Flexjet Plans SPAC IPO With Billionaire Todd Boehly Valued At $3.1 Billion


Directional Aviation will combine its OneSky Flight unit, which includes fractional share operator Flexjet, jet card seller Sentient Jet, two on-demand charter brokers, aircraft management and maintenance, with Forbes 400 lister Todd Boehly’s ($5.3 billion, ranked 184) Horizon Acquisition Corporation II (NYSE: HZON) SPAC. The deal, announced this morning, is valued at $3.1 billion. It is expected to close in the second quarter of 2023, after which the company will trade on the New York Stock Exchange under the FXJ ticker.

News broke last night after the private jet company sent an email to customers announcing the plan to go public.

It will bring a second pure-play private aviation flight provider to market following Wheels Up’s SPAC in July 2021. While Wheels Up enjoyed record sales, its stock price has been pummeled from the initial $10 mark to as low as $1.12 as losses mounted and investors soured on special purpose acquisition companies.

However, Directional principal Kenn Ricci, who will serve as chairman of Flexjet, Inc., says there are fundamental differences, the biggest being that while Wheels Up is still losing money, Flexjet is profitable.

According to a presentation to investors, Flexjet revenues grew from $1.34 billion before the pandemic to $1.72 billion last year and are projected to reach $2.3 billion this year. Over that time, EBITDA has risen from $97 million in 2019 to $184 billion in 2021, with a forecast of $288 million in 2022.

While both Flexjet and Wheels Up have subscription models, Ricci says Flexjet’s focus on fractional ownership is stickier with share and lease customers who sign up for five years at a time. Sentient, like Wheels Up, offers jet card subscriptions, which provide guaranteed availability to private jets at contracted hourly rates, but only require customers to commit in increments of 25 hours.

Flexjet share customers must first dole out the money to buy their piece of an airplane, which starts at a 1/16th slice and represents 50 flight hours per year. They then pay a monthly management fee regardless of how much they fly, and an occupied hourly rate, plus a fuel variable, which covers the current price of jet fuel. In 2021, Sentient represented about $400 million of the group’s revenues. Wheels Up’s business, like Sentient, is primarily focused on memberships and fund deposits, which must be renewed annually.

However, as jet card companies have increased prices and added restrictions, more flyers are opting for fractional ownership. According to research by Private Jet Card Comparisons, the number of subscribers entering the longer fractional ownership and leases increased from 4.9% in 2021 to 15% this year. About 80% of respondents use jet cards, a number that remained unchanged, while 42.9% charter on a flight-by-flight basis.

FXAir in North America and PrivateFly in Europe sell on-demand charter, essentially giving publicly traded Flexjet “storefronts,” as Ricci refers to them, in everything from fractional ownership, where customers often fly 100 + hours per year to the occasional user.

The Flexjet deal includes Directional units Constant Aviation and Nextant Aerospace, which are being folded into the current OneSky unit by year’s end. Constant is particularly critical as it provides maintenance for private jets from over 20 locations and the capability to quickly fix aircraft that have mechanical issues at remote airports.

Ricci says while there has been a big focus on pilot recruitment and retention, fleet operators are coming to realize the benefits of having an in-house MRO. He says Constant is currently doing over $50 million in outside maintenance work in addition to servicing Flexjet aircraft. Constant, he says, has enough capacity to handle company needs for at least the next three years. Delays in getting planes fixed in a timely manner have hampered service delivery in the market.

Flexjet will have 254 aircraft by the end of the year with 142 super-midsize, large-cabin and ultra-long-range jets, which includes 18 of Gulfstream’s G650s. It has previously said it expects to keep growing by around 50 new airplanes annually.

Ricci says that since the pandemic, not only has the market of consumers flying privately expanded, but it is also attracting younger customers who are taking longer flights and traveling more internationally.

According to its presentation, Flexjet plans to continue expansion of its large cabin fleet as well as dedicated private terminals it currently operates in key markets like New York, Los Angeles, Dallas and Palm Beach.

It likely means more international expansion. Flexjet has been expanding in Europe since at least 2018 when it acquired U.K.-based PrivateFly and Italy-based Sirio, and in 2020 launched a Flexjet fractional ownership program. The Middle East could be next following the same strategy it used to cross the pond, first to support existing U.S. customers, and then to target the local market, says Ricci.

However, he rules out expanding beyond business aviation to target UHNW clients via villas and yacht rentals, part of the Wheels Up plan.

Ricci tells Forbes the decision to become a public company is a reversal in his thinking and was cemented by wanting access to more capital to accelerate growth.

He says that before this move, Directional had the capacity for deals up to around $300 million. However, he wants to be positioned to take advantage of organic and external market opportunities.

“There’s this huge consolidation…There’s a tremendous amount of capital coming into our business and it’s getting deployed,” Ricci says, noting 92 private equity investments into business aviation providers over the past five years.

Rival Vista Global has plucked up operators XOJet, Jet Edge, Red Wing Aviation, Air Hamburg and Talon Air, plus brokers JetSmarter and Apollo Jets over the past four years. Wheels Up has acquired Delta Private Jets, Gama Aviation Signature, Mountain Aviation, TMC Jets, Air Partner and others as part of a similar M&A spree.

The decision to pursue an IPO came earlier this year after Ricci decided “capital is becoming our competition…whether it is well or poorly deployed.”

He says the SPAC route is less costly than a traditional IPO and doesn’t provide the same constraints as a direct private equity investment. During a series of discussions that ran through the summer, management also decided to eschew interest in acquiring OneSky outright.

Ricci’s thoughts about the public markets changed after leading Zanite Corporation’s SPAC merger to spin-off eVTOL manufacturer Eve from parent Embraer.

“I think SPACs got a bad reputation because a lot of them were doing pre-revenue funding. When the market slows down, people don’t want to invest in pre-revenue,” Ricci says.

Going public, he notes, provides opportunities to reward employees with stock. He says Flexjet fractional customers are supportive of the move. During conversations under NDA to brief them on today’s announcement, Ricci says several said they would have been interested in investing directly.

Before Zanite, he says being publicly traded was not part of his vision. Speaking of Directional Partner Michael Rossi, who becomes CFO at Flexjet, Inc., Ricci says the two previously had a pact, “The first one who mentions an IPO gets shot. It wasn’t in our vocabulary. My perception that (being publicly traded) was all negative was turned around by Zanite…It went from shoot me if I mention it to let’s look at it.”

Michael Silvestro who serves as CEO of Flexjet and Andrew Collins, who is CEO of Sentient Jet, will serve as co-CEOs of the publicly traded company.



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