Lower Heavy Jet Ops Hampers Signature's Revenue Growth

 - August 6, 2019, 12:11 PM

Signature Flight Support revenue overall slid 0.9 percent to $879.1 million in the first six months, reflecting lower fuel prices, negative foreign exchange movements, and a relatively flat market for business and general aviation (B&GA) movements, according to BBA Aviation, the FBO chain’s parent company.

In the U.S., business and general aviation movements inched up 0.3 percent in the first half, BBA Aviation noted, citing FAA data. While the overall revenue at Signature was down, its organic revenue was up 1 percent in the first six months, representing an “outperformance of 70 basis points,” BBA said.

Tempering the results, though, was a dip in heavy jet traffic in the Signature network, “which has limited our ability to outperform the overall U.S. B&GA market at our usual levels.”

BBA also pointed to uncertainty surrounding U.S. trade tariffs, Gulf tensions, and the slowdown in China as reducing discretionary flying, “which has been most notable in our charter segment.” But the company added that it still believes the U.S. represents a long-term growth market.

A 4.7 percent first-half dip in European movements also took a toll, BBA Aviation. “While Europe is a small part of Signature, this has clearly impacted overall performance, although encouragingly we saw a much-improved performance in June.” Signature’s profit slipped 2.6 percent in the first half to $156.4 million.

But, BBA Aviation said it remains "confident in Signature’s ability to deliver significant longer-term value creation across our enlarged network, supported by the commercial growth investments made during 2018 and the phased implementation of the strategic growth initiatives.”

“The first half of 2019 has been broadly in line with our expectations for BBA Aviation, with a solid Signature performance in a flat B&GA market,” said BBA Aviation CEO Mark Johnstone. “We are pleased to have advanced our new commercial initiatives in Signature including a successful fuel RFP and increasing the Epic fuel card penetration within the Signature owned network.”

He was bullish about the performance of its Ontic legacy parts specialist, which he said delivered a strong performance. Ontic saw revenues increase 28.2 percent overall with contributions from 2018 license acquisitions and Firstmark, and 8 percent growth organically, in part to strong growth of its GE license portfolios.

He noted the proposed sale of the unit to CVC for $1.365 billion, saying the agreement “represents a compelling transaction multiple which we believe fully recognizes the strategic value and strong growth track record for the business.”

Comments

Another, and probably primary, reason for the lack of growth is their outrageous pricing and average service. Many operators, myself included, frequently seek other providers or avoid airports where Signature is the sole provider. They need to start being competitive and stop being abusive if they want continued growth and business.

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