Outside $$$ Finding FBOs

More and more, private equity firms are turning their attention and dollars to fixed base operations (FBOs), offering once family-owned and operated businesses an opportunity to move on.

Relatively speaking, aviation is a young industry. It's also an industry in transition. More and more, private equity firms are turning their attention and dollars to fixed base operations (FBOs), offering once family-owned and operated businesses an opportunity to move on, as some say. Both Jim Haynes, president, The Aviation Group, a consulting firm which works with private equity firms, and Blake Fish, president and CEO, Quantem FBO Services, LLC, a private equity firm, agree that this shift is a positive one for the industry.

Haynes is a former FBO owner and airport operator. "A lot of what we've done recently," he says "has been work for investment companies, primarily the private equity industry."

According to Haynes, there are a number of private equity firms which have made investments in the general aviation industry in recent years, including The Carlyle Group, Macquarie Bank, and CapStreet Group. "The most visible, because it's probably one of the largest private equity companies, is The Carlyle Group, which owns Piedmont-Hawthorne, Standard Aero, Associated Air Center, and most recently, they acquired Garrett Aviation from General Electric," says Haynes, who views this investment as a positive for the industry.

"I see the industry transitioning from the original companies which were family owned, extrepreneurial-owned companies, to companies that are institutionally owned and managed by professional managers."

Atlantic Aviation is one of the best examples of this, says Haynes. Atlantic was founded in the early days of aviation by the DuPont family. It was run by various family members until the late 1990s when Lake Mason purchased the company.

"At that point," says Haynes, "Atlantic was a troubled, dysfunctional company. There was employee unrest, they had no real focus on their business. The main thing that Lake Mason did is they brought in a team of professional managers... That team turned Atlantic around."

Atlantic was subsequently sold in two pieces, one to ABS Capital, a private equity firm, and the other to Dassault Falcon Jet.

ABS Capital made the decision to focus Atlantic on line services. "They sold off their charter, aircraft sales, and aircraft management business," explains Haynes. Eventually, Macquarie Bank purchased Atlantic Aviation, which is now part of its holdings. Macquarie Bank also owns AvPorts. Adds Haynes, "They have taken both of those companies and formed it into a publicly held company called Macquarie Infrastructure Company and that company is listed on the New York Stock Exchange."

Fish agrees that private equity investment is a positive for the industry. "It provides a lot of credibility to the industry," he says, "in that FBOs are thought of more as a financial business and not just an avocation." Fish, in conjunction with a financial partner, purchased Byerly Aviation in February 2005.

The Peoria, IL-based full-service FBO was an attractive acquisition, says Fish, because of its location, staff, and customer base. "It was just the right fit for us. And that's sort of where we're targeting our resources: family businesses that are now wanting to go to someone else's control."

Evolution of an Industry

The evolution of the entrepreneurial-owned, family owned businesses to a much larger business that is well-capitalized is the "history of business," says Haynes. "Some companies will always be small, family owned companies because they are in a market and that's the size of that market and they can't expand.

"I'm sure that 50 years ago at Teterboro Airport the businesses were probably fairly small. Seventy-five years ago Wilmington was a small airport, not a lot of activity. But as the size of the investment that's required to service planes as large as the BBJ, the Gulfstream V - there's a need for capital." Haynes adds that the FBO industry is a relatively young industry. He calls this shift the "natural evolution of things."

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