Surf Air Mobility Inc. - the parent of electric aviation company Surf Air (URF, Santa Monica) - has announced its intention to go public through a direct listing on the New York Stock Exchange, to be preceeded by a merger with Southern Airways Corporation, the parent of Southern Airways Express (9X, Memphis International).
According to a June 5 filing on the US Securities and Exchange Commission (SEC), Southern and its consolidated subsidiaries will become a wholly-owned subsidiary of SAM immediately before the listing, which would happen "as soon as practicable".
Southern stockholders will have the right to receive a number of shares of SAM's common stock equal to USD81.25 million or 12% of the fully-diluted shares of the common stock upon listing. Surf Air will remain a wholly-owned subsidiary of SAM, with the parent owning directly or indirectly all of the equity securities, assets, business and operations of each of Surf Air and Southern.
The consummation of the Southern acquisition is subject to the effectiveness of the registration statement, the approval for listing of SAM's common stock, the completion of the internal reorganisation, regulatory approvals and other customary closing conditions.
In a statement to investors, SAM said it had filed a registration statement with the SEC relating to the proposed direct listing of its common stock. It intends to list on the NYSE under the ticker symbol "SRFM". Unlike an Initial Public Offering (IPO), a direct listing requires no newly-issued shares and no involvement of underwriters.
The company had already announced a confidential submission with the SEC for a proposed direct listing on November 16, 2022.
This came after it called off a merger with Tuscan Holdings Corp.II on November 15, 2022. The termination agreement obligated SAM to file the registration statement with the SEC. In consideration of the merger termination, it also obligates SAM to issue to Tuscan 635,000 shares of common stock (or an equivalent number of shares of common equity) if SAM completes the direct listing on or before November 14, 2025. In addition, as reimbursement of Tuscan's expenses, at such time, SAM will either issue Tuscan an additional 35,000 shares of common stock or pay Tuscan USD700,000 in cash.
Leveraging the combined operations of Surf Air and Southern, SAM said it intends to accelerate green flying by developing, with its commercial partners, hybrid-electric and fully-electric powertrain technology to upgrade existing fleets. It also intends to create financing and services infrastructure to enable this transition on an industry-wide level. "We believe operating as a publicly traded company and having efficient access to growth capital will allow us to accelerate the implementation of our strategic plan," it said in the SEC filing.
Incorporated in 2011, Surf Air Global Limited (formerly incorporated as Surf Airlines Inc.) was formed and became the parent company of the Surf Air group in 2016. Surf Air currently provides a regional air mobility platform with scheduled routes and on-demand charter flights operated by third parties under Part 135. Electric powertrain technology will start with a hybrid-electric and a fully-electric variant of the Cessna (single turboprop) 208B Grand Caravan EX.
Since March 31, 2023, Southern Airways Express is considered the largest commuter airline and the largest passenger operator of Cessna Caravans in the United States by scheduled departures. It serves 40 US cities but ceased serving the Mariana Islands on April 1, 2023. Southern has multi-year contracts with the US government to operate Essential Air Service (EAS) routes.
"The Southern acquisition will result in a combined regional airline network servicing US cities across the Mid-Atlantic, Gulf South, Midwest, Rocky Mountains, West Coast, New England and Hawaii. Surf Air and Southern together served over 99,000 passengers across 44 cities with over 18,000 departures for the three months ending March 31, 2023."
Over the same period, Surf Air generated USD5.5 million and Southern USD22.7 million in revenue, an increase of 14.3% and an increase of 35.6%, respectively, on the same period in 2022, the filing read.