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Greetings!
"... FBO
bankruptcies are hitting a high-water mark.
At least two manufactures have spent into nine digits bringing out
airplanes that advance the state of the art, only to find their highly
promising products rejected by shrunken markets." "Industry inertia reflects the effect of
ailing national and international economies on a once booming industry." A friend recently wrote me with this quote
from an editorial by James Holahan in the 1991 NBAA Aviation
Convention News. Sound familiar?
As I write
this in mid September 2010, Cessna has just announced an additional layoff of
700. At the National Aviation Hall of
Fame dinner in July Cessna's CEO Jack Pelton, referring to the awful PR after
the auto CEO's landed their Gulfstreams in Washington, said, "We really took it on the
chin." Clay Jones, CEO of Rockwell
Collins said, "This made business aircraft a toxic asset." But then, as Bill Garvey reports, the mood changed. Pelton talked about the recovery and Jones
pointed out that Rockwell Collins had kept R&D investments high "because we
know that there will be a brighter day and with the right products in place when
it dawns our company will thrive." David
Sokol the new CEO of NetJets announced a first half profit of $114 million
after a $700 million loss the prior year.
And speaking of David Sokol, there was
a very interesting article on him in the August issue of Fortune
magazine, Warren
Buffett's Mr. Fix-It. The story
begins the day after Lehman Brothers collapsed in September 2008. Sokol noticed that Constellation Energy's
stock had collapsed. He called his boss,
Warren Buffett who told him to make a bid for Constellation. The deal, however, had to be done within 48
hours or Constellation would have to file for bankruptcy. Sokol boarded a Falcon 50EX and sped to Baltimore. He met with Constellation's
board and struck a deal that evening to buy the company for $4.7 billion, staving
off bankruptcy.
Within
weeks, before the acquisition was completed, Constellation's board received a
competing bid from Électricité de France for about a 30% premium. The board
liked the offer, and so did Sokol -- who walked away with a $1.2 billion breakup
fee. So you can understand why Sokol is
bullish on private aviation.
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Zenith Jet Business Jet Forecast
Predicts return of the Cessna Columbus  In
July Montreal-based Zenith Jet released one of the most comprehensive forecasts
on the business jet industry that I have read in a long time, the Business Aviation
10-Year Forecast (2010 -2019). By clicking on this link, you can read
or download and read the full report. Some of the highlights are the
prediction that Cessna will re-initiate the Columbus program with an entry-into-service date
of 2016. Zenith also predicts that Cessna will account for 35% of all
business jet deliveries, giving it the largest share of business jet unit
volume. In case you might think that Zenith is somehow connected to Cessna
or biased in that direction, note that several members of their senior
management team are former senior Bombardier executives.
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Macquarie Infrastructure
Company
Back From the Dead?
 Atlantic Aviation is a company I am very familiar
with. Five years ago The Aviation Group began
helping Macquarie assemble this group of 72
Atlantic Aviation FBOs. Recently George Fisher, a
financial writer, penned an article in Seeking
Alpha, an online financial newsletter.
The following are a few of the highlights from this article. "Macquarie Infrastructure (MIC - $14.50) is one of those
in-vogue infrastructure investment vehicles that were popular between 2004 and
2007, but subsequently crashed and burned. Much like trees reforest after a
fire, MIC is working its way back and is starting to gain investor attention
once again." "Atlantic Aviation (AA) is the most risky business
of the four [infrastructure investments]. AA operates 72 private jet facilities
[FBOs] at 68 airports, and is the sole provider at about 50% of the locations.
As the largest provider of ground services to business and personal jet
traffic, AA was hit pretty hard by the decrease in jet usage over the past few
years. Measured by monthly take-offs and landings, the market slumped from
October of '07 to February of '09. Encouragingly, the market has seen positive
growth since January of this year. As jet traffic increases with an economic
recovery, so should AA's performance." MIC
and Atlantic Aviation may be a good proxy for the FBO industry. |
A Quote Worth Remembering
The Need for Speed
 Business Jet Traveler magazine recently interviewed Mark Cuban, owner of the Dallas Mavericks BJT: "What would you say to business leaders who've stopped flying on business
jets because of the negative public perception?"
Cuban: "They have
to make their own decisions, but I just hope I compete with them. I get to work
while they get to stand in line at the airport.
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