Hmm: Northern Pacific Airways wants you to invest

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You don’t see this very often…

Northern Pacific Airways seeks public funding

We’ve seen quite a few airline start-ups recently, and Northern Pacific Airways is one of them. Northern Pacific wants to make Anchorage a trans-Pacific hub connecting the United States and Asia using Boeing 757s.

Northern Pacific essentially hopes to replicate what Icelandair has done for transatlantic flights and what Copa has done for flights within Latin America. Now, while those airlines have had success with the concept, I think the North Pacific business model is much more difficult.

If I didn’t know better, I’d almost say the people behind the airline aren’t serious, but they’re not – the people behind this airline are the same people behind Ravn, a regional airline in Alaska .

Either way, Northern Pacific says it will launch operations this fall, as the airline already has several planes in its fleet and has also reportedly entered into a wet-lease agreement with Icelandair.

Nonetheless, Northern Pacific emailed those who wanted updates on the carrier’s launch, asking for money.

As the email describes this opportunity:

As a valued supporter of Northern Pacific, we wanted you to be among the first to know that we are now hosting a community round on Wefunder to support the launch of our international airline!

This means that we let our biggest supporters – you, our future customers – become investors in the company.

You can invest as little as $100 in by clicking on this link.

The airline claims to have a valuation of $350 million, although for the first $1 million invested, a 20% discount will be applied to the valuation, bringing it to “only” $280 million. Currently, this is being marketed as a “friends invest first” opportunity, ahead of its opening to the public on June 3, 2022.

The airline offers incentives for those who invest, with reward thresholds ranging from $250 to $5 million:

  • Invest over $250 and you’ll get free drinks on the North Pacific through 2023
  • Invest over $500 and you’ll earn Northern Pacific and Ravn “1K” elite status through 2023
  • Invest over $1,000 and you’ll get $1,000 in Northern Pacific Flight Vouchers
  • Invest over $5,000 and you’ll receive an invitation to the North Pacific Anchorage North Terminal Launch Party
  • Invest over $10,000 and you’ll get $10,000 in Northern Pacific Flight Vouchers
  • Invest over $50,000 and you’ll earn Northern Pacific and Ravn “#1” elite status through 2025
  • Invest over $100,000 and you’ll get tickets to Northern Pacific’s inaugural flight
  • Invest over $500,000 and you can name a Ravn DHC 8
  • Invest over $1,000,000 and you can name a North Pacific Boeing 757
  • Invest over $5,000,000 and you can paint a North Pacific Boeing 757 with your custom design

The airline makes numerous claims in its pitch to investors, including that by 2026 the airline will have 50 aircraft, $1.3 billion in annual revenue, and $120 million in annual profit. The airline says the total addressable market for trans-Pacific air travel is $20 billion, so if the airline thinks it gets $1.3 billion from that market (~6.5%), that’s very optimistic, to say the least.

Is it cute or disturbing?

There are all kinds of airline startups out there, some more legit than others. At the end of the spectrum, you have Avelo Air and Breeze Airways, both of which were founded by respected industry veterans, and have combined hundreds of millions of dollars in funding.

At the other end of the spectrum, you have Global Ghana Airlines. The founder repeatedly claimed that the airline was within weeks of launching, even though the company had no funding or planes.

But when it comes to crowdsourcing funding and selling people the dream of a successful airline, Baltia comes to mind. Baltia is a company that has been around for over 30 years, and the airline even had a 747-200 for over 20 years, which never operated a single commercial flight.

The company’s plan was allegedly to launch flights between the United States and Russia using Boeing 747s. I’m sure its “Golden Rooster Club” frequent flyer program was also going to pay off big. The airline never got started, but the people behind the company kept selling the dream and people kept believing in it. Baltia ultimately didn’t “dead” until a 2018 SEC suspension, and even then many people still believed the airline was serious.

I am in no way suggesting that the North Pacific resembles Baltia in terms of intent. I think the folks behind Northern Pacific are serious. Although I don’t believe in the business model, I think they do, and that’s fine.

But the concept of scavenging old planes for next to nothing, claiming a $350 million valuation, and asking people to invest, seems a bit Baltia-esque.

This may be partly my bias here based on my impression of the company’s business model. Because if Breeze’s David Neeleman opened up a round of funding to the public and you could invest over $100, I’m sure a lot of people would find that interesting. But perhaps it’s also telling that he doesn’t need to give people free drinks on an airline for a year to raise $100. I do not know…

At the end of the line

Northern Pacific looks to the public for funding. The airline claims to have a $350 million valuation, but if you invest now, you can “buy” at a $280 million valuation. While there have been a lot of airline startups lately, it’s not often you see an airline take this approach.

What do you think of Northern Pacific looking to the public for funding in this way? Anyone investing?

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