Directional Aviation includes Flexjet, Sentient, FXAIR, PrivateFly, and more than a dozen private aviation B2B companies. Recently, its founder Kenn Ricci was the subject of an in-depth profile by Corporate Jet Investor. Here are the highlights…
Recently Corporate Jet Investor took a deep look at Kenn Ricci, the founder of Directional Aviation, home for a host of private aviation providers from consumer brands such as Flexjet, Sentient Jet, FXAIR, and PrivateFly to a host of B2B companies. Below is an excerpt of highlights reprinted with permission.
Directional Aviation’s history
- Ricci bought Corporate Wings, an operator, charter, and maintenance company, in 1981. Mike Rossi joined as the chief financial officer (CFO) in 1984, and the pair started acquiring fixed base operators (FBOs) or private jet terminals. Ricci flew a lot during this time – including for Governor Clinton’s presidential campaign. In fact, the campaign team leased an aircraft from Corporate Wings.
- In 1998, he launched Flight Options, a fractional operator that started with pre-owned aircraft and grew quickly, soon ordering new aircraft. Flight Options fleet was dominated by Beechcraft and Hawker aircraft, which Raytheon owned. In 2001 it merged with Raytheon Travel Air (and ordered $900 million of new Raytheon aircraft types). A few years later, Ricci offered to buy Raytheon out but was instead outbid and sold his stake.
- He has often said that selling Flight Options was a mistake, but the sale led to Directional Aviation Capital creation. In the early 2000s, private equity companies started looking at business aviation. He and Rossi were approached by several and decided to work with Allied Capital, which had ended up owning a chain of FBOs when a loan went bad. Directional took a 25% stake. Three years later, Macquarie bought it for more than $600m. In 2009 it was able to buy back Flight Options.
Directional Aviation today
- Directional Aviation now consists of around 13 companies (it depends on how you view each division). These employ more than 2,000 people and generate more than $1.5 billion in sales each year. They operate more than 175 business aircraft (and have more than 80 on order), making Directional the third-largest operator by flight hours (behind NetJets and Wheels Up). It ranks higher on profit.
On choosing investments
- “Directional is not a fund – we don’t look to make returns by selling,” says Ricci. It is happy to keep hold of profitable businesses but also sell when the price is right. It is happy to launch new businesses as well as acquire. This focus on growth is important to retain staff, says Ricci: “One of the biggest things we do is give executives the opportunity to invest alongside us.”
On managing Directional Aviation’s businesses
- Ricci says that Directional’s strength comes from the managers that run each business. “Every company has its own CEO,” he says. “We only get involved in three things: the strategic vision of the company – which can be based on monthly or weekly meetings depending on the size of the business – capital decisions; and executive compensation.”
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- Bonuses are based on the return on capital invested. “Mike Silvestro [CEO of Flexjet] can’t just buy a billion dollars of aircraft to grow revenues,” says Ricci. He says the company has a mid-teen hurdle rate.
On brand positioning
- Each business is run as a separate one. While there are support sister companies, Ricci stresses that each business needs to “swim in its own lane” and not compete. Flexjet does offer some jet card programs but only on specific aircraft models where Sentient Jet does not have cards. FXAIR, the new US brokerage business, does not compete with European-orientated PrivateFly.
On using the company fleet
- When Directional bought Sentient Jet in 2012, it was able to put Sentient customers on underused Flight Options aircraft (Ricci also attempted to buy Marquis Jet by purchasing its debt). The group used this ’keep-it-in-the-family’ strategy in 2020 by allowing FXAIR, Sentient and PrivateFly onto older Flexjet aircraft that are no longer flying under fractional arrangements.
On his SPAC, Zanite
- Zanite is looking to identify a private company worth more than $750 million. “As Directional, we typically have around $30m to invest in equity. With leverage, we can make that up to around $100 million or $150 million,” says Ricci. “There are private equity companies interested in several billion-dollar companies, but there is a gap between what we do and what the large funds are doing. That is why we have filed for a SPAC – that is the area we are targeting.”
Related: - PRIVATE AVIATION DEAL BOOK: Catalog of Mergers, Acquisitions, Launches, IPOs, Capital Raises and Bankruptcies by Private Jet Charter and Fractional Operators
- Zanite will not compete with existing Directional Companies, and Ricci is not looking at returning to FBOs.
On buying private jets
- In the past 40 years, Directional Aviation has ordered aircraft worth more than $10 billion at list price from Aerion, Bombardier, Embraer, and Gulfstream.
On private jet manufacturers
- Some are trying to dominate maintenance. It is something that frustrates Ricci. “Frankly, it really agitated me,” he says. “Some manufacturers expect you to pay millions for an aircraft and then charge you 10 times over for a part that they control. But this will hurt them in the long run.”
At the beginning of the pandemic
- “At the start of March, I was worried. I did wonder if this is could be the end of aviation as we know it,” says Ricci. “So, we took drastic action. Having been through four recessions we knew what we had to do.”
On the rebound
- Fractional Flexjet, broker and jet card company Sentient Jet and international on-demand broker PrivateFly and its North American on-demand counterpart FXAIR all saw a rush of new customers who decided they no longer wanted to fly on airlines.
You can read the entire article here.