Originally Posted by
Cloudsurfer2
There’s been a lot of recent discussion about Leading Edge’s financial position, including talk that they’re around £9 million in debt. Whether that figure is fully accurate or not, it raises questions about why they were selected as a partner, especially given the volume of negative experiences that continue to surface. These issues don’t appear to be new either, they seem to have been ongoing for several years. A few years back, they were reportedly banned from flying at Oxford due to unpaid landing fees.
The 9 million figure is a bit misleading - abridged balance sheets don't tell you much. I suspect that figure (10.7m liabilities in 2023 and 14.8m in 2024) is primarily deferred income, whereby a student pays cash for their training in advance and that goes on the balance sheet as a liability, which is then removed once the course is delivered.
Some napkin figures: let's say they take on 10 students a month at £120k a pop on a rolling average per student per month, or 1.2m a month. That works out as 14m of deferred income a year on a rolling basis. That's not the same as owing a bank £14m.
The problematic part is that the money paid in advance isn't safely put to one side and used later on to pay for that student's training. The cash you pay now invariably ends up being used to pay for current expenses. To put it another way, you pay £20k in April for your flying which is due to complete in September. That £20k is used right now to fund someone else's training. By September when you are doing your flying, you hope that the school has had its expected incoming stream of students who are now paying for your flying.
This approach works until there is a lull in income, at which point the tiny cash balance isn't enough to weather the storm. For a business this size, anything less than a million or two in cash won't get you very far if things go quiet. That's why a seemingly busy flying school can go pop and close their doors, without a penny left to pay back to students.
BUT this is how all the schools operate, so it's just a risk IMO. And I agree that Jet2 should have done their due diligence and that is a good sign, though there is lots of talk of the flying part taking a long time to complete. That's the case for most schools though, they can't seem to manage their fair weather bases properly.
Anecdotally I heard that the last lot of people on the Leading Edge bonded FI course were having a bad time, being passed over for any flying in favour of paying students.