But first . . .

I repeat:

higher wages = greater demand = stronger economy = greater job growth = virtuous cycle

To which one could append:

stronger economy = [higher tax revenues + lower safety-net payouts] = lower deficits

Those who ask, “Well, why not a $50-an-hour minimum wage” are not adding insight to the conversation.  (If 2% inflation is better than none, as economists argue, why not 20% inflation or, better still, 200% inflation?  If walking 15 or 20 miles a week is a good idea for most people, why not 100?)  But by the way?  Scaling it up to $15 — as persuasively suggested by Nick Hanauer — is worth discussing.


Lisa Walden:  “An entertaining post yesterday.  And I’d like to add that I find amazement in being able to use my trusty iPad to Google how to fix a malfunctioning microwave keypad and several YouTube videos pop up with really helpful people breaking down how to fix that kind of pesky problem. I discovered that it is a green ribbon behind the panel that has become loose and with a slight adjustment of a wiggle or two -voila….fixed keypad. Easy peasy! I’m with you in thought; why should I add one more bunking piece of metal to the world trash heap if I can help it?”

☞ Oh my gosh — this is exciting!  You may have solved my problem!

And now . . .


As noted already (and reported here), WheelTug just added 50 new slots:

WheelTug has announced the execution of an agreement for 50 ‘WheelTug’ systems for 737 MAX aircraft. With the new reservations the order book of WheelTug aircraft drive systems stands at 781 delivery slots reserved by thirteen airlines from Europe, America, the Middle East and Asia. As the system is in the nose gear there is no interference with brake cooling, which means that WheelTug ground operations can offer customers reduced turnaround times by up to 15-20 minutes.

And now, Thursday, a new airline with four more:

Gibraltar, 30 January 2014 – WheelTug plc announced today the execution of a Slot Option Purchase Agreement with A.T. Inc., Air Transat, for four slot options for 737NG Aircraft. With the new reservations the order book of WheelTug® aircraft drive systems grows to 785 delivery slots reserved by fourteen airlines from Europe, America, the Middle East and Asia. WheelTug is in active discussions with over 300 airlines worldwide, and expects to surpass 1,000 slot reservations this year.

Four planes aren’t many, but this adds yet another airline to the list, and despite the small size of the deal, Air Transat (“named World’s Best Leisure Airline at the 2012 Skytrax annual World Airline Awards”) is not such a small airline.  As the press release goes on to say, “Air Transat is Canada’s leading holiday travel airline. Every year, it carries some 3 million passengers to nearly 60 destinations in 25 countries aboard its fleet of Airbus wide-body jets.”  WheelTug is not currently being offered for wide-bodies, so this is apparently for their 4 narrow-bodies.

Guy Hagner:  “Quick question:  When does WheelTug expect to begin fulfilling the orders that have been booked?”

☞ When, indeed.  First they have to get FAA approval, and to get that they may have to get sign-off from Boeing and Airbus, and to get that . . . well, who knows?

But before you despair altogether, consider that 14 airlines have now indicated that they want this: and Boeing and Airbus are not (primarily) in the business of alienating airlines.  Consider also what an advantage Boeing would have if it could offer WheelTug on its new planes before Airbus did (or vice versa).  Who would want to buy a new plane without this capability?  Would you buy a TV with every desirable feature at a great price — but no remote control?

So might Airbus, at some point, want to get a jump on Boeing?  Or vice versa?  I don’t know.

Consider also that airports, environmentalists, and passengers will increasingly come to want WheelTug to reach fruitiion as it gets better known.  Airports, because they can effectively add “new gates” without having to add gates at all.  Faster turn-around times mean less time at the gate.  (They will also have fewer tug vehicles running around, adding to congestion and complexity.)  Passengers will appreciate the savings in time — and, if they’re way in the back, not having to wait nearly as long to get off the plane once it’s landed.  (This won’t happen right away, let alone everywhere.  But as demonstrated in some of the WheelTug videos, a maneuver it calls “the Twist” will allow planes to park parallel to the gate with jet bridges extended to both the front and the rear doors, cutting boarding and deplaning time roughly in half.)  Environmentalists will appreciate that less jet fuel is being burned into the air.

What I do know is that WheelTug seems to have gone from the, “oh, please, this is completely preposterous and will never work or happen” stage to the stage where there’s video of its working, where 14 airlines have signed up for it, where industry icon Bob Crandall (who ran American Airlines) has expressed his enthusiasm, and where (as just one more example of growing credibility) its CEO will be presenting in New York Wednesday at Cowen and Company’s 35th Annual Aerospace/Defense Conference & Transportation Conference.  Among the other presenters: the CEO of Boeing.

But could our wait drag on for another year or two?  Or longer?  Absolutely.  One cannot help recalling, with dread, that famous New Yorker cartoon.  A businessman on the phone, being asked to find a date to get together, asks,  “How’s never?  Does never work for you?”

Which is why I still assign a 50% probability to this whole thing just somehow proving worthless.  In my heart of hearts, I don’t actually see how all the company’s intellectual property and patents could be worthless, but “we don’t know what we don’t know,” and all that, so let’s say it’s 50%.

The company now estimates annual potential savings per plane at more than $1 million a year, of which its model is to take half.  I can’t imagine their ever getting paid anything like that . . . which is why I keep using “a net profit of $50,000 a year per plane” for the back of my envelope.  That amount I can easily imagine.

There will ultimately be a market for something like 20,000 planes, maybe more, for which WheelTug’s system would make sense — but I’ve been using 10,000.  Which would mean, at $50,000 x 10,000 planes, a net profit of $500 million a year.

Which at a seemingly conservative 5 times earnings — still on the back of that envelope — would give WheelTug a $2.5 billion valuation.

Borealis doesn’t own the whole thing — it owns most of Chorus Motors which owns most of WheelTug.  But for the purposes of my envelope, I just figure that’s canceled out by all the other potential not counted here.  (Could this motor technology have an application in automobiles?  elevators?  something else?  Could any of the other allegedly revolutionary Borealis technologies someday prove real, as WheelTug seems to have proven?).

So here we have a 50% chance that something currently valued at $85 million will one day — five years from now? — be worth $2.5 billion.  And conceivably a great deal more.

If you buy these wild guesstimates, then that 50% chance of $2.5 billion = $1.25 billion = $250 a share, up from $16.50 today.  (Well, or zero if it all proves worthless; or $500 if the 50% chance goes our way.)

What is $250 five years from now worth today?

If you’d accept 10% a year on your money, then the answer is $155.  (Or $129 if you have to wait 7 years; or $188 if you have to wait only three.)

If you’d expect to compound your money at 20% for something so risky, then the answer is $100.  (Or $69 if you have to wait 7 years; or $144 if you have to wait only three.)  Of course, I would argue that the “riskiness” of the investment was already factored in when we cut the chance of success down to 50%.  If you use $500 a share as the hoped for return — not chopping it in half for the risk — but you demand 40% on your money, compounded, then you would pay $93 today for $500 five years from now.  (Or $47 if you have to wait 7 years; or $182 if you have to wait only three.)

One of you who’s good at Excel might even want to construct a tiny spread sheet for us with values we can plug in for each of the variables — the chance ANY plane will ever fly with WheelTug times the number of planes that might times the annual net profit per plane that does times the multiple the market would assign to those earnings — all that discounted back to a present value depending on the annual rate of return you expect for tying up your money this way and the number of years you think you’ll have to wait for the pay-off.

We could then play with the numbers all day long.*

Which won’t bring us any closer to FAA certification.  But — fully aware I could be wrong, and that, in any event, a 50% chance of failure means just that: a 50% chance of disaster — I don’t see how BOREF’s present value is only $16.50.  And so — albeit only with money I can truly afford to lose — I hold on to every share.


*Assume a 90% chance of failure and a net of only $20,000 on 5,000 planes and the same 5 times multiple of earnings, then the present value discounted back at 20% a year over 7 years and you get a current risk-adjusted share value of $2.79.  Assume a 60% chance of failure but a net of $100,000 a year on each of 12,000 planes and an 8 times multiple of earnings discounted back at 15% a year over 6 years and you get a current risk-adjusted value of $338 a share.



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