Blade says passenger segment sale is ‘transformational’

New York-based aviation company Blade Air Mobility said the move to divest its passenger business to electric vertical take off and landing aircraft company Joby Aviation will be transformational for the company.

Earlier this week, Joby Aviation acquired Blade’s passenger segment for $125m in an effort to fast-track urban air mobility operations.

“This is a strategically important acquisition that will support the successful launch of Joby’s commercial operations in Dubai, our subsequent global rollout and our continued leadership in the sector,” said JoeBen Bevirt, founder and CEO, Joby Aviation at the time of announcement.

Blade said the move became necessary as it was unable to invest capital needed to grow the segment without hampering the overall earnings of the company. It said the focus for Blade now would be to become a pure-play medical company.

Blade passenger operations are expected to continue as normal, with the business continuing to be led by Blade founder and CEO Rob Wiesenthal as a wholly-owned subsidiary of Joby trading as Blade Air Mobility. Blade’s medical division will remain a separate public company to be rebranded as Strata with Wiesenthal serving as the new company’s board chairman.

“We strongly believe that this is the best path forward to create long-term value for all stakeholders, including employees, customers, partners and shareholders,” said Wiesenthal in his comments on the transaction in second quarter earnings call.

Blade’s medical segment continues to witness strong growth. Blade said its revenues from medical segment grew by a stellar 17.6% year-over-year to $45.1m at the end of second quarter. This account for nearly two-thirds of the total revenue of $70.8m at the end of first quarter.

On the other hand, revenues from its short distance segment (passenger) saw a decline of 17.8%  year-on-year to $17.2m at the end of first quarter.

The Blade Passenger sale includes all of its operations in the US, Europe, including lounges, terminals as well as the Blade brands.

Blade expects that with the pure-play nature of Strata, combined with the cash war chest, it should enjoy a valuation that represents the company’s strength.

Speaking at the earnings call, William Heyburn, company’s chief financial officer said the “capital allocation strategy supported by approximately $200m of cash on the balance sheet pro forma for the upfront proceeds from the Blade Passenger sale” will help Strata move forward. Heyburn said they expect another $35m in the next 12 to 18 months based on certain employee retention and financial metrics.

The company, which operates its medical segment under the Trinity Medical Solutions brand, is already eyeing mergers and acquisitions with these funds.

“There is also a considerable opportunity to deploy capital towards strategic acquisitions to strengthen our core business, growth potential and earnings power,” said Heyburn.

Despite strong improvement in the medical segment revenue, Blade posted a net loss of $3.7m – a significant improvement from a loss of $11.3m in the same period of last year.

The company said it expects the impact from the sale of its passenger business to be “neutral” to adjusted EBITDA and free cash flow on a go-forward basis.

“We expect the loss of passenger segment adjusted EBITDA to be offset by a reduction in unallocated costs associated with passenger business,” said Heyburn.

Meanwhile, read more about Blade’s sale of its passenger business to Joby Aviation here.