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Rebounding private flights fuel M&A interest in corporate jet services providers

Credit: REUTERS/DAVID BECKER

As U.S. business aviation traffic rebounds to pre-pandemic levels, a niche, fragmented industry providing services ranging from hangars to fueling is drawing interest from private equity funds and infrastructure investors.

By Allison Lampert and Maiya Keidan

April 9 (Reuters) - As U.S. business aviation traffic rebounds to pre-pandemic levels, a niche, fragmented industry providing services ranging from hangars to fueling is drawing interest from private equity funds and infrastructure investors.

Fixed base operators, or FBOs, play a key role in keeping private jets flying, offering services like hangars and fueling, and some buyers are betting the revival in flights could spill over into allied industries.

While business jet orders and deliveries dropped in 2020, private flights, which carry smaller groups and promise wealthy passengers less risk of exposure to the coronavirus, have generally fared better than commercial. That is underpinning investor interest in FBOs.

The sector recently made headlines when Gatwick Airport owner Global Infrastructure Partners joined forces with Blackstone BX.N and Bill Gates' investment vehicle to make a $4.73 billion offer for Signature Aviation SIGSI.L, the largest private jet services firm.

There are other deals brewing too. Macquarie Infrastructure Corp MIC.N has said it is seeking buyers for Atlantic Aviation, the second-largest FBO network, for a deal by year's end.

Most of the deals are smaller in scope, with networks growing one site at a time.

FBO network operator Luxaviation Group, which added a site in Miami in March and has plans for another location in New York, is seeing investor interest even as it eyes acquisitions.

"We currently see some interests from private equity firms in our activity and we are carefully assessing our best way forward to expand our FBO business especially in the USA," Luxaviation Chief Executive Patrick Hansen said by email.

"Raising capital is part of such plans and so it is good to see some transactions like Signature that draws attention to this sector."

GROWTH PLANS

Airlines and corporate plane operators cut flights as demand plunged due to the pandemic last year. But with U.S. airlines resuming pilot hiring and corporate charters expecting a recovery in summer travel due to vaccinations, FBO operators are dusting off their growth plans.

Florida-based Sheltair Aviation Services plans to add to its 24 locations, said spokesman David Buritica.

While business aviation investments are too small to track, Refinitiv data show airline deal volumes recovered to $5.85 billion in the first three months of 2021 after hitting a more-than 10-year low of $60.7 million in the first quarter of 2020.

March business aviation flights in the United States, the largest market for corporate aircraft, surpassed 2019 traffic for the fourth consecutive week, according to recent data from Flightaware.

"The pandemic has unlocked elevated demand for business jets from customers looking for safer and more reliable means of air travel in the current environment," RBC analyst Walter Spracklin said in a note this week on Canadian business jet maker Bombardier BBDb.TO.

Independently owned Meridian, which has FBOs located near New York City and San Francisco, gets "inquiries all the time as to whether or not we would consider selling," said a spokesman, who insisted the sites are not for sale.

Ehsan Monfared, legal counsel at Canada's YYZ Law firm, said he is seeing more cases of private equity investing in aircraft management companies.

"I do get the sense that there is interest in investing further," said Monfared, who expects to see more consolidation in the industry.

(Reporting by Allison Lampert in Montreal and Maiya Keidan in Toronto; Editing by Denny Thomas and Dan Grebler)

((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters Messaging: allison.lampert.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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