Ricci Views Private Equity Capital as Industry Problem

“Private equity has found our industry in a bad way,” said Flexjet chairman Kenn Ricci, speaking yesterday morning in the keynote conversation at the opening session of NBAA’s Schedulers & Dispatchers Conference in Cleveland. “We have a lot of capital trying to find the next thing in our industry, and the result of that has been that innovation is getting stifled to some extent.”

Interviewed by NBAA president and CEO Ed Bolen at the standing-room-only event, Ohio-native Ricci did not hold back on his opinion that this cash influx is having a deleterious effect on the business aviation industry. “What’s happening in the maintenance business, they’re rolling up all the mom-and-pop shops,” he explained, adding that as a result of the consolidation, five-year projections suggest maintenance labor costs rising to more than $300 an hour. “So private equity made an investment in this maintenance business with the vision that the investment basis is to get to $300 an hour in maintenance.”

Ricci pointed to the longer times now associated with maintenance activities in many cases. “That’s because private equity big money has narrowed the funnel in the interest of profitability.” Even engine hourly costs have seen an impact, according to Ricci. “You look at the hourly rates that they’re charging now; this influx of private equity is raising the cost.”

On the FBO side, he discussed the recent phenomenon of the special event fees, which universally draw the ire of aircraft operators. “Everyone of us negotiated a contract that probably included [lavatory] service and parking and a fuel surcharge, and whatever it needed to be. But they then invented a category called event fees, and it wasn’t in our contract, so now that’s private equity; they came into that industry.”

As a plus for business aviation, Ricci credited the airlines in their post-Covid actions for pushing what he described as the “frugal wealthy”—those who could afford private aviation, but for whatever reason chose to avoid it—into trying private flights. “When Covid hit, they gave up the frugalness, and then once they did that, they didn’t go back, and we see that.”

That stickiness has resulted in a demographic shift in the industry. “We have a whole different class post-Covid," Ricci explained. “Our average owner is 10 years younger, so we’re getting people to buy in at a younger age.” As well, he noted that the line between aircraft leisure use and business use has blurred.