Business Overview
Sky Harbour Group Corporation (SKYH) is an aviation infrastructure development company that is building the first nationwide network of home basing hangar campuses for business aircraft. The company develops, leases, and manages general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.Sky Harbour's unique real estate-centric business model is designed to capitalize on the significant imbalance between the supply and demand for private jet storage. The company leases land at major U.S. airports under long-term ground leases and constructs custom-designed hangar campuses to serve the growing fleet of private jets in the country. These hangars are then leased to private aircraft owners and operators, providing them with a premium home basing solution.
The company's strategy is focused on targeting the best airports in the country, where hangar demand is highest and rental rates can command a premium. Sky Harbour's first three hangar campuses, located in Nashville, Miami, and Sugar Land, Texas, are now functionally fully leased, demonstrating the strong demand for the company's offering. The recent opening of the company's fourth campus at San José Mineta International Airport in California has also seen a rapid leasing pace, with the facility already 60% leased just six weeks after opening.
Financials
For the first quarter of 2024, Sky Harbour reported revenue of $2.4 million, up from $1.1 million in the same period of 2023. This increase was driven by the additional tenant leases in place at the company's Nashville and Miami hangar campuses. However, the company also reported a net loss of $21.2 million, compared to a net loss of $8.8 million in Q1 2023. This wider loss was primarily due to a $16.2 million unrealized loss on the company's warrants.Liquidity
Despite the net loss, Sky Harbour maintains a strong liquidity position, with $159.2 million in cash, restricted cash, investments, and restricted investments as of March 31, 2024. The company's debt is in the form of long-term, fixed-rate bonds, with the first maturity not due until 2032. Sky Harbour also has the ability to access additional capital through its $100 million at-the-market (ATM) equity offering program, though it has not utilized this facility to date.Recent Developments
Sky Harbour is in the midst of a significant expansion, with a Gantt chart showing a three-fold increase in development projects from 2023 to 2024 and 2025. The company's focus in the first quarter was on determining the structural remediation plan for three of its development projects that had design issues. In the second quarter, the company has been working to define its processes to scale up operations and deliver projects faster and more efficiently.Looking ahead, Sky Harbour is focused on maximizing revenue capture by targeting the best airports in the country, where it can command higher rental rates. The company's site acquisition team has grown significantly, and it has over 100 airports in the "gestation process" that could yield additional ground leases. On the development side, the company is moving towards standardization and structuring itself for scale, with the goal of running multiple projects in parallel across the country.
In terms of leasing, Sky Harbour is aiming to generate brand awareness nationally this year, as it transitions from being a local story in each of its markets to a national player. The company is also focused on differentiating its offering and catering to the specific needs of its resident aircraft owners, with a maniacal focus on efficiency, personalization, and safety.
Risks and Challenges
While Sky Harbour's growth prospects are promising, the company faces several risks and challenges. The company's ability to continue expanding its network of hangar campuses is dependent on its ability to secure additional ground leases at attractive airports, which can be a complex and time-consuming process. Additionally, the company's development projects are subject to construction cost inflation and potential design issues, as evidenced by the recent structural remediation work required at three of its sites.Furthermore, as Sky Harbour becomes a more prominent player in the private aviation market, it may face increased competition from other providers, which could put pressure on rental rates and occupancy levels. The company's success will also depend on its ability to effectively manage and operate its growing portfolio of hangar campuses, as well as its ability to attract and retain top talent.