Smart money returns to business aviation
Entrepreneurs like Vistajet’s Thomas Flohr are betting their on money on the chance that the business jet market will turn around very soon.
Great news in Europe this month, as the number of business aviation movements increased in August for the first time in 22 months. The report was quickly tweeted by the European Business Aviation Association. For those of you who missed it, traffic was up by massive 0.2 per cent or 122 movements!
— EBAA (@EBAAorg) September 18, 2013
OK, this is nothing to celebrate. We still need confidence to return to business aviation users. But if you are looking for early signs of green shoots, it is worth considering new investment coming into the industry. In the last few weeks we have had the launch of Wheels Up, the acquisition of Flexjet by Directional Capital and VistaJet launching in the US. Clearly, successful entrepreneurs think things are changing.
Wheels Up is rumoured to be sourcing $50 million of equity and $60 million of debt. If it achieves this – and it looks likely that it will – it will be a significant amount for an industry that has still not recovered. Although cynics will argue that raising money is the easy bit – as DayJet, Pogo and Jet Bird showed – these were businesses that were conceived at the top of the market and are not comparable.
Directional Capital has made several investments during the downturn (and CFO Mike Rossi’s presentation at our Miami conference last week was definitely one of the highlights, coming just two days after the acquisition of Flexjet). But it is worth noting that Bombardier was not a distressed seller and felt that it would get good offers now.
Although it is only basing three aircraft in the US to start with, VistaJet’s investment in the US will be much larger. It clearly thinks it can become one of the few global brands in the industry that are not manufacturers.
Most significantly, Thomas Flohr is betting his own money on charter demand returning in the world’s largest market. That counts for more than any forecast.