Maintain it and they will come
The last few years have seen bucketloads of money invested in aviation technology companies offering to disrupt business aviation.
But there are also lots of opportunities in the less-fashionable, less-glamorous but critical maintenance market.
As well as Gama Aviation’s capital raise last week, private-equity firm New Heritage Capital has bought a minority stake in Flying Colours, the privately-owned maintenance and modification company. You do not get rich quick maintaining aircraft. It requires significant investment, great people and a lot of regulation before you can even start looking for customers. It is also a competitive market. But good returns can be earned with commitment.
The signs are particularly good now. The deadline for US-flying aircraft to be equipped with advanced ADS-B avionics is in less than two years. At Corporate Jet Investor Miami last year Aaron Hilkeman, president of Duncan Aviation, estimated that 40% of the US fleet is not on line to hit this. Utilisation – the hours that aircraft fly – is also rising and this is, of course, a big driver of maintenance.
Argus TRAQPak’s 2017 Business Aviation Aircraft Activity Review shows that in 2017 flight hours were 3.02 million, 3.9% up on the 2.9 million hours flown in 2016.. This is the highest growth rate since 2014 and the most hours flown since 2008. Jet Support Services, Inc. (JSSI), the leading independent provider of maintenance support programmes, says that average flight hours in the fourth quarter of 2017 were at their highest levels in a decade.
Textron says that this utilisation drive meant that its services revenue was 11% higher in the fourth quarter of 2017 compared to the same period in 2016.
Other manufacturers and independent maintenance shops also had strong years. Gulfstream had record sales and profits for its service business in 2017.
Flying Colours wants to use the cash it has raised to grow its operations – including building new hangars and offering new services. It also wants to acquire other businesses. This all makes sense. But lots of other people want to buy maintenance businesses too.
Have a great weekend,
NOTE: The below originally appeared as the editorial in our November 17 One Minute Week newsletter. To find out more, and sign up for free, please click here.