Wheels Up bidding for Air Partner
Kenny Dichter, the founder, chairman and CEO of Wheels Up, is permanently in what he calls “deal mode”. Last week he put forward a bid for Air Partner the charter broker listed on the London Stock Exchange.
The offer is not a big surprise. Wheels Up has been in talks with other European brokers and operators for more than a year. It also fits its so-called asset-light strategy where it plans to sell third party charter rather than having to own or operate aircraft itself.
“This acquisition will allow us to offer existing and future customers even more compelling and seamless options for private travel, expand the reach of our marketplace in key markets around the world and add important operational capabilities to our network,” said Dichter in a statement. “We look forward to sharing more details on the transaction and our go-to-market plans after the deal formally closes.”
If its bid is successful, it will give Wheels Up a European business jet charter beachhead (and some very good US customers). It will also move Wheels Up into larger commercial aircraft, freight and consulting (Air Partner owns Baines Simmons which outsources the technical inspections for the Isle of Man Aircraft Registry).
Air Partner’s group charter business – which ranges from last minute cover for airlines with technical problems to government evacuations and conference travel – is just as important to the business as private jets. In its half year results for the six months up to July 2021 Air Partner made a group charter gross profit of £5m (down from a record £12.3m due to covid evacuation flights) compared with £5.9m from private jets (up from £4.6m).
Wheels Up, advised by Jefferies, is offering £1.25 per share – a 50% premium on what it was trading at. This works out at £84.8m ($107m) for a company that made a profit before tax of £11.6m. It is hard to see another industry bidder choosing to beat this.
Air Partner’s financial year runs from February to January. Unlike many aviation companies it had a phenomenal 2021 financial year helped by government repatriation and cargo flights. Air Partner made an adjusted profit before tax of £11.6m – compared with £4.2m in 2020; and £5.8m in both 2018 and 2019.
Investors seem to have missed this performance. The charter broker has raised its profit guidance for this financial year six times since June. Despite this its share price has hardly risen in the last year – trading between £0.65 and £0.99. It was at £0.8 before the Wheels Up offer.
It is no secret that Wheels Up has been looking at buying operators in Europe, but Air Partner is a lot simpler acquisition. There are fewer regulatory issues (particularly foreign ownership) and integration should be simpler.
Buying a brokerage is not original. Directional Aviation acquired jet card company Sentient Jet in 2012 and PrivateFly in 2018. Vista Group bought US broker Apollo Jet in 2021 and JetSmarter in 2019. Rivals to Wheels Up may also look at privately owned Air Charter Service (ACS) – Air Partner’s biggest competitor. ACS did consider merging with operator Hanger8 in 2014 but the deal fell through (Hangar8 was later acquired by Gama Aviation).
The biggest risk for anyone buying a charter broker is that individual brokers can always leave with their clients. But Air Partner has strong systems and close customer relationships. “Air Partner has a lot of loyal old-money individuals, companies and government contracts that are sticky,” says one charter industry insider. “As a broker they tend to be more focused on customer service than price.”
Air Partner was founded as a flight school in 1961 and started broking charter in 1967. It has extremely strong relationships with operators and worked with more than 550 in 2020. These should also benefit Wheels Up’s third-party charter business.
“Among Quorem’s operator users Air Partner consistently presents the highest enquiry to booking ratio of any European broker,” says Phil Brockwell, founder of Quorem the charter optimisation company. “This, combined with higher-than-average transaction values, make Air Partner a firm favourite with aircraft operators.”
The Air Partner acquisition gives Wheels Up more customers in Europe – a significant business jet market. But it does not solve its biggest problem which is lack of aircraft supply in North America. It hopes technology, allowing operators and owners to free up aircraft, will solve this.
If the bid is successful Air Partner will be Wheels Up’s fifth acquisition since 2019. There are more on the way.
Top: Kenny Dichter said the acquisition will enable Wheels UP to offer existing and future customers “even more compelling and seamless options for private travel”.