Northern Pacific seeks public investors

Northern Pacific Airways is taking a somewhat unusual approach to funding ahead of its expected launch later this year. The carrier is running an open call to unaccredited investors, hoping to boost its visibility in the market, as well as its cash balance.

The airline partnered with WeFunder to run a campaign seeking to raise funds. Much like a Patreon or Kickstarter program, different investment tiers come with different benefits for contributors. These include free drinks on board, flight vouchers, and even the ability to name or pick a livery for one of the company’s 757-200s.

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The company is looking to raise up to $5 million, at a $350 million valuation. For the first $1 million raised there’s a 20% bonus on the valuation, further hoping to entice investors. The limited potential total investment suggests this effort is much less about the money than it is the publicity.

Also, thanks to the offering, we know a bit more about Northern Pacific’s expectations for the future.

Growing the Northern Pacific valuation

CEO Rob McKinney also acknowledges another round of funding is coming, though “post revenue at a much higher valuation.” He also recognizes “a few significant variables (geopolitics, fed policy, fuel futures, midterms)” that preclude naming that future valuation goal.

Chairman Josh Jones is a bit less reserved in talking about the company’s valuation targets. He sees a valuation between $1-2 billion by 2025 or 2026, based on total capital raise under $200 million.

Read More: Northern Pacific to lease aircraft for service launch

Jones also suggests that valuation is reasonable based on rumors of a recent $1bn valuation round at Breeze Airways, which he erroneously describes as “currently roughly the same size and projecting similar growth as Northern Pacific.” To be clear, Breeze already operates approximately 20 planes on 90 routes between 31 cities in 18 states. Moreover it is growing at the tune of one new A220-300 per month for the foreseeable future.

That is a very different current position and growth plan compared to Northern Pacific.

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Northern Pacific Fleet Planning

For example, while Northern Pacific will launch operations with leased aircraft from Icelandair, that is not expected to last too long. The company financials have the ACMI leasing costs (a/k/a Aircraft, Crew, Maintenance, Insurance, or wet-lease) disappear by Q3 2023.

Removing those four leased aircraft will occur as other owned or leased planes join the fleet. In addition to the two planes purchased last year, Northern Pacific acquired two more at the end of March. It also signed a letter of intent on another half dozen frames earlier this year. That accounts for 10 of the 11 planes it plans by Summer 2023.

That it will operate with a mixed fleet of Rolls-Royce and Pratt & Whitney engines does not seem to bother the company. The different performance characteristics and higher maintenance costs to handle two different sets of engines is not great, but neither is availability of enough RR-powered jets to fill out the fleet.

Read More: Northern Pacific unveils aircraft, addresses service launch challenges

The fleet goal is 50 planes by 2026. Where they are expected to fly in Asia is unclear. There are not many cities that a 757 can reach from Anchorage that would support service to the USA. Also, there’s no guarantee all the planes will still be 757s at that point.

Jones confirms that “the A321XLR is exactly in our plans for the future,” though timing on that future is unclear. Getting A321XLR slots in the next few years is likely a very, very challenging proposition. The newer planes would would extend the range a bit, however, and maybe open a few more markets in China.

Routes and frequencies via Anchorage

One major risk for the company comes about from Russia’s invasion of Ukraine. With the associated sanctions from that action Russian airspace is closed to US airlines. Northern Pacific plans to fly the route without ETOPS certification, meaning it needs access to Russian airports along the path for potential diversions, even if the route typically stays mostly offshore.

No ETOPs required. That's basically the only way they can make the launch happen this year. https://t.co/VCDqfLvBRu pic.twitter.com/g8j0uwmWiK

— Seth Miller (@WandrMe) January 19, 2022

Without that access the company’s plans to launch in mid-November are very much in doubt. And just flying between the lower 48 and Anchorage won’t bring the revenue NP is looking for.

Update: McKinney confirms that the company will be able to launch, even without the non-ETOPS diversion options in Russia. Because the first few planes flying will be leased from Icelandair they can operate under ETOPS rules, which do not require access to the Russian airports.

Executives did, however, confirm daily flights to Las Vegas are in the plans. So are flights to Orlando. McKinney notes that NP “already worked out space and timing for [MCO]” to launch service to Central Florida.

Connectivity Commitment

The company also lists Intelsat as a partner, so it seems pretty safe to assume that the 2Ku in-flight internet service will be available on board, at lease for the planes NP owns directly. That at least some of them had the hardware already on board certainly makes that an easier choice. McKinney previously confirmed the company is “working hard to make sure that we have the best cutting-edge internet available, up to and including possibly being able to stream your own Netflix account.” This would seem to deliver on that goal.

Read More: Streaming IFE, softer seats feature on Northern Pacific’s new interiors

The leased planes should still have the Anuvu hardware on board. But Anuvu does not have other customers in most of the Northern Pacific flight regions. It is unclear if the companies will arrange for satellite capacity for the anticipated short-term run of those leased aircraft.

More on Northern Pacific's road to launch:

• Ravn Alaska plans international expansion, 757 acquisition, Anchorage hub
• Ravn Alaska registers Northern Pacific name for transpacific LCC operations
• Northern Pacific snags six 757s for Asia service
• Northern Pacific unveils aircraft, addresses service launch challenges
• Streaming IFE, softer seats feature on Northern Pacific’s new interiors
• Northern Pacific to lease aircraft for service launch
• Northern Pacific seeks public investors
• Northern Pacific visits Saipan in search of partners
• Northern Pacific finally set to fly, just not across the Pacific yet