September 05, 2013
The fractional aircraft ownership industry is continuing to reshape with the decision by Bombardier to sell its Flexjet activities to Flight Options parent Directional Aviation Capital in a deal that comes with a new order for up to 245 Bombardier business aircraft valued at $5.2 billion.
The sale, subject to regulatory approvals and other conditions, is expected to close by year’s end.
Directional is paying just $185 million for the Flexjet assets, but is agreeing to place firm orders for 85 Learjet and Challenger aircraft valued at $1.8 billion and options for an order of another 160. The firm orders comprise 25 Learjet 75s, 30 Learjet 85s, 20 Challenger 350s and 10 Challenger 605s. Deliveries are expected to begin in 2014 and continue through 2018.
Also as part of the sale, Bombardier is selling its 49% stake in Flexjet partner Jet Solutions, which held the Part 135 certificate and contracted to provide charter flights for Flexjet. The 51% stakeholders of Jet Solutions, including President Dennis Keith, are buying the remaining portion of their company, but will maintain their strategic relationship with Flexjet, says Flexjet President Deanna White.
Directional formed a new company, Flexjet LLC, to make the acquisition. Flexjet will be added to the Directional portfolio that not only includes fractional operator Flight Options, but Sentient Jet cards and Sentient Jet Charter.
The acquisition would provide a boost to Flexjet’s fleet, which has held steady at about 80 aircraft in recent years. Flexjet has slowly added new aircraft to the fleet, but for replacement only. Flexjet this year has begun to return to growth mode, with sales growing 96% in the first half and fractional sales alone increasing 112%. Flexjet also had begun to expand its pilot base, which is currently at about 300. But the company had no plans to take delivery of new aircraft until next year, and the additions next year were much less ambitious than the most recent order.
The sale of Flexjet’s activities does not come as a complete surprise – Bombardier has been rumored for some time to have been shopping the fractional ownership operator. Those rumors heightened after the manufacturer in June 2012 announced an agreement with rival NetJets to sell a fleet of up to 275 Challengers, pitting NetJets and Bombardier’s own fractional operation in head-to-head competition. Flexjet executives responded that the sale made good business sense for Bombardier, which would translate into a stronger overall company. They also said Flexjet played an important role because it served as a venue to introduce new Bombardier products into the marketplace.
Directional was among those long believed to have had an eye on Flexjet, and questions surfaced a year ago about a potential sale. But at the time, Directional had just acquired Sentient, and Directional Chairman Kenn Ricci had said, “We still have a lot to digest with the Sentient acquisition.”
Bombardier calls the sale to Directional “the next step in Flexjet’s evolution,” maintaining that the 18-year-old fractional ownership provider has developed into a strong, profitable business. “The sale of Flexjet’s activities is a unique business opportunity that will allow Bombardier to focus on its core business areas,” adds Bombardier President and CEO Pierre Beaudoin. “I am confident that under its new ownership Flexjet will pursue its growth and diversification, continue to offer an outstanding experience to owners and customers, and will expand its brand globally.”