KKR bets big on biz av
If you want to see how private equity feels about business aviation, you just need to go to KKR’s website. Last week the global investment firm agreed to buy Atlantic Aviation from Macquarie Infrastructure Corporation for $4.5bn and, in a separate transaction, provide a $150m credit facility to Jet Edge.
The purchase of Atlantic Aviation, the second largest FBO chain, follows a bidding war for Signature Aviation at the start of 2021. Macquarie Infrastructure hopes to complete the sale by the end of the year. Jefferies advised KKR with Lazard and Evercore acting as advisers to Macquarie Infrastructure.
Jet Edge is using the cash to accelerate the growth of its managed floating charter fleet, which it is now branding as AdvantEdge. With AdvantEdge, owners agree to make their aircraft available for charter for a certain number of pre-arranged hours a year. If their needs change, they can also charter other aircraft from the fleet. “It is like AirBnB,” says Bill Papariella, CEO, Jet Edge. “Tell us when you are not using your aircraft and we will charter it.”
The AdvantEdge programme has three tiers. It starts with Edge 250+ where owners make their aircraft available for 14 weeks. Jet Edge then guarantees to sell more than 250 hours of charter. The next level is at 28 weeks and 500+ hours. Finally, there is the 52-week, 900- hour programme – Edge 900. “With Edge 900 we are writing cheques to owners each month,” says Papariella.
While the name is new, Jet Edge already has 68 aircraft enrolled in AdvantEdge (out of a total fleet of 88 aircraft) and has been experimenting with the model for several years. Papariella says it works because they have the infrastructure in place, a floating fleet (without owner approval), and because they have invested heavily in yield management and fleet optimisation. He says that picking the right aircraft types matters.
“You can definitely make money from charter, but you need to have the right model and right infrastructure,” says Papariella. “Most aircraft management is still antiquated.”
Jet Edge will use the KKR cash for technology, people and to support its guaranteed buy-back clause for aircraft sold into the AdvantEdge fleet. The company will also be growing its direct charter sales division, which sells the Reserve charter membership product. (Papariella stresses that they are keen to keep working with their key broker partners for the long-term).
“Our senior team sat down in April last year and said: ‘If we don’t do it now, when will we do it? Let’s go for it’,” says Papariella. “We decided to invest going into a down market to build market share. But then the boom came.”
Jet Edge already has another 12 aircraft lined up to join AdvantEdge.
These and other announced transactions deals by other private equity firms mean that 2021 will see record investment in business aviation of more than $10bn. This is more than double the record set in 2007.
Papariella believes the money being invested in business aviation will reshape the top operators. “Activity leads to both investment and innovation,” he says. “We are going to see a lot of consolidation and change this year and the crazy thing is we have not even seen business travel fully return yet.”
Last week was a busy one for KKR. The global investment firm agreed the purchase
of Atlantic Aviation (above). It also provided a $150m credit facility to Jet Edge.
Subscribe to our free newsletter
For more opinions from Corporate Jet Investor, subscribe to our One Minute Week newsletter.
