Integral Acquisition Corporation 1 (NASDAQ:INTE) has entered into a definitive agreement to combine with Argentine airline Flybondi under so far undisclosed terms.

Buenos Aires-based Flybondi flies to 17 destinations in Argentina and three in Brazil, holding a roughly 20% share of Argentina’s domestic air travel market.

The combined company is expected to trade on the Nasdaq under the symbol “FLYB” once the deal is completed in the first half of 2024.

Transaction Overview

Integral 1 has about $31.4 million in its current trust after seeing 73.6% of its shares redeemed in a May extension vote that moved its transaction deadline to November 3.

Its shareholders will go back to vote on November 1 to push this to November 5, 2024.

The parties have not yet released their merger documents or an investor presentation, but Integral 1’s profile page will be updated once more information is made available.

Quick Takes: SPACs have been active in propelling aircraft companies of various types, but this would be their first deal with a traditional airline.

It hasn’t been for lack of trying.

Tuscan II announced a combination with regional airline Surf Air Mobility (NYSE:SRFM) in May 2022, but terminated it in November and later liquidated. Golden Falcon’s attempt to merge with Turkish air freight operator MNG Airlines flew the same unfortunate path, ending in the termination and the SPAC’s liquidation in August.

The closest SPAC target to a traditional air operator that has completed was Experience Investment’s 2021 combination with Blade (NASDAQ:BLDE), which operates helicopter shuttle taxis between urban centers and airports.

The reasons we haven’t seen a SPAC airline come all the way in for a landing are manifold, but a big one is likely that airlines have a few more options for financing themselves than the sorts of companies SPACs typically engage with.

Air carriers that own their own planes can leverage financing on them in a pinch and those that lease their aircraft can usually renegotiate or downgrade their fleet if needed.

A fully scaled and operational airline also would likely have a smoother flight to the public markets through a traditional IPO or direct listing than a typical SPAC target as well. So, at a time when the SPAC market is turbulent, many may have made course corrections.

Surf Air did just that a year after its deal with Tuscan II fell through. But, its experience may have been a lesson for Flybondi.

Surf Air debuted its shares on the NYSE in a direct listing in July at $5 per share, and a $460 million market cap, after a reference price of $20 – a -68% drop from its proposed valuation in its deal with Tuscan II.

From this lower perch, it fell further, dropping -40% on its debut day and it last closed at $1.25, down -75% from its opening IPO price, and down 94% from its reference price with a market cap of about $85.6 million.

It could have dropped from its initial de-SPAC price as well, of course, and, judging by the rest of the market, likely would have. But, in veering from a SPAC deal to a direct listing, it also gave up 38,000,000 earnout shares it could have received as long as it maintained altitude operationally.

These earnout share dispersals were tied to revenue and product development targets in addition to share price benchmarks, so it could have still pocketed this upside even if the market remained stormy.

We won’t know if Flybondi got similar protections until the merger documents are released as the press release provided no financial details. But, the transaction has the potential to provide an encouraging example for other regional careers interested in going public.

There are about a dozen regional airlines in the US alone of similar scale to Flybondi with its 20 destinations.

Flybondi itself is described as a budget airline, but it does not appear to be the sort operating on such low fares that its margins are paper thin. Its website quotes near-term fares from Buenos Aires to Sao Paulo at about $250 and $288 to Rio de Janeiro each way.

The company mentions in the press release that it has existing cash on its balance sheet and so it may also be less sensitive to potential redemptions with any proceeds left over going to working capital and growth.

ADVISORS

• Flybondi Advisors:
  • Greenberg Traurig, LLP, Marval O’Farrell Mairal, and DWF Law LLP are serving as legal counsel
• SPAC Advisors:
  • Ellenoff Grossman & Schole LLP, Beccar Varela, and Travers Smith LLP are serving as legal counsel