KC Underweight Deal: Pets Can Now Take to the Skies

Summary

In this week’s edition of Underweight Deals, we are going to take a look at PetAirways current raising over at WeFunder. The name says it all: this is an airline for pets. As we all know flying on “Human Airways” with pets is a bit of a hassle – which is where pet airways comes in.

 The problem is whether or not this is a large scale, long-term viable business model worthy of investment by the crowd. 

Management’s goal is to help pets travel freely anywhere in the United States regardless of constraints like size. They will know that their job has been well done when pets arrive at their destination happy and healthy.  

As far as we can tell, pets-in-transit have never had it so good. The company has two options for pets and their owners: (1) Chartered flights for pets and their owners and (2) A soon-to-be-launched Pets-Only flight where pets fly in the main cabin right behind the pilot and are serviced by a flight attendant.

“Excuse me, Mr. Spot, would you like another chew toy?”

Imagine Source: PetAirways.

To us, this sounded like better service than humans sometimes receive on some bare-bones discount airlines. Which is why coming across the point on the company’s own website was all the more humorous.

The idea for a pet-focused airline was actually born over a decade ago and quickly “took off.” Unfortunately, when the Great Recession struck the company was unable to raise badly-needed growth capital and airline was “grounded” for two years.

Now that the clouds have parted, the company is taking what it learned in its first years of operations (a period that saw the company transport over 9,000 pets safely to their final destinations in 9 different cities) and taking to the skies once again. As previously mentioned, a crowd-focused raise is occurring over at WeFunder ad a more traditional Private Fundraise is taking place over at Fundable for accredited investors.

The market is (possibly) there: last year over 6 million pets traveled by air (to say nothing of the countless pets that piled into the family mini-van for summer road trips). Airborne pets are then placed, securely, in the cargo holds of airplanes. This is one of the company’s better arguments: that cargo holds are designed for luggage, not our best friends.

One final note regarding the company’s “customers.” PetAirway’s says it has a dual mission: to help pets who already have owners to travel more easily AND to help rescued pets get to cities where they can be more easily adopted. Both are laudable goals.

Image Source: PetAirways via Fundable.

However, as we shall see, there are a few red flags in our view.

Logistics  

It has no doubt occurred to the reader that running an airline is, inherently, a logistical nightmare. Airlines famously spend billions upon billions of dollars on complex algorithms to get you where you need to go. This, coupled with the obvious need for safety, makes what airlines have managed to accomplish over the past century even more impressive.

At its’ peak PetAirways has said it’s reached extended to 9 U.S. cities – what if “Fido” and I are going to Akron, OH? That’s where the company’s charted plane offering comes into play, but one quickly realizes the potential market for a pet-focused airline quickly shrinks when such questions are asked.

The global pet-care market is expected to reach approximately $200 billion by 2025, but we have to imagine that number drops off dramatically when further qualified down to the “global private pet-centered long-distance travel market.”

Human-airlines are great at their jobs yet we still occasionally wind up trapped in Atlanta’s airport overnight.

Pricing

Here’s where things get interesting: we had a hard time finding out how much it costs to fly a dog or cat.

PetAirway’s pets-only service is still in the planning/buildout phase and getting a quote requires a lengthy information-exchange process. We do know one thing chartered plane flights aren’t cheap.

A quick search for a turbo-prop chartered plane flight that seats 6-9 humans and flying from Cleveland, OH to Miami, FL requires a $12,000 deposit with Monarch Air Group. Sounds fair to us, but even if you spread that across two-dozen pets that equates to $500 per animal.

Americans love their pets, but that’s a high price to pay to take Fido to the beach.

The Bottom Line  

Having completed our initial review, we are assigning an “Underweight” rating to PetAirways.

It’s valuation currently stands at $5 million – which seems fair but also irrelevant. By which we mean the business model itself raises a lot of questions, and we’re not sure it will work long-term no matter what the valuation.

We should also note the vast majority of airline launched fail fairly quickly because this is an industry that only works with tremendous scale and a strategic network model. Pet Airways seems to be lacking any of these key components.  

Regarding its previous attempts at building the business (before closing the doors in 2011), the company notes it was close to breakeven. Fair enough, but to be a rewarding equity crowdfunding campaign PetAirways will have to not only build a valuable service for pet owners – it will also have to reach “escape velocity” for its bottom line.

Given the plethora of alternatives (including flying ones pet on traditional airlines – which looks like a fine option in our estimation) to transport pets, we think this is a niche-service even under the most optimistic of scenarios.  

If you have any questions regarding the underweight rating of PetAirways, you can reach us at hello@kingscrowd.com