Sky Harbour Group (SKYH) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01Our ability to meet our obligations under our ground leases and our indebtedness is dependent on our ability to enter into and collect lease payments from tenants
2. 02The majority of our outstanding indebtedness is secured under the terms of the Series 2021 Bonds. We intend to incur additional debt in connection with new hangar projects at new airport locations, refinancing of existing indebtedness, future acquisitions, or for other purposes
3. 03Secured debt obligations, including those under the Series 2021 Bonds, expose us to the possibility of defaults and cross-defaults, as well as foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt
4. 04Our growth will depend on our access to external sources of capital, and our ability to obtain financing or access capital markets may be limited
5. 05Increases in market interest rates or unavailability of additional indebtedness may make it difficult for us to finance or refinance our debt, which could have a material adverse effect on our financial condition, results of operations and growth prospects
6. 06Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow, and ability to service our debt and ground lease obligations
7. 07declines in the financial condition of our tenants could make it more difficult to collect rental revenue from them
8. 08An epidemic, pandemic, or similar public threat, and the measures that federal, state, and local governments and other authorities implement to address it could have a material adverse effect on our business and results of operations
9. 09We have in the past and may again in the future be required to record impairment charges to future earnings if our long-lived assets become impaired
10. 10The industry in which we operate is subject to significant competition and our failure to effectively compete could have a material adverse effect on our business and results of operations
11. 11The growth and success of our business is subject to our ability to market, attract, and retain tenants
12. 12Our rental revenue in the past has been concentrated within a small number of tenants and the loss of or default by one or more significant tenants could have a material adverse effect on our business and results of operations
13. 13Our capital projects are subject to uncertainties, including the possibility of delays, cost overruns, and inflation, which could have a material adverse effect on our business, results of operations and market reputation
14. 14The production of our hangar buildings is subject to design and construction defects, product liability, and other claims that could be significant and costly, which may delay our construction projects and could have a material adverse effect on our business and results of operations
15. 15Failure to adequately maintain our home basing hangar campuses or the integrity of our fuel supplies may have a material adverse impact on the revenue or market share of one or more of our home basing hangar campuses, resulting in a decline in operations of the business
16. 16The growth and success of our business is dependent on the continued service of certain key employees and the ability to recruit and retain new employees
17. 17We conduct substantially all of our operations under ground leases, which grant significant rights to airport authorities as our direct or ultimate landlord. The termination for cause of one or more of the ground leases would affect our business and results of operations significantly
18. 18Because we do not directly own the sites we lease, we will not be able to liquidate real estate investments in order to meet liquidity needs
19. 19We cannot assure you that our airport ground leases will be renewed or that our hangars will be re-leased at rental rates equal to or above the current average rental rates or that we will not offer substantial concessions or below-market renewal options to attract new tenants or retain existing tenants
20. 20Failure to succeed in new markets may have adverse consequences
21. 21Our business and results of operations will be dependent on tenants satisfying their obligations under tenant leases, which may be subject to default or termination
22. 22Our business and results of operations may be materially adversely affected by a default under a ground lease or the bankruptcy of a subsidiary
23. 23In the event of assumption and/or assumption and assignment of any executory contract with a third party, the subsidiary would be required to cure any pre- and post-petition monetary defaults and provide adequate assurance of future performance under the ground lease or other applicable agreements
24. 24The lack of accurate and reliable industry data can result in unfavorable strategic planning, mergers and acquisitions, and macro pricing decisions
25. 25We are subject to extensive governmental regulations that could require significant expenditures. Regulators, such as the TSA, have and may again consider regulations that could impair the relative convenience of general aviation and adversely affect demand for our services
26. 26Compliance or failure to comply with the ADA and other regulations could result in substantial costs
27. 27Potential limitation of tax-exemption of interest on private activity bonds could impact the debt funding of Sky for future projects or significantly increase our cost
28. 28Uninsured losses or a loss in excess of insured limits could adversely affect our business and results of operations
29. 29A major health or safety incident could adversely affect our business and results of operations and could be costly in terms of reputational damage
30. 30We may not be able to rebuild our properties to their existing specifications if we experience a substantial or comprehensive loss of such properties
31. 31Our properties are subject to environmental risks that may impact our future profitability
32. 32We are exposed to the potential impacts of future climate change and climate change-related risks
33. 33Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks

Risks Relating to Our Organization and Structure

1. 34We are a “controlled company” within the meaning of the New York Stock Exchange listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements
2. 35The Existing Sky Equityholders control the direction of our business, and the concentrated ownership of Common Stock prevent you and other stockholders from influencing significant decisions
3. 36the payment of dividends on Common Stock
4. 37Provisions in our Bylaws and Delaware law may have the effect of discouraging lawsuits against our directors and officers
5. 38Because members of our senior management team hold most or all of their economic interest in Sky through other entities, conflicts of interest may arise between them and holders of shares of Class A Common Stock or us
6. 39The requirements of being a public company may strain our resources and divert management’s attention

Risks Relating to Tax

1. 40Our only principal asset is our interest in Sky, and accordingly we will depend on distributions from Sky to pay dividends, taxes, other expenses, and make any payments required to be made by us under the Tax Receivable Agreement
2. 41The Tax Receivable Agreement requires us to make cash payments to the TRA Holders in respect of certain tax benefits and such payments may be substantial. In certain cases, payments under the Tax Receivable Agreement may (i) exceed any actual tax benefits the Tax Group realizes or (ii) be accelerated
3. 42tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement
4. 43We could be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in the United States or other jurisdictions

Risks Relating to Our Common Stock and Warrants

1. 44The market price of Class A Common Stock and Public Warrants has been and may continue to be extremely volatile, which could cause purchasers of our securities to incur substantial losses
2. 45if the market price of our Class A Common Stock declines, you may be unable to resell your shares at or above the price at which you acquired them, and the Public Warrants you own may become out of the money
3. 46We cannot predict the impact our dual class structure may have on the market price of Class A Common Stock
4. 47The outstanding Warrants are exercisable for shares of Class A Common Stock and common units in Sky may be redeemed for Class A Common Stock. The exercise of these outstanding Warrants will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
5. 48We do not intend to pay cash dividends for the foreseeable future
6. 49If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline
7. 50You may experience future dilution as a result of future equity issuances
8. 51We may be subject to securities litigation, which is expensive and could divert management attention