Baltia Airlines Annual Stockholders Meeting, Sept. 26, 2011
The meeting was called to order in a meeting room of JFK Terminal 4 by corporate secretary Walter Kaplinsky, who placed into nomination the names of the current board of directors for another one year term. No other nominations were offered, and the nominated directors were unanimously elected. Mr. Kaplinsky then turned the meeting over to the company president, Igor Dmitrowsky, to give his report on the status of the company.
Igor reported that the arduous FAA certification process of Safety Attribute Inspections (SAI), consisting of a moving target of over 4000 questions addressing the thoroughness of the company’s detailed manuals for operations, training and maintenance, was now almost at an end. He expects Baltia to receive final approval of the manuals and their related SAIs within 30-45 days. After that milestone is reached, Baltia can then start hiring and training. Following initial training of crews and operations staff, the FAA will supervise a “table top exercise” (where the FAA comes to the company offices and poses a number of hypothetical problems & emergencies, and rates the response of the company personnel according to procedures spelled out in the approved manuals).
Aircraft evacuation training and tests will be held. Finally, there will be proving flights totaling about 100 hours flying between JFK and St. Petersburg, where FAA check pilots will test the flight crews’ response to various simulated emergencies. Then Air Carrier Certification is expected to be granted, a DOT order authorizing the beginning of revenue flights is granted, and then 30 days later revenue flights with passengers can begin. Baltia advertising will not be allowed until the DOT order is issued.
Igor reported that Baltia’s second 747, N706BL (formerly of Northwest Airlines), has received its certificate of airworthiness and remains at the Kalitta airlines facility in Oscoda, MI where a few final cabin and navigational upgrades are being performed. He expects this plane to fly to JFK around the end of October.
Baltia is in the process of moving most of its office staff and equipment to a new large facility on the JFK grounds formerly occupied as the U.S. HQ of Japan Airlines. (These offices comprise about 9000 square feet.) One of Baltia’s two offices at JFK Terminal 4 (the International Terminal) is being retained as a terminal office. But all other personnel and operations will be housed at the new facility, including 24/7 reservations. Attendees were invited to visit the new offices after the meeting.
Igor then invited questions from the audience of about 20 shareholders (those not otherwise connected with company), and about 10 questions were asked and answered.
Q 1: What is the company’s policy regarding share dilutions?
A: Dilution, though not desired, has been necessary in order to raise the money needed to enable the highly complex and demanding startup and certification process without incurring debt. However, the company has tried to minimize this necessity through frugal management. When revenue flights commence, one could see share values increase by many multiples of their current value.
Q 2: Why did the FAA change the rules for airline certification on Baltia?
A: It wasn’t because of Baltia, though Baltia is the first new airline to go through this process. The FAA’s AFS-900 team developed the new certification system, and together with the NY-FSDO FAA group here in NY, they developed the rigorous SAI concept with over 4000 SAI questions to be answered by the airline. The SAI process was developed to greatly enhance airline safety, and has gone through at least 4 revisions while Baltia has been in the certification process. The FAA staff involved has also changed somewhat, further complicating the process. The SAI process is a monster in complexity, but will serve the traveling public with much higher standards of safety discipline for airlines. The only other airline to go through this process was Atlas Airlines, a preexisting cargo carrier that applied to modify their certificate to include passenger carrying authority. It also took Atlas 2 years to go through the SAI process.
Q 3: Is Baltia’s SAI work proprietary, or can anyone else use it without cost?
A: It is somewhat proprietary. Those parts that are proprietary could perhaps be sold to another airline starting the process.
Q 4: How long until the FAA approval of the manuals?
A: About 1 month to 45 days. Getting final approval is not a completely straightforward process, as it is partly subjective. But the FAA has been cooperative, reviewing our text along the way, and so we do expect final approval to come without any undue difficulties.
Q 5: How long after approval to the first paying flight – 60 days?
A: Approximately so. But it depends on the DOT’s subsequent issuance of their order to allow Baltia to proceed with operations. We expect that to follow quickly on the heels of FAA certification.
Q 5b: So you won’t start flying until after the start of the New Year?
A: Possibly.
Q 6: What is the status of Baltia’s first 747, the one in Maylasia?
A: All attention and resources have been focused on N706BL (Baltia’s 2nd 747) because this plane could be certified quicker. All effort is focused on the earliest possible launch.
Q 7: Will there be a reverse split of the stock?
A: “We are not masochists yet!” Igor emphatically said he is against any reverse split, and is not interested in the arbitrary requirements of some financial institutions for a stock price of over $1 in order to be listed. (Such as NASDAQ’s apparent requirement. BC later said he believed that a price waiver permitting getting on NASDAQ with a price well under $1 per share could be gotten if the company is very strong in other requirements for listing. He believes this would be the case with Baltia. Apparently such waivers have been given before. So in this case, there would be no reason to even consider a reverse split.)
Q 8: Will Baltia do a stock buy-back?
A: This has been discussed, but capital should be used to grow the company instead. This would be a far more effective way to increase share value, by growing and strengthening airline operations.
Q 9: What future routes and what numbers of planes are you planning?
A: We want to be both careful and aggressive at the same time. First, we must establish operational standards for the airline in actual practice before adding more routes and planes. The SAIs have been a great educational process toward these standards. We will be establishing line stations to the same standardization. We know that once an airline has 4 or more planes, problems rapidly multiply. We anticipate that, and will be ready for it when we reach that point. Markets of interest to us include the capital cities of Russia, Ukraine, and the Baltic states. We’ve applied for the Moscow route, and when we get that, we will close off the New York – Moscow – St. Petersburg triangle from other airlines, and this should be highly lucrative. Nonstop service from JFK to these cites is highly advantageous.
Q 10: What is Baltia’s cargo sales potential?
A: We’ve received lots of interest from Fedex, DHL, etc. for block space. An advantage of the 747 is that it has a huge amount of cargo capacity, compared to most other planes. We would be involved with high-end cargo that pays a lot. We can carry 100,000 pounds to Russia and 80,000 pounds back, at $1 per pound, which is quite profitable. However, initially our focus will be more intense on developing the passenger market.
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No more questions were offered, so the meeting adjourned and many went to see Baltia’s large and impressive new offices and adjacent maintenance facility on the airport about a mile from Terminal 4. Total square footage of the offices is about 9000 square feet. A PowerPoint slide show on the painting of N706BL and the gold gilding of the rooster on its tail was shown, along with the video of the plane’s dramatic takeoff from Victorville.
Unlike another attendee, I did not perceive any distress among the Baltia staff about the company’s financial situation. In fact, the attitudes and atmosphere seemed genuinely upbeat and confident. However, there are indeed formidable financial hurdles to be surmounted before the first revenue flight. Somehow, BC and his team seem to continue to do magic.
- As recalled by DeepSpringer
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