September 06, 2013
The acquisition of Flexjet assets by Flight Options owner Directional Aviation Capital will spur an evolution of both fractional ownership providers, with one positioned as the premium, high-end brand and the other selling a value proposition, company executives say.
Directional Aviation Capital on Sept. 5 announced plans to acquire Flexjet from Bombardier for $185 million and a commitment to place orders and options for up to 245 Bombardier business aircraft valued at $5.2 billion.
Under the plans, Dallas-based Flexjet will maintain its operations and branding independent of Cleveland-based Flight Options. While the two are competitors, Kenn Ricci, principal of Directional and Flight Options chairman, says the companies will position themselves as complementary operations, serving different clientele with different requirements.
The Flexjet acquisition originally stemmed from a desire to increase the Flight Options fleet, with a larger medium-sized or super midsized fleet, Ricci says. Directional and Flight Options executives had been negotiating with both Embraer and Bombardier over the potential acquisition of either a fleet Legacy 500s or Learjet 85s.
Ricci says, however, he was hesitant to acquire an aircraft that Bombardier was placing with its own fractional operation. That then led to discussions of a possible acquisition of the entire Flexjet operation, Ricci tells Aviation Week.
Bombardier has long been thought to have wanted to spin off Flexjet, and rumors of a potential sale heightened after the manufacturer began selling Challengers to rival fractional operator NetJets. Former Flexjet President Fred Reid had told Aviation Week that Bombardier had been pushing Flexjet to become a more independent operation, and said, “There was never a hard and fast rule that said Bombardier will only sell its planes in the fractional space … to Flexjet. Bombardier is first and foremost a manufacturer.”
Flexjet officials have also long maintained that operation was an important venue for Bombardier aircraft, helping to launch products and work out a service history on them. While Bombardier is collecting a relatively modest $185 million for Flexjet’s assets from Directional, it is maintaining that pipeline. Directional has stated an interest in maintaining its focus on Bombardier aircraft. And, that price is augmented with an important order that ensures a pipeline not only for the Challenger products, but the Learjet program – which has struggled during the economic downturn.
The firm order, which will begin delivery in 2014 and continue through 2018, includes 25 Learjet 75s, 30 Learjet 85s, 20 Challenger 350s and 10 Challenger 605s valued at $1.8 billion. Options include up to another 160 aircraft, raising the total potential value to $5.2 billion, with deliveries stretching through 2024.
That order not only will provide some replacement, but Flexjet President Deanna White says it includes a growth component. This is important for Flexjet, which has not grown since the downturn and remains a smaller version of the operation it was in 2008. The fleet has roughly maintained around the 80-aircraft mark, while new fractional business remained a tough sell. White says that with Directional’s background in operations, “It’s a great opportunity to take Flexjet to the next level.”