The strong rebound in the private jet charter market is set to attract more investment and spur additional mergers and acquisitions. That’s the take of Balmoral Advisors, a Chicago-based investment bank specializing in middle-market transactions.
Brooks Crenshaw, managing director of the firm, says interest in Part 135 charter operators is being spurred as affluent consumer flock to private aviation to minimize COVID-19 exposure.
In a video posted to Vimeo, first reported by Aviation International News, a trade publication, he says both private equity and family offices will find plenty of opportunities due to the industry’s fragmented nature.
While American Airlines, United Airlines, Delta Air Lines, and Southwest Airlines hold a 69% share of the U.S. airline travel market, the 25 largest charter operators combined control just 35% of their segment.
Crenshaw points out that the market was already frothing before the COVID-19 pandemic.
Delta Air Lines maintains a 25% stake in the company, valuing it at $234 million, nearly twice its 9% interest in Air France-KLM Group, which like other airline groups, has seen its share price battered by the coronavirus pandemic.
Other significant deals have included Vista Global Holding’s purchase of XOJET Aviation in 2019 and JetSmarter last year.
Earlier this year, Jet Edge bought JetSelect Aviation, and FlyExclusive picked up Sky Night. Fast-growing Jet Linx Aviation has purchased the management and charter arms of Meridian and Elliott Aviation. The deals made the Omaha-based management company and jet card seller a major player at Teterboro Airport, before the pandemic, the nation’s busiest private aviation airport. It also enabled it to open its 19th city with a base in Minneapolis.
Directional Aviation’s OneSky Flight acquired U.K.-based broker PrivateFly in 2019 and earlier this year launched FXAIR as a “premium” broker here in the U.S. Its principal, Kenn Ricci, was recently tied to a SPAC that is seeking to raise $100 million for aviation-related investments. However, its focus is thought to be on more futuristic concepts.
Surf Air, which offers shared flights and earlier this year acquired charter platform BlackBird, also said it plans to go public via a SPAC.
Crenshaw says smaller companies can use the investment to grow, gaining new technology, expanding retail brokerages, and launching jet card programs.
Kinston, North Carolina-based FlyExclusive, which has grown its fleet to around 60 aircraft, launched its first membership program earlier this year. Previously, it had focused mainly on selling via third-party brokers.
The Balmoral pitch for the market also references McKinsey’s recent study showing a 10-fold growth opportunity for private aviation. The report estimated over one million households and businesses in the U.S. have the means to access private aviation.
The most recent data from both Argus and WingX Advance suggest the charter market is continuing to lead the industry’s recovery.
After seeing flights drop by 67% in April, Part 135 charters were down just 9% in October. That compares to aircraft used exclusively by their owners, where flights were still 17% behind 2019 levels.
Fractional fleet operators also saw a healthy recovery. After an 80% drop in April, last month their flying was just 11% below last year’s levels for the same period.
WingX Advance data shows globally worldwide private charters were just 6% off of 2019 levels in October and fractional flights were down 8%.
There also appears to be plenty of opportunity for more flights with the existing fleet. JSSI reports charter jets flew an average of 22.5 hours per month during the last quarter. Airlines often get as much as 10 hours per day from an airplane. Of course, the Part 135 data compares to just 12.5 flight hours per aircraft per month for Part 91 types.
So far, one player that has been on the sidelines is the industry’s largest operator, Berkshire Hathaway’s NetJets, which already has a fleet of over 700 private jets, more than twice its closest competitor.
In the blue skies pitch, Crenshaw concludes by telling would-be investors, “Consolidation has the potential for a smooth landing on a longer runway in an active industry.”