The influx of investment capital into the business aviation market has caused major changes to the industry, Directional Aviation principal Kenn Ricci said yesterday at Corporate Jet Investor Miami. According to Ricci, the amount of private aircraft available for nonscheduled commercial operations has increased by approximately 25 percent since 2016, but the amount of operators has begun to decline.
At the same time, the average fleet size per operator grew from 11.4 to 15.7 aircraft and the number of operators with more than 80 aircraft climbed from two in 2017 to seven today. In fact, the top five operators—NetJets, Flexjet, Vista Jet, Wheels Up, and Jet Linx—now control more than a third of the private jet fleet due to merger and acquisition activity, as well as organic growth.
That growth has been spurred by significant capital deployment in the industry, Ricci said. Since 2017, there have been 92 private aviation operating company transactions. As examples, he cited the recent acquisitions that allowed Wheels Up to add 233 aircraft to its fleet and VistaJet’s purchases that increased its own fleet by 225 airplanes.
As a result, Ricci said larger operators can now compete better with airlines to attract and retain pilots and offer stability even as many corporate flight department vacancies go unfilled. In fact, he sees further declines in the utility of corporate flight departments, which are in some cases tied to corporate structure in terms of the salaries they can offer flight crews. As well, with the trend of corporate flight activity moving to a lower profile due to “flight shaming” concerns, commercial fleet operators offer the benefit of anonymity.
Many of the pilots recruited by the large business jet operators come from commuter airlines or smaller Part 135 operators. “That then trickles down and creates a challenge for the smaller operators as to where they get their pilots from and that then exacerbates the problem, because the larger operators continue to grow their fleet,” he said.
Ricci predicts the economies of scale leverage enjoyed by the large operators will continue to put pressure on the smaller operators.
“This huge influx of capital expanded infrastructure, it has expanded maintenance capacity, and it has provoked and instilled the beginnings of these large fleet operations,” he noted. Ricci cited several investments of $400 million or more by private equity in the business aviation market over the past several years, involving not only fleet operations but infrastructure as well.
Included are the $4.7 billion deal for Signature Aviation, $3.47 million purchase of Atlantic Aviation, and $1.197 billion sale of Tac Air. In addition, the aircraft OEMs have pumped “tremendous” internal capital into their maintenance networks to increase capacity.