October 23, 2013
Flexjet, which just increased its order for Bombardier business jets to up to $5.6 billion in Learjet 85s and Challengers, next will consider adding a large, long-range aircraft to its fleet. That aircraft, though, may or may not be a Bombardier product.
Speaking to ShowNews here, Flexjet President Deanna White says the pending sale to Directional Aviation Capital is providing an opportunity for Flexjet to expand its fleet with fresh capital investments. Directional and Bombardier on Sept. 5 announced a deal under which Directional would buy Flexjet for $185 million and in return buy up to 245 Bombardier aircraft. The sale of Flexjet has not closed yet; that’s due to happen later this year, assuming regulatory clearances.
White says customer reaction to the sale has mainly been wanting to ensure nothing will change. But her response is: “We want to evolve forward,” and Directional wants to see that happen. This includes looking at new programs to offer the customer base, as well as new fleet decisions.
While Flexjet plans to continue to cater to a domestic customer base, its customers increasingly want to travel internationally. This is driving a requirement for larger and longer-range aircraft, White says. She acknowledges that once the sale is finalized, Flexjet would no longer be required to buy a Bombardier-only fleet, and aircraft from other manufacturers could come under consideration.
At the same time, White says that Flexjet expects Bombardier “to remain our largest and most strategic partnership.” The fractional operator will still be Bombardier’s largest customer, she adds. A decision on a new airplane likely would come next year.
Flexjet chose to up its order to 265 so soon after announcing the original deal after the Learjet 85 received a strong response from recent tours, she says. The company has sold 68 shares so far of the midsize business jet, which should complete its first flight in the next few months.
The new aircraft will help Flexjet expand its fleet, something that hasn’t happened since the downturn, and bring down the average age of the aircraft – already one of the youngest in the industry, at six years – to four years. Before the downturn, Flexjet maintained its fleet at an average age of four years, but it crept up over the past several years.
As part of the growth, the company has been hiring pilots and seeing share sales and card sales rise. While the percentage of fractional sales have gone up more than jet card and lease sales, White has seen a continual shift to jet card and lease business.
Before the downturn, jet cards and leases accounted for 15% of its business. Now that’s about 30%, and White believes it will eventually become half of its business. This means a shift in Flexjet’s fleet, from primarily owned by fractional shareholders to a more even mix of shareholder owned and Flexjet owned.
This comes as financing fractional shares can still be difficult. White notes financing is more complex when it comes to owning a fraction of an asset. “Only a few organizations will finance that,” she says, but customers still need to fly and look at other options.