Gama Aviation set to double in size over the next two years

Gama Aviation has told investors that it will double the size of its business in the next two years. The global business aviation company announced the target as it realised strong interim results for the first six months of 2016.

Revenue rose 13.3% to $209.8 million giving Gama Aviation an adjusted profit before tax of $9.6 million.

Gama now manages 153 aircraft – up from 139 in June 2015. The company had a gross profit margin of 13.3%. This was down 3% from June 2015 because most of the growth came from lower margin aircraft operations – including Gama’s contract with Wheels Up.

“We have delivered a solid set of results in challenging markets, demonstrating our business model and the benefits of our geographic diversity” said Marwan Khalek, CEO of Gama Aviation. “We are on track to grow our business in a fragmented market and will double the scale of the business within two years.”

Gama will need to acquire some other business to do this, but Khalek stresses that the company will only invest if companies add to shareholder value. “We have no interest in just making acquisitions for the sake of acquiring things,” says Khalek. “We will only buy at the right price, where there is a strategic fit and where putting one plus one together creates more than two. We are not obsessed with scale for the sake of it.”

Gama grew strongly in the US in the sixth months up to June 30. Sales for the aircraft operating business rose to $109.8 thousand – up from $76.2 thousand in the same six months of 2015. Gama managed 105 aircraft at the end of June 2016  in the US – compared with 78 aircraft in June 2015. It will add at least another 30 Wheels Up aircraft by the end of 2018. The air business had an adjusted EBITDA of 2.4%. The company now has nine maintenance bases in the US, with ground revenues flat at $6.1 million, but with a 16.2% EBITDA.

“Aircraft operations may not give the best yields, but it is important to note that we are making money from them in this market which is different to some of our competitors,” says Khalek. “Air is not a loss leader.”

Khalek says that operating aircraft also acts as a shop front for the rest of Gama’s businesses.

European revenues fell 16.5% to $74.2 million because Gama cut several African contracts that were originally agreed by Hangar8. Although these were profitable, they were being managed from Europe and were also taking up a lot of management time. Although revenue was down, the European EBITDA rose 11.7% at adjusted currencies to 1.7%.

Gama’s Middle Eastern business broke even despite a 15.1% fall in aircraft operations. The maintenance business was up 40%. The Asian business now has three aircraft and contributed $8. 5 million in revenues.