The World's Oldest Startup Airline

November 3, 2016 9:36 AM

For seven years, a 747 sat at Willow Run Airport (airport code: YIP) near Ypsilanti, Michigan. For most of that time, it was the sole member of the fleet of Baltia Airlines, which was established in 1989.

[E]ven though the company is still extant and still raising capital, it has never flown a flight, has never earned any revenue, and has recently given up on its only airplane.

posted by Etrigan (36 comments total)

The Baltia shareholder community exists primarily on public message boards like Investors’ Hangout and Investors’ Hub—the former has become the de facto base of the pro-Baltia camp; the latter is where the skeptics gather.

The message boards can receive thousands of hits a day. There are feverish arguments over the minutiae of FAA Certification Part 121 Phase 2, or what the latest SEC filings indicate.

Man, I am never going to laugh at a failed Kickstarter again.

People hate to give money to others they won't see back ON PURPOSE, but they love to do it through stupidity.
posted by selfnoise at 9:55 AM on November 3, 2016 [5 favorites]

I thought this was mostly the vaguely amusing story of some complex fraud, or maybe persistent incompetence. Then I got to the penny stock listings and the shareholders who've been duped and any humor in the story sort of evaporated.
posted by Nelson at 9:56 AM on November 3, 2016 [1 favorite]

In 2015, a year in which Baltia lost $8.3 million, Dmitrowsky, the CEO, was paid $44,534; Vice President Barry Clare, $95,877; Vice President Russel Thal, $91,867. In 2014, a year in which Baltia lost $15.4 million, Dmitrowsky received $121,600; Thal, $107,800; and Clare took home $769,361.

Well, someone's getting paid.

SHARES OUTSTANDING (B): 9.286

That's a homeopathic level of dilution right there.

Greg Hurley bought $1,000 worth of stock in May 2015, but, as he continued to research, he “saw red flags all over the place,” and dumped the stock a few days later.

The story goes on to say he's an attorney, so...no offense to this gentleman, but the fact it's an OTC stock should be the first and only red flag he needed. That, and the quantity of shares outstanding.
posted by mandolin conspiracy at 10:02 AM on November 3, 2016 [2 favorites]

I find it a little hard to sympathize with the "thousands that have lost millions" investing in the company. Like maybe that guy on the street corner really does own the bridge in Brooklyn he's trying to sell you but are you really not going to do any due diligence before you invest you life savings?

I grant you the line is a fine one, but the guys who hang out on investing forums aren't investors, they're playing the lottery.
posted by danny the boy at 10:12 AM on November 3, 2016 [5 favorites]

I admit I can be pretty uncharitable and overly skeptical, but if you have these allegedly valuable routes, don't you just lease an airplane from someone who knows what they're doing and let them fly the route until you figure out the details? Airplane purchasing and operation is a solved problem. Your company should stick to its core competencies until it branches out, and acquiring routes and passengers and outsourcing the planes leaves plenty of room for a company to operate in.
posted by straw at 10:14 AM on November 3, 2016 [3 favorites]

I mean, in 1991, this is what the NYT wrote:

No Funds, No Planes: It's Baltia Air!

Several airline analysts give Baltia a chance to get off the ground by next year, but questioned whether there were enough Americans of Baltic descent to make a hub in Riga profitable. The analysts did say that a new airline would benefit from a surplus of aircraft available for leasing on generous terms.

But the record for start-ups has been dismal. Only two carriers of any significance -- Midway and America West -- remain of the nearly 200 that began operating after deregulation took effect in 1978.
posted by mandolin conspiracy at 10:17 AM on November 3, 2016 [1 favorite]

They're just waiting for a shipment of lemon-scented napkins.
posted by jonmc at 10:32 AM on November 3, 2016 [37 favorites]

In 2015, a year in which Baltia lost $8.3 million, Dmitrowsky, the CEO, was paid $44,534; Vice President Barry Clare, $95,877; Vice President Russel Thal, $91,867. In 2014, a year in which Baltia lost $15.4 million, Dmitrowsky received $121,600; Thal, $107,800; and Clare took home $769,361. The numbers aren’t much better in other years (and their auditor has been sanctioned for omitting executive compensation in 2007 and 2009). In the first quarter of 2016, Baltia executives awarded themselves at least $484,000. (Dmitrowsky died in January.)

Sounds like they've been doing just fine for themselves as things are. Why, in a situation like this, would you want to incur the additional risk of actually operating an airline? That's a sure way to lose shit tons of money.
posted by Naberius at 10:35 AM on November 3, 2016 [22 favorites]

Oopsie. Messed up the link above. Meant to link to this for the cite to the number of shares they have out.
posted by mandolin conspiracy at 10:41 AM on November 3, 2016

I grant you the line is a fine one, but the guys who hang out on investing forums aren't investors, they're playing the lottery.

It seems to me like this kind of I-have-a-system-to-beat-the-system investor would be naturally attracted to things like startup airlines.
posted by thelonius at 10:42 AM on November 3, 2016 [2 favorites]

I love that they have a frequent flier program.
posted by miyabo at 10:45 AM on November 3, 2016 [11 favorites]

1) Buy rapidly depreciating asset
2) ???
3) Deduction!
posted by zippy at 10:47 AM on November 3, 2016 [2 favorites]

For pity's sake, don't invest in penny stocks or support the companies they represent. I'm just a regular joe from a small town, and I know too many people who have worked for penny-stock companies who got screwed over big time.
posted by infinitewindow at 10:48 AM on November 3, 2016

still better than flying Frontier.
posted by boo_radley at 10:50 AM on November 3, 2016 [4 favorites]

Who is whispering "buy penny stocks" into these people's ears anyhow? I doubt most of my relatives even know what a penny stock is. Ads on some Glenn Beck show?
posted by selfnoise at 10:51 AM on November 3, 2016 [2 favorites]

This is why airlines are perpetually losing money - they're hugely capital intensive so once you're in the game there's no escaping - you have to generate revenue even if it's unprofitable. And although the assets are expensive they're also not very liquid so you can't just sell off planes that you're not using.

still better than flying Frontier.

Hey, at least they fly. And they are cheap.
posted by GuyZero at 10:57 AM on November 3, 2016

Who is whispering "buy penny stocks" into these people's ears anyhow?

The fact that money is quantized makes penny stocks seem like they're a great investment - go from ten cents to eleven cents per share and you've made 10%! Go to twenty cents and you've doubled your money! That's only an extra ten cents!

That plus there are no shortage of people who make bad decisions based on poor research.
posted by GuyZero at 10:58 AM on November 3, 2016 [3 favorites]

Who is whispering "buy penny stocks" into these people's ears anyhow? I doubt most of my relatives even know what a penny stock is. Ads on some Glenn Beck show?

Penny stock promoters. Con artists, basically.
posted by leotrotsky at 11:02 AM on November 3, 2016 [2 favorites]

Who is whispering "buy penny stocks" into these people's ears anyhow? I doubt most of my relatives even know what a penny stock is. Ads on some Glenn Beck show?

Pump and dump schemes - a la Wolf of Wall Street, Boiler Room, etc. - are still around.

That being said, this seems more like a case of "attract investors to finance our salaries by issuing more share capital."

But yeah, it's the lure of "this could DOUBLE overnight!" or be the "Next ten-bagger!" Never underestimate the lure of get-rich-quick schemes of any kind.
posted by mandolin conspiracy at 11:02 AM on November 3, 2016 [2 favorites]

SHARES OUTSTANDING (B): 9.286

That's a homeopathic level of dilution right there.

For reference: right now, there are only 9 NYSE/NASDAQ companies with more than 5 billion outstanding shares. Microsoft, Apple and Cisco; Pfizer, GE and AT&T, Wells Fargo and Bank of America. Only BOA has more than 9 billion outstanding shares.
posted by Homeboy Trouble at 11:06 AM on November 3, 2016 [3 favorites]

I thought this was going to be a story where like a million people had put in $100ish, essentially playing the lottery. On that basis, I definitely wasn't enraged by the 2015 executive compensation. I initially was like "oh, that's eminently reasonable," even.

Then I read the article and saw that some people had invested rather significant sums, not just $100 or even $1000 and I felt kinda bad for them. That said, it doesn't read like a real con. It sounds like people who have no business trying to buy an airline, especially given the first aircraft purchase. Even the second sounds like a bad deal. Maybe it is a con, though. They could easily have hired a consultant to help them buy an airplane and make it through certification. Or, as others have mentioned, wet leased. They might have even been able to eke out a tiny profit on a wet leased 767, 777, or A330, buy it sounds like they didn't even try.
posted by wierdo at 11:24 AM on November 3, 2016 [3 favorites]

came here for the lemon-scented napkins reference, was not disappointed.
posted by randomkeystrike at 11:51 AM on November 3, 2016 [2 favorites]

miyabo: "I love that they have a frequent flier program."

I just tried to join it. Figured I would tell them I was joining every FF program I could and wanted the card with my name on it. Went to the web site. They had a phone number to call. Reservations as it turns out doubles as FF program. No answer. Just a message saying no one was available and to leave a name and number.

Love their optimism.
posted by AugustWest at 12:19 PM on November 3, 2016 [9 favorites]

Is there any legitimate reason why the FAA evaluations are not publicly available through FOIA? In the article, they even go as far to shine a light so they can't be observed. That's going to stoke the flames of conspiracy theory for sure.
posted by dr_dank at 12:21 PM on November 3, 2016

still better than flying Frontier.

Nice! But given this airline is based in Eastern Michigan, I would go with "still better than flying Spirit."
posted by Joey Buttafoucault at 12:22 PM on November 3, 2016 [3 favorites]

Is there any legitimate reason why the FAA evaluations are not publicly available through FOIA?
I'm speculating, but FOIA exemption 4 allows for "trade secrets and commercial or financial information
obtained from a person [that is] privileged or confidential" to be redacted and held back. While the fact that they passed or failed the test is publicized, the actual details of the systems set up and the corrective actions recommended might be regularly redacted to better encourage participants to be transparent.
posted by Karaage at 12:33 PM on November 3, 2016 [2 favorites]

But this credit card was supposed to give me triple miles with Baltia for every dollar I spend...
posted by DirtyOldTown at 12:55 PM on November 3, 2016

Mock all you want, but they've never lost one piece of luggage.
posted by orange ball at 1:03 PM on November 3, 2016 [20 favorites]

> That said, it doesn't read like a real con. It sounds like people who have no business trying to buy an airline, especially given the first aircraft purchase.

Oh, come on. As soon as I read "Baltia was founded in August 1989 by Igor Dmitrowsky, a Latvian immigrant who’d recently sold his dairy distribution company," I knew it was a con. I mean, I like to think the best of people, but ex-Soviet is to shady management as Nigerian is to e-mail scams. I'm sorry for the people who lost a lot of money, but this thing had so many red flags they might as well have been handing their life savings to a guy on a streetcorner with a ski mask and a large burlap sack.
posted by languagehat at 1:44 PM on November 3, 2016 [4 favorites]

Oye, my hometown.

It's funny: WR airport gets a helluva lot of traffic, at least in the evening from my vantage point at the nearby campground. Cargo, private, etc. This is in contrast to Ann Arbor airport in the town next door which I've mostly seen small passenger private planes/jets come and go.
posted by JoeXIII007 at 2:56 PM on November 3, 2016

and lists information on their frequent flyer program and the “Golden Rooster Club"

A subsidiary of Veroka Salt LTD.
posted by clavdivs at 4:03 PM on November 3, 2016 [2 favorites]

they might as well have been handing their life savings to a guy on a streetcorner with a ski mask and a large burlap sack

They might as well have been handing their life savings to Donald Trump.

"Omit needless words." Strunk and White, the Elements of Style.
posted by Naberius at 5:37 PM on November 3, 2016 [4 favorites]

Trump wept.

(Any Baltia shareholders that might read this: I grew up near to there and went to plenty of airshows. I am willing to buy up to $20 worth of stock just to have them for the novelty. Email's in the profile. This may be the best and most legitimate chance you ever have to recoup any of your investment.)
posted by klangklangston at 6:28 PM on November 3, 2016 [7 favorites]

Ooh, I just had an idea. You can ask any company's investor affairs office for paper stock certificates for your stock, and they're supposed to send them for free. $1 will buy you 1428 shares of Baltia at today's prices. If they use standard office paper, that's almost 14.28 pounds of paper. Scrap office paper sells for 8.5 cents a pound to recyclers, so it's worth $1.21.
posted by miyabo at 7:45 PM on November 3, 2016 [10 favorites]

1.21
Same as in Metro.

.83 and I'll pilot the replacement dirigable.
posted by clavdivs at 7:55 PM on November 3, 2016 [3 favorites]

I bought cardboard when it was fourteen cents a ton. It's up to sixteen cents, now, and I bought three tons of it, so that's...well, you do the math. And I made a special deal where I only have to keep two tons of it at my house.

Comedy is not pretty.
posted by maxwelton at 1:08 AM on November 5, 2016 [2 favorites]