that, which now allows us to fully leverage that platform for revenue and profitability.
Speaking of leverage, one of the things, you know, in, in the finance side and us as a company are looking at is how are we performing as it relates to growth as it relates to cost? One of the things we need to kind of point out is it's difficult to compare quarter to sequential quarters, because Q1 is a very different market for us as Q2, and Q3 is very different from Q2, and Q4 is very different from Q3. The most accurate adjustment and to look at is to look year-over-year. How do we do versus Q2 of last year, which is a similar customer base, similar revenue stream, similar kind of pricing?
What we managed to do is we grew our revenue by 80%. We only grew our cost by 59%. We grew our available aircraft by 33%. We grew our block hours by 70%. What this means is, is we are operating with more aircraft, but we're using the aircraft we have more, which is getting us much better utilization. We're also adding revenue to our bottom line without increasing our cost, or increasing our cost at a lower rate. This is a key focus for us. One of the things we're going to point out, and we'll be much more detailed about this when we talk about our Q3 results, is I need to remind everyone, we have two types of revenue. We have ACMI revenue and full charter revenue.
ACMI revenue is around between $3,000 and $5,000 an hour. Full charter revenue, which includes fuel and basically an all-in price, tends to be 2.5x to 3x higher. The mix of ACMI to charter revenue will impact the ultimate revenue number, but not necessarily the margin. Again, we'll talk about this significantly more in Q3 results, and we'll have that disclosure broken out in our 10-Q. Again, revenue isn't the only metric, it's one of a couple metrics. Block hours is another one.
What we're seeing here is a couple of dynamics going on, which we had talked about in the previous quarters, why we wanted to get to the number of airplanes that we have as quickly as we got to them. You're seeing that the variable costs are increasing as we increase revenue. Fixed costs, not, not increasing as much. We've got the foundation in place to operate more airplanes than what we currently have. As we, as we add airplanes, our costs are increasing on the variable cost side, not as much on the fixed cost side. We could grow revenue 80%, but our costs are much lower than that. As well, we're seeing the power of the network.
The more aircraft that you have, the more likely it is that you can get charter contracts, because it means that you've got more airplanes that are positioned around the country, and it's easier to fit all of the puzzle pieces together so that you can pick up additional flying and have aircraft standing by nearby where that charter will originate. We're seeing as we add airplanes, we're increasing the block hours. We're getting better utilization out of the airplanes because they're spread a bit more across the country or across the Caribbean. We have more airplanes, so we can have one airplane take a client to a city, and then a second airplane swoop in the next day to take them back to where they need to go. Again, it's the power of the network.
Additional aircraft allow us better utilization of all aircraft and allow us the opportunity to bid on more contracts beyond just the incremental increase in the number of airplanes.
Looking forward, you know, these are our key, what we call non-financial KPI metrics, which we released in the past. We have added July just to kind of reinforce the point. When you look at our what we're adding, if you look at the bottom right, the number of aircraft days per month has grown around 135%, but our total block hours per month has grown at 246%. What that means is we're flying, we're growing our fleet, but we're also flying our fleet that we've grown more often, and that's reflected in the average block hour per aircraft. One of the big drivers of that is the pilot pool, which we talked on the bottom left.
One thing I'm going to make a point out for Q3 is kind of a, a leading indicator. In Q1 and Q2, the percentage of flights that were flown on an ACMI basis, which is the lower revenue number per hour, is in the 30s. For Q3, that number is going to be in the 70s. What that means is you're not going to see a dollar for dollar increase in revenue for the block hours, but you will see it, it will have an impact on the profitability. I just... when we have the numbers for Q3 to show, we will demonstrate that, but we just want to make sure people understand that dynamic. Every quarter is pretty unique on the percentage of ACMI and charter, and then the rates for ACMI and charter. Again, there's multiple dynamics.
We're going to do a much better job , I think, a more detailed job, explaining it going forward so people can understand what's going on. We are growing, we're growing quickly, and we're getting better utilization of our assets, which is the key goal of the company. How does that translate into our outlook for 2023? We're looking to increase our revenue forecast to over $150 million, with 75% currently contracted. We have over $50 million in identified targets, outstanding quotes for the period of August through December, which translates into 13,000 hours contracted for 2023 to date, with a potential to add up to another 7,000 hours. This compares to 10,000 hours, 615 total hours contracted in 2022, all significant growth numbers.
The leading indicators for this is our pilot count and our fleet count. So we're executing on this plan. We're very optimistic with this plan. As Ed pointed out, we're quoting over $2 million a day to help fill this for this year and next year. Our target fleet size by the end of the year is 12 passenger aircraft and six are cargo aircraft. We'll go on the delivery specifically in a few slides. I don't know if you wanted to add anything.
Yeah. We're currently at about $112 million-$115 million revenue contracted, which means signed with a deposit. probably another $10 million or so where that is out for contract, and then another $50 million that we've identified targets, and we've got quotes out there. We close about 80% of our quotes at this point. We're comfortable now in raising our revenue target to $150 million, up from $140 million. Dependent on getting aircraft delivered, but we, we are comfortable with the new aircraft delivery dates that we've built into our schedule, based on the delays that we've seen with other aircraft. We're comfortable with $150 million.
We will probably beat that, $150 million is what we are comfortable with providing as guidance at this point. This is our next airplane that will be delivered. This is another example. This airplane should have been delivered about six months ago. It's continuous delays because of various supply chain issues, it's an A319. It's a great airplane. Once we get it on, onto our certificate, it will be converted for a period of time this winter into a VIP configuration with 68 seats. This airplane is already almost fully booked up while it's in VIP configuration. It will make an excellent airplane in a two-class or a one-class configuration for many of the sport teams that we fly, NCAA, and some of the other teams.
This airplane should be here and on the certificate by the third week in August. Again, it's pretty solidly booked, because of its economics and the way that we're going to configure this airplane, into the fall and winter. Here's our delivery plan. Our target plan is now our current plan. Our target plan was contingent largely on the financing, which is now in place, this is our current plan. Our ninth A320 passenger aircraft was delivered, as well as our second freighter, was delivered during the quarter. That brings us to nine passenger aircraft and two freighters. The current plan, we'll take the A319. We've just showed you the picture of that. That'll be in August, this month.
By the third week of this month, we should have that airplane on the certificate. We're taking another freighter late in Q3, and then a mix of passenger aircraft and freighters through the end of the year. The A320 number seven is actually a passenger aircraft, not a freighter. We expect to be at 12 passenger airplanes and six freighter aircraft by the end of this year. We have all of the capital that's required to bring those airplanes on. Many of the deposits have already been made, even in advance of the financing that we just put in place. We're in great shape in terms of bringing these airplanes into the fleet. We've paid the deposits.
We have the pilots and the crews standing by to fly these airplanes, and we have a pipeline of pilots to make sure that we've got enough as we get to 18 airplanes to fly the entire fleet. Our cargo side continues to ramp up. Two freighters, as I said, are currently in operation. Those are fully sold. We're getting an average of 200 hours per month per aircraft. As freight forwarders and others see the operating performance and the economics of this airplane, we are competing against 757 freighters and, in many cases, 737-800 freighters. This airplane pencils out both in operating and financial performance better than those two aircraft. Our fuel burn is much less than a 757, and we carry 50% more than a 737-800 at about the same fuel burn.
We feel very confident as we present this airplane and pitch it to freight forwarders, other airlines, cargo units, that we pitch very well because of those performance characteristics of the airplane. We've got seven aircraft that we, at this point, have allocated. We don't have seven. We've got, obviously, two, with another four coming this year. We think that within the U.S. government, post office, and other agencies, we've then assigned two airplanes. Our Miami to Caribbean business is taking off, literally. We've got one airplane assigned to that, and we're flying regularly now to taking cargo to Cuba, cargo to Jamaica, cargo to the Dominican Republic, cargo to Haiti, as well as to the Eastern Caribbean. We've got a full slate of flights to Port of Spain, Barbados, St. Lucia, and Guyana.
This business will continue to increase for us. I see the number that we assigned to the Caribbean will increase next year. I would project that we will have three freighters operating almost full time in the Caribbean by this time next year. Central America is also a focus for us. This is the right-sized airplane to come out of the U.S. into Central America. One of our next airplanes will be assigned out of Miami to fly four freight forwarders into Guatemala, Honduras, El Salvador, Costa Rica, et cetera. We feel good about that business. Our partners at Ascent will keep one airplane busy. Because we only have two, it's been difficult to schedule some of those flights.
The third airplane will be assigned to Ascent, and we'll move that airplane to be based in Texas to start flying for them. We anticipate that we'll get our monthly revenue targets met with that airplane flying in the automotive market. Latin America, we are progressing with our Colombian AOC. We're now in Phase 3. We expect to get that AOC finalized and issued to us by late September or October, and we'll effectively assign 1 aircraft to that AOC. That aircraft will fly from Latin America into the U.S. with Latin pilots, which will ease some of the pressure on our pilot force here in the U.S. We see that business growing.
es in Latin America have approached us about flying that airplane for them, and I think that that number will increase from one to three airplanes over the next 12 to 18 months. But we also will want a spare, and an aircraft that can provide additional capacity for any of those business lines to be assigned at some point. So effectively, we've got the allocation for the first seven airplanes, and we are starting to formulate our plans for the next five airplanes after that. So cargo demand we're seeing is increasing
While the volumes are down for the wide-body freighters coming from Asia, the intra-regional cargo demands into the Caribbean and into Latin America remain strong, and this airplane outperforms any of its competitors, and so we will win more than our fair share of the market because of that. Ryan, you want to take this?
Sure. The question we get on every Q&A relates to uplisting, I probably get it pretty, pretty much daily. You know, with the Axar financing, there is no pressing need to raise capital, and generally, the reason you go through the expense of an uplisting is to raise capital. That being said, it's clear, with the way our stock has performed, we're not on the right exchange, and that needs to be addressed. What we do have is, because of the capital raised, we have the option to determine when it's the best time to uplist based on market conditions, share price, and financial performance. There are two real kind of hurdles that we have to cover. We need a share price over $2, and we need positive shareholder equity.
A positive shareholder equity is generally addressed through a raise, which we feel very comfortable we could accomplish at the time, and be more comfortable doing if we're at $3 or $4 a share. All that being said is we are monitoring it. You know, Ed and I are spending a significant amount of time talking to investors, talking to institutional investors, getting our story out, so when the time is right to uplist, we will be well-received. You know, for people who are existing shareholders who are wanting to uplist so they can sell their shares, be conscious that you don't want, you need, you need buyers on the other side of that, or you don't, or it doesn't work. So we are thinking through that on the long term.
We're working towards it, we understand the value in getting to the different exchange. On the right, we have our updated cap table per post the financial close, which breaks out the, the common Class A, Class B, and the warrant structure that exists. We have total outstanding shares of $57 million and fully diluted shares of $85 million. With that, I think that's finish.
Yeah, I think, I, I think it's important to understand that. The Axar financing does a number of things for us. Most importantly, it puts cash on the balance sheet, which is important. That cash and that financial strength allows Ryan and his finance team to put better credit lines in place for us for fuel, for ground handling, for use of FBOs, for maintenance. It frees up a lot of our capital to invest in the business, and it shows our competitors, our alliance partners and everyone that we have got the capital to stay and grow.
I think that's very, very important, especially when we're talking to clients about providing airplanes over in Europe or airplanes, for instance, to fly to Hawaii after we get our ETOPS certification, and so forth. This financing gives us room to breathe. It allows us to execute our plan, it allows us to increase our credit lines with our key vendors, and it gives everyone the confidence that we are here to stay, and we will continue to grow to become the preeminent narrow-body charter operator in the U.S.
Again, just to wrap up, we feel this is a very, very successful quarter for us, in terms of setting us up for the future, making sure that we've got the aircraft under LOI to be delivered later this year, to get our maintenance facility built, to get the pilots that we needed on the payroll, trained and ready to fly. This has set us up for a great future along with the Axar financing. Again, a successful quarter. We are seeing the benefits of all that we've done over the past six months here in July and August and moving forward.
We are in very, very good shape, and we are very, very confident about our future and our projections and what we will do to become the best charter airline in the U.S. With that, Grant, we'll turn it back to you, and happy to answer any questions.
Thank you, Ed and Ryan. We have some questions in already, and just as a reminder to the participants, there's a Q&A feature at the bottom of your screen, so please use that to submit your questions, and we'll get to them in a moment. A lot of discussion, understandably, about Axar and the flexibility it builds into your future plans. Ryan, when you and I spoke in the recorded interview that was released after the Axar announcement. One thing you addressed, which I thought was important, and it's little further to what has already been stated. You talked about the certainty that this introduces going into 2024 and the commitments that you can make so that there's much more management comfort around the objectives that have been stated for 2024?
Yeah, ultimately, we, you, you do need capital in order to execute the mission, and capital to execute on a day-to-day basis. You know, our growth plans are significant, and we effectively were doing this with little to no capital prior to this, and so having that, that fuel or that, that fallback is, is pretty critical for us.
All right, let's get to the questions. There's a couple here from Chris Roth, and they're effectively the same question, where he was asking about: When do you anticipate you'll turn the corner and, when you'll report a profitable quarter?
Q3.
That was direct. Jason Zambanini, how long do you expect the crew hiring and training to continue as a drag, as it continues to be a significant cost quarter-over-quarter?
As we move forward, the percentage of percentage of our total costs that are represented by pilot hiring and training will be reduced. When we're going from two to four airplanes, that's there's a significant drag, or when you're going from seven airplanes to 12, there's a significant drag. In the future, as you go from, say, 20 airplanes to 21 airplanes, that's a much less significant drag on, on cash and on profitability. As, as we move forward with a steady increase in number of airplanes, the percentage that that represents of our overall costs or our overall revenues will get significantly less.
From Karl Brewer, with your new plane almost fully booked already. I believe he's talking about the freighter, or it may be the executive class, I guess, an 80% acceptance of quotes, do you think you have room to price more aggressively?
Yes, we are.
Jeff Lee, your press release mentions LOIs, letters of intent for two A321 freighters in both Q2 and Q3. Can you confirm that those are different and refer to four freighters in total?
Yes, I can. We'll announce, we've signed LOIs for two freighters that'll be delivered this year on top of the other two, and the other LOI is for our, for aircraft that will be delivered in Q1 and Q2 of 2024.
Randy Hill. Randy was asking, what is ICE? That's Immigration and Customs in the U.S., I believe I'm correct on that one.
Right. ICE, which is our, customs, and immigration enforcement agency, has as many as, a minimum of 12, as many as 20 airplanes operating at any one time, to move, people, people, across the U.S. and also from the U.S. back to their home countries in Central America and South America. Those programs are ramping up. You know, we're seeing a great increase, in the number of airplanes that they need in that program, and we've been asked to provide, as I said before, as many as four airplanes later this year into that program. We're flying right now, we're flying five to six trips a week, into Central America under that program.
A question here, and I think it, it pertains to some degree, you, you mentioned that, there have been a lot of discussions with institutional investors as you look down the road to a Nasdaq listing when the timing is right. Perhaps you can provide a little more clarity around the nature of those discussions and the type of reception that you are receiving.
You know, over the last, you know, through the fundraise process, we probably talked to 70 to 80 different institutional investors. Many of them, you know, if you're going to say why they did or did not participate, you know, a lot of it is, you know, they are credit funds, and we don't have a lot of assets, or they're equity funds, and our deal is too small. It's kind of a Goldilocks, Goldilocks problem. We're on all the radars. You know, I think in the last quarter, I participated in four different investor conferences, probably conducted between Ed and I, we conducted about 70 one-on-ones. We're gonna continue that volume.
A lot of what institutional will do is they'll put you on their radar, and they'll watch your results for two or three quarters, and then they'll decide if they're going to invest. They have a much longer buy cycle and much more diligent buy cycle than you would expect from maybe some of the other investors out there. So we, we work through it, and we, we try to be transparent. We try and hit the targets we said we're gonna hit. As I think our, our track record of execution is gonna ultimately pay off.
Ultimately, the biggest value of an uplisting is actually the roadshow that goes with it, that gives you the exposure to these institutional investors, which, you know, I like to think we can prime the pumps when we are ready to do that, we'll hopefully have a receptive audience.
Well, there was a thank you from Chris Roth for the direct answer on the profitability, and you stated it was Q3. Now we've got three questions from Helane Becker. Just as a reminder to folks who are listening in, that Helane Becker is currently airline and transportation analyst with Cowen out of New York and is an advisor to GlobalX. I'll start with their first question: Do you fly the aircraft in and out of Haiti with the same crews? If not, how do you ensure the safety of the crews in Haiti and elsewhere in risky markets?
We've done a total safety and security assessment of Haiti, and we're gonna start flying there. We're flying there now with the freighter, and next month, we anticipate starting to fly once a day to Port-au-Prince and once a day to Cap-Haitien. Spirit, JetBlue, American, all fly into Haiti. There are protocols there on the ground at the airport to ensure the safety and security of all of the crews and the aircraft. There are protocols in the event that we have to stay overnight there for any, any reason.
We won't plan to do that, but on the off chance that we have to, we have worked with Spirit and JetBlue, and we're gonna piggyback off of their programs, and all three of us will support each other when if a situation occurs that requires us to stay overnight. We've done a full security assessment. We've had consultants come in and do that for us, as well as put in place programs for us to get our people to a hotel and back to the airport the next morning if that situation arises. We're very comfortable with the programs that are in place. Again, American flies there out of Miami several times a day, Spirit and JetBlue as well.
There's international traffic in and out of there all day long, and we'll just be part of that international community of airlines that support each other, in difficult situations like that.
Helane, second question: How do you think the bankruptcy of Western Global will affect you? Are there opportunities to pick up either equipment or business?
Western Global is, operates 747s and MD-11 freighters, which obviously are wide-body aircraft, are very dissimilar to the A321 freighters that we fly. Their business has been severely impacted, with the package business coming from Asia to the U.S., and Europe to the U.S. They've seen the number of block hours that they fly significantly reduced because of that. We, we don't, we don't operate in those markets, and so we have not seen that level of reduction of volume, of cargo volumes in the narrow-body market, particularly in the markets that we operate in, the automotive, the express business, into the Caribbean.
A lot of what we fly into Cuba and into Kingston and in, in, into Haiti is a DHL business that's been that that has been contracted to us. We 're not really interested in any Western Global's equipment. It looks like they've got essentially a prepackaged bankruptcy that they will put Western Global through and they'll come out the other side, I would assume to be a much leaner, lower-cost operation that will allow them to survive until their cargo volumes from Asia pick up again. We don't really see any impact to us. It's not like we can pick up flights that they're not flying because they're bankrupt. They're just a different, different equipment size, so it doesn't really impact what we do in any way.
Our third question relates to ICE and the transportation of people , and in short, she's asking how , or what or can Global X ensure the best humane treatment for those people that you're flying?
We have a lot of protocols that we have in place with both, a nd we fly for a number of agencies, so we fly for Customs and Border Protection, we fly for ICE, and we fly for HHS, Health and Human Services. We, we essentially don't do much on the airplane. Our, our flight attendants are there in case of an emergency. The passengers are monitored by guards that are placed on board the airplane by one of those agencies. And we have not seen, in the time that we've been flying, we've not seen any inhumane treatment of any of the passengers. There have been threats made to our crew members, and they're specially trained to deal with those, but we haven't seen any, any mistreatment at all.
We, we do run some flights that contain or include passengers who are being deported because of criminal activity in the U.S. There may be, there may be more guards or more security involved around that. We have never had a problem or an incident in any of those flights.
Question here about a recession and how Global would deal with it. There's a variety of opinions, whether or not there will be a recession, a mild recession, a soft landing, or any recession whatsoever. Should there be a severe recession, do you have any contingency plans in place or how, how will you handle that?
A couple of things, and then I'll let Ryan also provide some color. We've built this airline to be as recession-proof as possible. When you look at the list of clients that we fly and fly for, U.S. government agencies, NCAA Division I teams that fly, whether there's a recession or not, because of the size of their programs. The charter operations where we're moving the VFR traffic, visiting friends and relatives to Cuba, Santo Domingo, and Haiti, those flights will continue in a recession as normal. We calculate that as much as 85% of our current business is effectively recession-proof, and that those clients will continue to come to us and will continue to need airlift for their requirements. Severe recession is not really forecast.
Some, as you say, Grant, some analysts are saying it'll be a very soft landing. Some are saying we may be able to avoid it completely. What we're seeing in Europe right now, where we could have if we had the capability to do so, we could have moved our entire fleet over to Europe to fly for airlines over there this summer. Europe is arguably in worse economic shape than the U.S. We're not seeing any degradation in the number of charter flights that are being requested, or the number of people who are traveling on charters, particularly this summer. If that's a leading indicator, you know, we think that the traffic will hold, but again, the vast majority of our business is recession-proof.
The final one we have here, so far, asking for an update on the A330 freighter plans. In the presentation, I believe I'm correct, that you said that right now you could use seven freighters. Obviously there's a lot of growing demand there, more demand than you currently have capacity to handle. I don't know if you want to provide any additional comments on that.
Yeah. Again, the narrow-body and the wide-body freighter markets are two different markets. We're seeing good demand for our, our airplane because it competes well against its competitor set of aircraft. Because there is a need for additional lift into the Caribbean, Central America, and out of the U.S. into Latin America, but not with wide-bodies. The A330s, something that we very much want to add to our certificate. We would start with a passenger aircraft, because we can't get an A330 freighter now. Frankly, even if we could get an A330 freighter, I think we would want to wait until the volumes come back up on the long-haul cargo markets, before we added that A330 freighter.
We have already gotten a lot of interest and demand for an A330 passenger aircraft, in with some of our clients. We've received Board approval to start the certification process, which is a very low risk project or exercise to start because we can do that with internal resources. It's modifying a number of our manuals, putting together some training programs, and getting the FAA to sign off and approve those. We can do all of that before we spend any money on a, on a full certification process with the A330. A lot of the prep work is being done now to add the A330 to the certificate. Again, we've been given a green light by our board to move forward in certification. We'll have to come back to them before we start spending any real money on that.
I think that that's something that we will execute on sometime next year, with the hope to have an A330 flying for next summer. Again, the freighters, it's impossible to get an A330 freighter, and even if we could get one, I think that we'd want to push that off until we're a little bit more comfortable in the long-haul cargo markets, and their rebound, you know, back to. Well, I mean, just to give you a sense, the, the, the cargo levels are back to 2019 levels. They're not back to 2021 levels when they were flying wide bodies en masse between Asia and the U.S., with all sorts of package packages and also PPE. Both the A330 passenger and freighter on the radar, we'll do passenger first.
We've got demand for that airplane. It's easier for us to do that. Once we have full board approval, we'll move forward into those programs as quickly as we can.
A couple of questions, just came in, both related to the stock market. Jerry Kaiser asks: Have the institutional investors indicated what Global needs to do from a profitability standpoint before they would consider adding Global to their portfolio?
Not specifically. You know, institutional investors don't tell you that. They, you know, they'll express interest. I guess I'll know we've done it when they start buying.
The second part was: Do you agree that the only way to get the share price to $2 is to attract institutional investors?
No, no, I don't think so. I think retail investors play a very important role. You know, we have a heavy, heavily, heavy retail following. Retail investors' money is as good as institutional investor money. So I think it'd be a disservice to the retail investor if we, if we didn't focus on them as well. So that's why we do webinars like this. This is why we try to be as transparent as possible. We send out, you know, we have 17,000, I think, is on our newsletter. Grant, that you kind of, kind of make sure all our we issue a lot of press releases, and that's to keep the, the retail investor informed as, in so much. So, no, I don't think the only path is through institutional.
It's somewhat easier because you need to get 10 institutionals and 1,000 retail to kind of do the same volume, but I, I think we need to be looking at both, and we are.
I think, so a little bit more color on that. As Ryan alluded or mentioned, right? Through the process of raising our, what became a $35 million financing from Axar, we talked to probably, I think it was 96 different institutional investors, private equity funds, other institutional investors to do this deal. Their focus was: Do you have a scalable platform where you can add airplanes and become a major force in charter in the charter airline world? Not looking at, did you make a couple of dollars this quarter by not hiring pilots and not adding airplanes and skinnying down your operations so that you could eke out a profit at these levels. It's not what they're focused on.
What institutional investors focus on is: Do you have a platform that can scale and that can grow at reasonable rates, so that you can leverage the power of your network, the power of your fleet, the power of your employee base, to become sustainably profitable over the long term? That's what they focus on. You know, in terms of the retail investors who can move our stock $0.10 by selling 100 shares, we need to get away from those investors. They don't understand our business. They don't wanna understand our business. They believe that we could have gotten to 50 airplanes with $10 million of capital. In many ways, they're unrealistic because they're not experienced in our business, and I understand that. Yes, we do need institutional investors.
We do need retail investors who understand that what institutional investors look for is: Do you have a platform that can scale and will be sustainably profitable? Can we get in at a level where we can ride that up as you scale and are sustainably profitable? In the second quarter, could we have cut off all pilot hiring? Could we have delayed every delivery of every airplane? Could we have hunkered down and made a profit? Yes. We would have not been able to fly the July through the end of the December schedule. We would not have been able to get the clients that we now have under contract, and at some point, we would still have to hire and train those pilots to grow from seven airplanes up to where we need to grow to.
Do you take the pain now or do you take the pain later? Institutional investors want you to do and execute your plan now so that the future is sustainably profitable. That is what we have done.
Just as an additional note on that, if people go look at GlobalX stock charts, January, February, March of this year, and then they also look at the volumes, through the first quarter of this year, there was a pretty aggressive online push directed at retail investors that was coordinated with GlobalX, and a lot of that came out of this office and with their assistance. You look at the volumes, and there was tremendous retail support. It was almost all retail. It is out there. I'm just going to take a liberty here. I was reading a report from Terra Nova Funds out of Toronto, and they, they run more than a billion dollars in assets. They do have a micro-cap fund. Just read a couple of lines.
It says, "Conditions in the micro-cap world, as evidenced by the continuing lackluster performance of the TSX Venture, are as bad as we've ever witnessed. We are not simply saying that we can't imagine a lot more downside, but we are saying that as a group, they are being priced so low now that there isn't just much more that they can drop." It goes on and on and on about other newsletter writers. We're seeing, and I can say in our almost 35 years, the conditions in the junior markets right now are absolutely horrific, and I think GlobalX has done a hell of a job in context of everything that you've had to face here. With that, gentlemen, congratulations. Any closing comments?
No, I think, I think that's right, Grant. You know, it's. The moving to an uplisting to a mature exchange is something that we need to do. Ryan and I are two of the largest shareholders in the company. Believe me, our interests are aligned with every shareholder. Right? We're putting in 12-hour days, six days a week to make this work. We're not, you know, we follow our stock price, obviously, very closely. It's frustrating to see Surf Air Mobility with seven planes, seven single-engine planes. They haven't made a profit since day one. They merged with another airline. They have a market cap that's twice ours. They have losses predicted for the long term. Their market cap is twice ours.
Seven single-engine planes that have, that can carry eight passengers. Let me say that again. Seven single-engine planes that can carry eight passengers. Their market cap is double ours. It" s frustrating. We talk to institutional investors as much as we can, but if someone wants to sit and sell 150 shares and drop us $0.05, we see that happen all the time. We want to get support from institutions. Hopefully, retail investors will talk to each other and say: Why are we doing this? Why, why do we keep knocking the stock price down, right, for no apparent reason, other than because we can do it?
We need to get to a mature exchange, we need to change the mix of our investors, and we need people to understand that we are growing this business to be sustainably profitable, and we are well along the curve to making that happen.
Again, thank you, and thank you to our participants, and we look forward to all of the announcements that will lead into what we anticipate are going to be quite wonderful Q3 results. Thank you.
Great. Thanks, Grant. Thanks, everyone.