Aero e-com struggling in face of dot-com bust

 - October 9, 2007, 12:41 PM

Aviation–and more particularly business aviation–is increasingly becoming the dominant component in the portfolio of UK public company BBA Group. The London-based group aviation holdings on both sides of the Atlantic now account for close to 60 percent of its worldwide business (out of approximately $2.3 billion total revenues recorded last year).

Its top management has indicated that some $360 million may be available for further expansion in aviation, while BBA seeks to consolidate recent investments and restructuring in its materials-technology operations.

Peter Whitehead, chief executive of BBA Aviation in Europe, is now actively scouring the continent for investment and partnership opportunities in the business aviation service sector. The company would like to add to its recent acquisitions in the UK, but is not expected to rush into the sort of expansion that saw prolific growth of the Signature Flight Support chain in North America during the 1990s. Opportunities to build new FBO facilities are few and far between in Europe, where airport real estate is limited and tightly controlled.

Last month BBA announced that revenues for the first half of this year rose by almost 9 percent over the same period last year, to £695 million ($1 billion). However, profits before taxes dipped slightly to £71 million ($103 million).

On the same day, the group also reported the acquisition of the Chicago-area FBO Priester Aviation for $16 million and of turbine engine parts and accessories company U.S. Barrett, which has a large inventory covering the Honeywell TFE731 engine family. It has also signed an agreement with Executive Jet’s NetJets fractional-ownership program to become the preferred ground-handling vendor at all airports at which Signature Flight Support has bases.

BBA recently bought Airport Services International Group (ASIG) and has merged its commercial airline fueling and handling operations with those of the Signature chain. In addition to its U.S. facilities, ASIG is active at eight European locations. “BBA believes that the business opportunities are bigger and more widespread in aviation,” said Whitehead.

In October last year BBA pulled out of its Signature Flight Support facility at Switzerland’s Zurich Airport. It had made a substantial investment in the base, which had been viewed as a bridgehead for further expansion in Europe.
Nonetheless, the group retained its executive handling operation at Paris Le Bourget, which it had acquired from Portuguese business aviation service company Air Luxor.

Most of BBA Aviation’s European growth has been in the UK. In July last year it paid $55 million for both the British and U.S. operations of Lynton Aviation. Lynton’s UK portfolio consists of the full-service FBO at London Luton Airport (formerly Magec Aviation), as well as aircraft maintenance, sales and management services at the London-area Blackbushe and Denham Airports.

Also last year, BBA acquired the CSE Aviation group at Oxford Airport, with its large flight-training school and aircraft maintenance and sales divisions. This included the CSE Citation Center at Bournemouth Airport on the south coast of England. It also purchased the Osprey Aviation FBO at Southampton Airport.

At Luton, the Signature Flight Support business already has plans for a new 30,000-sq-ft hangar as well as an extension to its terminal building. It is now contemplating further hangar development because of the sudden availability of more land immediately adjacent to the site.

The new development would accommodate a couple of bizliners and several other aircraft, and would provide significant additional ramp space between the new hangar and the Signature terminal. It might also accommodate some of Signature’s maintenance department, freeing up space in the company’s existing hangar. The company would like to have the new facilities open by next June.

Traffic handled by Signature Luton so far this year has increased by 5.6 percent from last year, and fuel sales have grown by 11 percent. Last year the FBO handled some 12,500 movements.

Jonathan Soper, managing director of Europe for Signature Flight Support and Charter & Management, said the company is not seeking to exactly replicate its U.S. brand of service in Europe, citing differences in infrastructure, culture and customer expectation. In fact, Signature doesn’t offer its Gold Cap aircraft cleaning service in Europe.

Signature’s European charter division is set to add a new Falcon 2000 to its fleet before year-end. This will join three Hawker 125s and a Falcon 900EX that it already manages for use in the charter market. It also manages a GIV and a Falcon 900EX.
Soper, who has come to Signature from the luxury hotel business, is eager to look “outside the box” to lure new customers to try business aviation. One option being explored is operating helicopters to and from private yachts. He added that fractional ownership is crucial to growth in its handling business, with NetJets already the main account at both the Luton and Paris bases.

BBA’s other aviation holdings in the UK are APU service firm H+S Aviation; wheels, brakes and landing gear repair operation APPH Aviation Services; and hydraulics design and manufacturing group APPH Ltd.