Directional Aviation Capital (DAC)–the Kenn Ricci-led company that owns Flight Options, Sentient Jet, Nextant Aerospace and Constant Aviation, among others–announced last month that it is buying fractional provider Flexjet from Bombardier for $185 million. The transaction is expected to close by year-end, pending U.S. government approvals. All Flexjet employees, including president Deanna White, will remain in place, Ricci said.
Bombardier president and CEO Pierre Beaudoin said the sale to DAC “marks the next step in Flexjet’s evolution…[and] will allow Bombardier to focus on its core business areas,” mainly aircraft manufacturing and product support. Ricci told AIN that the deal, announced on September 5, had been in the works for nearly a year, as Beaudoin wanted to make sure that Bombardier was selling the fractional provider to a stable and committed suitor. “Flexjet is a well run, profitable business known for its exceptional focus on owner experience and operational excellence and is a perfect complement to our current portfolio,” Ricci said.
Flexjet LLC, DAC’s shell company for the acquisition, also placed a $1.8 billion firm order for 85 Bombardier business jets–25 Learjet 75s, 30 Learjet 85s, 20 Challenger 350s and 10 Challenger 605s–along with options for 160 more worth another $3.4 billion. According to Ricci, the Learjet 75 order is for a not-yet-announced LXi version, which has a six-seat cabin configuration with a divan (a mockup of this interior will be on display this month at the NBAA Convention).
Overall, this $5.2 billion aircraft order is “more additions than replacements,” White told AIN, so Flexjet will be expanding its fleet. Aircraft deliveries will begin in July next year and run through 2018.
Two Separate Businesses
Ricci said that Flexjet LLC will operate separately from Flight Options, with the former providing a luxury “bespoke” fractional service flying newer aircraft (four years old or less) while the latter will be the “value” fractional operation with a fleet of mostly pre-owned or remanufactured jets. Even though it has more flight hours, he noted that a four-year-old fractional airplane still has a comparable resale value to a non-fractionally-owned one at that age. “So four years is the perfect time to remove the Flexjet airplanes from the fleet and put them up for sale,” Ricci said.
“Our vision for Flexjet is of a luxury brand with a young fleet, the latest technology, hand-crafted interiors and an unmatched owner experience,” he said. The interiors of the new aircraft will have some variations, breaking away from the “cookie cutter” standardized cabins typically found in fractional aircraft, he added.
Through its Flexjet, Flight Options and Sentient Jet brands, “Directional Aviation Capital’s portfolio companies will offer private air travelers a full range of choices as to how they fly, with programs ranging from fractional ownership, membership, leasing, jet cards and charter,” Ricci said. “Essentially, we’ll have two closed-fleet products–Flexjet and Flight Options–as well as two open-fleet options with Sentient charter and Sentient jet cards.” Combined, these businesses account for more than $1.1 billion in revenues and some 200,000 flight hours per year, he pointed out.
Looking at the bigger picture, Ricci said the consolidation of the fractional industry was “inevitable,” given that this market segment has matured and there has been excess capacity for several years. “This led to CitationAir exiting the fractional market and contributed to the recent downfall of Avantair,” he suggested.
While he admits that some excess capacity remains, Ricci is bullish about the fractional industry in the near and longer terms. In fact, he sees an opportunity in the ultra-long-range, large-cabin fractional market and told AIN that Flexjet LLC will likely be announcing a follow-on order in this segment by year-end. Flexjet currently does not have any ultra-long-range jets on strength. According to White, any such future orders could be with OEMs other than Bombardier, so while Globals are a candidate to fill this requirement, so too are contenders from Gulfstream and Dassault. “We’re under no contractual obligation to have an all-Bombardier fleet,” she said.
Ricci’s focus is now on ensuring the smooth transition of Flexjet from Bombardier to Directional Aviation. “The goal is for Flexjet customers not even to notice that there has been a change in ownership,” he said. “I’m used to buying distressed properties, but Flexjet has been profitable and frankly there’s nothing really to fix. So it’s steady as she goes.”
Meanwhile, Bombardier is selling its 49-percent share in Jet Solutions–its Dallas-based partner and the Part 135 certificate that has allowed the Canadian aircraft manufacturer to operate a fractional in the U.S. without violating foreign-ownership rules–to Dennis Keith. White said that Jet Solutions will still operate Flexjet aircraft after the acquisition, “but this will be reviewed after a six-month transition is completed.”