This article has been revised from its original version.

Hawthorne-based Surf Air Mobility Corp., a private aviation company that is also working to develop electric and hybrid-electric aircraft, has filed documents with the Securities and Exchange Commission to go public through a direct listing of shares.

The share offering is likely within the next 90 days, but the exact timing depends on wrapping up routine approvals and closing conditions for the offering and for Surf Air Mobility’s acquisition of Palm Beach, Florida-based commuter airline parent Southern Airways Corp. That deal, for an undisclosed sum, was announced last year.

The merged entity will retain the Surf Air Mobility name, but the chief executive will be Stan Little, the current chief executive of Southern Airways. Surf Air Mobility’s current chief executive, Sudhin Shahani, will remain on the board.

The decision to proceed with a share offering follows the collapse last fall of a $1.42 billion special purpose acquisition company, or SPAC, deal that would have taken Surf Air Mobility public. That deal fell apart as SPAC deals overall fell out of favor last year after federal regulators imposed tighter rules on the process. In addition, a number of companies that had previously been taken public through SPACs have performed poorly, including New York-based BuzzFeed Inc., which has seen its share price fall more than 60% over the past 12 months. 

Financial details

But conditions in the acquisition require Surf Air Mobility to be publicly traded.

In November, Surf Air Mobility announced it filed with the SEC for a direct listing. Under a direct listing or share offering, no new shares are offered, which means, unlike the case with an IPO, the company doesn’t reap additional capital. Rather, existing shareholders are given a chance to cash out by selling their shares. 

On June 5, Surf Air Mobility filed a formal S-1 prospectus document with the SEC, laying out the company’s financial position, its business model, its market opportunities and the numerous risks that might cause future drops in the share prices. The filing of an S-1 prospectus generally means the share offering is imminent.

Surf Air Mobility declined to comment for this story.

According to the prospectus, Surf Air Mobility posted $20.3 million in revenue last year, up from $11.8 million in 2021. But losses more than doubled last year to $74.4 million from $35.8 million in 2021.

“The company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit,” the prospectus stated. “The company is currently in default of certain excise and property taxes, as well as certain debt, tax and other contractual obligations.”

The prospectus cited Covid disruptions to air travel and the resulting plunge in revenue as a major cause for its operating losses.

When the pandemic began, Surf Air lost much of its core market: shuttling business executives between Los Angeles and the Bay Area. Surf Air pivoted to the vacation getaway market, but that proved a temporary spike only. 

Southern Airways acquisition

The document was also blunt about Surf Air Mobility’s future prospects: “Surf Air will need additional financing to execute its business plan, to fund its operations and to continue as a going concern,” it said.

Surf Air Mobility did receive a major injection of funds last fall, but much of that money was earmarked for the company’s effort to develop electric and hybrid-electric aircrafts.

In October, Surf Air announced that Miami-based Jetstream Aviation Capital, the largest global aircraft lessor focused exclusively on commercially operated turboprop regional aircraft and engines, had agreed to finance up to $450 million through an operating lease and sale structure. Jetstream’s investment is aimed at helping fund the growth of Surf Air’s fleet of converted turbo-prop aircraft. 

Jetstream also agreed to buy as many as 250 hybrid-electric and fully electric power trains over the next five years.

Also, according to the prospectus, in February, Surf Air Mobility and New York-based GEM (Global Emerging Markets) Global Yield amended a previous agreement to allow Surf Air Mobility to direct GEM Global Yield to purchase up to $400 million worth of Surf Air shares. That amended agreement also allows GEM Global Yield to advance as much as $100 million in $25 million increments.

In May of last year, Surf Air Mobility agreed to acquire Southern Airways, which operates two commuter airlines: Southern Airways Express and Mokulele Airlines in Hawaii. These two airlines have a combined network serving 44 cities with more than 200 daily departures.

Unlike Surf Air, Southern Airways is a federally-authorized commuter air carrier, meaning it can sell tickets directly to passengers on scheduled routes, the same way an individual can buy a ticket with a major carrier such as Fort Worth, Texas-based American Airlines Group Inc. Surf Air still keeps a semblance of its charter air carrier roots through its subscription program; for the most part, if someone chooses to book a seat on a Surf Air flight, they must first have an active membership.

Southern Airways also has a charter flight division, in which a customer can reserve an aircraft to fly to a destination of their choice at a time of their choosing. But the $5 million the company received in charter flight revenue last year represented only 7% of total revenue.

According to the prospectus, Southern Airways’ financial position is somewhat better than Surf Air’s situation. Revenue rose to $81 million last year 2022 from $57.8 million in 2021, while net income pivoted to a loss of $4.2 million from a positive $10.8 million in 2021. When the acquisition is finalized, the combined operations of Surf Air and Southern Airways will serve markets throughout the continental United States (though not typically with coast-to-coast flights) and Hawaii.