Rebounding private flights fuel M&A interest in corporate jet services providers
09/04/2021 11:00
By Allison Lampert and Maiya Keidan
April 9 (Reuters) - As U.S. business aviation traffic
rebounds to pre-pandemic levels, a niche, fragmented industry
providing services ranging from hangars to fueling is drawing
interest from private equity funds and infrastructure
investors.
Fixed base operators, or FBOs, play a key role in keeping
private jets flying, offering services like hangars and fueling,
and some buyers are betting the revival in flights could spill
over into allied industries.
While business jet orders and deliveries dropped in 2020,
private flights, which carry smaller groups and promise wealthy
passengers less risk of exposure to the coronavirus, have
generally fared better than commercial. That is underpinning
investor interest in FBOs.
The sector recently made headlines when Gatwick Airport
owner Global Infrastructure Partners joined forces with
Blackstone BX.N and Bill Gates' investment vehicle to make a
$4.73 billion offer for Signature Aviation SIGSI.L , the
largest private jet services firm. urn:newsml:reuters.com:*:nL4N2KB2AD
There are other deals brewing too. Macquarie Infrastructure
Corp MIC.N has said it is seeking buyers for Atlantic
Aviation, the second-largest FBO network, for a deal by year's
end.
Most of the deals are smaller in scope, with networks
growing one site at a time.
FBO network operator Luxaviation Group, which added a site
in Miami in March and has plans for another location in New
York, is seeing investor interest even as it eyes acquisitions.
"We currently see some interests from private equity firms
in our activity and we are carefully assessing our best way
forward to expand our FBO business especially in the USA,"
Luxaviation Chief Executive Patrick Hansen said by email.
"Raising capital is part of such plans and so it is good to
see some transactions like Signature that draws attention to
this sector."
GROWTH PLANS
Airlines and corporate plane operators cut flights as demand
plunged due to the pandemic last year. But with U.S. airlines
resuming pilot hiring and corporate charters expecting a
recovery in summer travel due to vaccinations, FBO operators are
dusting off their growth plans. urn:newsml:reuters.com:*:nL4N2LU486
Florida-based Sheltair Aviation Services plans to add to its
24 locations, said spokesman David Buritica.
While business aviation investments are too small to track,
Refinitiv data show airline deal volumes recovered to $5.85
billion in the first three months of 2021 after hitting a
more-than 10-year low of $60.7 million in the first quarter of
2020.
March business aviation flights in the United States, the
largest market for corporate aircraft, surpassed 2019 traffic
for the fourth consecutive week, according to recent data from
Flightaware.
"The pandemic has unlocked elevated demand for business jets
from customers looking for safer and more reliable means of air
travel in the current environment," RBC analyst Walter Spracklin
said in a note this week on Canadian business jet maker
Bombardier BBDb.TO .
Independently owned Meridian, which has FBOs located near
New York City and San Francisco, gets "inquiries all the time as
to whether or not we would consider selling," said a spokesman,
who insisted the sites are not for sale.
Ehsan Monfared, legal counsel at Canada's YYZ Law firm, said
he is seeing more cases of private equity investing in aircraft
management companies.
"I do get the sense that there is interest in investing
further," said Monfared, who expects to see more consolidation
in the industry.
(Reporting by Allison Lampert in Montreal and Maiya Keidan in
Toronto; Editing by Denny Thomas and Dan Grebler)
((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters
Messaging: allison.lampert.reuters.com@reuters.net))