Sentient restructures as two separate businesses

 - August 29, 2008, 9:40 AM

The day before Sentient Jet Holdings chairman and CEO Gregory Campbell announced a restructuring of the company into two distinct entities, one of which will be sold, the FAA’s Eastern regional counsel’s office slapped Sentient and company executives with subpoenas seeking documents. At press time, it was not known if the August 12 subpoenas had anything to do with Sentient’s purchase late last year of the assets of TAG Aviation USA (including assets belonging to AMI Jet Charter). A Sentient official told AIN that “we intend to comply fully” with the FAA subpoenas. Former TAG Aviation USA owner TAG Holding has no equity position in Sentient Jet Holdings.

For its part, the FAA refused to disclose any information about the subpoenas. “It’s FAA policy neither to confirm nor deny we’re conducting any investigation,” an agency spokesman told AIN.

The merger of JetDirect and Sentient Jet Holdings in April 2007 was supposed to yield a charter/management company large enough to compete with slow-growing fractional share operators. “This merger,” said then-JetDirect CEO Campbell, “creates a national company capable of providing superior service and safety without the capital risk inherent in fractional ownership.” That ambitious effort has now unraveled, with the announcement on August 13 that Sentient Jet Holdings, the resulting combined company, is splitting back into two standalone companies along the same basic lines as the former Sentient Jet and JetDirect.

One part of the split will consist of the charter and aircraft management operations, JetCorp main- tenance provider and three FBOs. The other portion retains the Sentient name and includes the jet membership card, charter brokerage and fuel management businesses, all of which are being sold to Macquarie Global Opportunities Partners (MGOP), pending U.S. Department of Justice approval. Another Macquarie entity, Macquarie Infrastructure, owns 72 Atlantic Aviation FBOs. And MGOP late last year announced plans to purchase Universal Weather & Aviation but later pulled out of the deal after problems surfaced with Feras, which is partially owned by Universal.

Former Sentient Chief Will Lead New Company
The sale of the new Sentient to MGOP was expected to be completed late last month. The new Sentient will be led by Steven Hankin, who left his job as CEO of Sentient Jet Holdings in early July amid revelations that the company had negotiated new supplies of funding from its financial backers to help solve a cash-flow problem. Then-Sentient chairman Campbell took over as CEO after Hankin’s departure.

The Sentient jet card business has 3,500 members and along with the charter brokerage and fuel management operations, the companies comprising the new Sentient business each have “a strong track record of profitable growth,” according to Michael Cook, MGOP senior managing director.

The reason for restructuring Sentient Jet Holdings, Campbell said, is that “the businesses have different operating characteristics. We have one highly regulated business, which requires a certain amount of attention and complexity, and the other is more of a brokerage business, which uses a vast network of aircraft to supply the demand, and they are different in the operational nature of the business.” Campbell wouldn’t say how many of the flights generated by the brokerage side of the business had been flown by the operations side, “but it was a meaningful percentage of the business and it will continue to be in the future. It’ll be a strong relationship.”

Charter and Management Division
The new non-Sentient remains of the Sentient Jet Holdings restructuring will continue growing, Campbell said, and will be rebranded and led by former TAG Aviation USA president and CEO Jake Cartwright, who will be president and CEO of the new company.

The fleet currently stands at nearly 300 managed aircraft, with more than 200 on various charter certificates that are being consolidated into one. “We’ve had substantial growth in the managed fleet this year,” Campbell said. “We still have the largest managed fleet in the world and tremendous advantages we can offer our aircraft owners in terms of purchasing, scale and economics. We expect to continue to expand the business pretty dramatically, and that growth will be almost entirely internal. We think that with the huge platform of operations we don’t really need to do any material acquisitions. At least for the near term we’re focused primarily on the U.S. market.”

Merger-related issues with various acquired companies’ accounting systems were responsible for Sentient’s cash-flow predicament, according to Campbell. A number of vendors that sold charter to Sentient did not get paid for their services.

The new funding was supposed to help alleviate that cash-flow deficit, but as late as the middle of last month, a charter operator contacted AIN to report that it was still waiting for payment of $200,000 worth of trips it had flown for Sentient. “We cut them off three weeks ago,” the operator told AIN, “when they quit talking to us and quit paying. Hopefully they’re getting the funding they say they are.”

Another operator reiterated that no money has come his way and that he hopes that the sale of the Sentient operations to MGOP will enable payment of overdue bills such as the $300,000 owed his company.

“We’re on track to improve the back-office operations,” said Campbell, “and we did complete our round of funding from the investors.” He also expressed surprise that these operators complained that no one from Sentient would respond to their phone calls. “We’ve been as open as we can,” he said, which includes providing his direct business and personal phone numbers. “There must be one or two out there that we haven’t properly reached,” he said.