Jefferies’ Nick Fazioli on why Wall Street loves private jets, non-GAAP financial metrics and why past results don’t preclude more investment.
While the financial results of big consumer names like Wheels Up and VistaJet draw much of the attention when it comes to the profit-and-loss profile of business aviation, a prominent banker in the sector says there is a much deeper story.
On a recent episode of the VIP Seat podcast, hosted by Jessie Naor and Preston Holland (center), Nick Fazioli, Global Head of Aerospace and Aviation Investment Banking at Jefferies Group LLC, offered a look into how Wall Street evaluates business aviation.
Jefferies serves as a conduit between investors and companies.
Fazioli discussed financial performance, valuation, and the metrics he says matter to investors.
He says business aviation’s transition from a “cottage industry” into a mature, institutional-grade investment category was partly spurred by one of the industry’s most notorious moments.
Fazioli says JetGate, when the CEOs of the Big 3 automakers each flew separately on their corporate jets to Washington, D.C., seeking a government bailout during the Great Recession, spurred investor interest in companies that offered private jet access without having full ownership.
Fazioli says, “innovative or different ideas…disruptive ways to try to play that space” received a positive reception from investors.
“Frankly, the capital markets and institutional investor activity across all these were quite available,” Fazioli recalls, adding, “We raised a tremendous amount of capital for a lot of your household names (VistaJet, Flexjet, Wheels Up) during that period.
Fazioli says business aviation is no longer on the fringes of Wall Street’s focus—overshadowed by commercial aerospace and defense.
Over the past 15 years, it has steadily built credibility through scale, transaction activity, and investor familiarity, particularly as large, recognizable platforms have emerged and attracted capital.
On the infrastructure side, FBOs, for example, investors are attracted to industry growth and insulation from competition.
For private jet operators and MROs, investors see fragmentation as a positive.
While operators face the greatest risk, MROs are seen as having more predictable revenue streams.
As private jet flying continues to grow, maintenance is a given, driven by hours and cycles.
Unlike the commercial side, companies aren’t overly reliant on just a handful of customers.
That evolution accelerated dramatically during the COVID period.
The surge in demand for private flying introduced new users to the category and forced operators to scale quickly.
Investors noticed how private aviation gained as commercial aviation contracted.
Moreover, he says, investors saw that once consumers begin flying privately, they stick with it.
However, the surge in demand created distortions.
That included inflated valuations and a lack of clarity about what “normal” looked like.
“We saw a ton of (M&A) activity,” he says, with “investments out of necessity. You had (flight providers that had) guaranteed to their customers that they could provide lift at a certain price and availability, and all of a sudden, their universe of subcharter operators (had raised) their prices out of control (or there was) no availability.”
The result was “this mad dash to come back in and acquire lift and pilots, and fleet as fast as humanly possible to satisfy their rapidly growing business.”
Fazioli says the market has since stabilized.
He says current M&A is in a healthier, more predictable environment.
“We’re actually in a really good time now,” Fazioli said.
He believes industry has reset at a higher baseline, with broader acceptance from both customers and investors.
Fazioli emphasized that not all parts of business aviation are viewed equally by investors.
He says there is a clear distinction between infrastructure businesses such as MROs and FBOs and the operators.
The infrastructure assets benefit from predictability, regulatory barriers, and diversified demand.
That makes them particularly attractive to private equity and debt investors who prefer steady, repeatable returns to the volatility of flight operators.
By contrast, operators require investors to make judgments about execution, scale, and competitive positioning, he says.
That means greater complexity and risk, even as the overall market continues to grow.
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Holland and Naor asked Faziolio to talk about the use of EBITDA and EBITDAR.
The non-GAAP metrics, touted by companies, are a lightning rod for critics.
“(EBITDA is) really just a shorthand way to look at operational cash flow,” Fazioli says.
He notes it excludes factors such as depreciation, financing costs, and the capital required to maintain and grow aircraft fleets.
For asset-heavy operators, those omissions can be significant.
Large fleets require ongoing investment in maintenance, refurbishment, and eventual replacement.
That is not reflected in EBITDA.
To bridge that gap, Fazioli says, investors often turn to EBITDAR.
The calculation adjusts for lease costs and attempts to normalize comparisons between companies that own aircraft and those that rely on operating leases.
Fazioli says the adjustment is intended to make different business models more comparable.
However, it is only an approximation rather than a definitive measure of performance.
Fazioli told the hosts, “At the end of the day, investors are really looking at what’s the ultimate cash flow generation.”
He added that investors look far beyond EBITDA and EBITDAR to analyze the actual cash required to sustain and grow the business.
Deeper analysis requires an examination of what happens “below the line.”
That includes maintenance capital expenditures, fleet replacement needs, and the true cost of keeping aircraft operational over time.
What’s more, he says accounting treatments can vary widely, especially in how companies handle maintenance expenses and capitalized costs.
Fazioli says that some private jet operators expense maintenance through the income statement.
Other operators capitalize major events like engine overhauls.
How they do it can materially affect reported earnings.
It also complicates comparisons between companies.
As a result, investors must reconstruct each business’s economics to understand the capital required to sustain operations, rather than relying solely on reported figures.
This analytical approach also informs how investors think about valuation, which Fazioli said is often misunderstood when reduced to simple EBITDA multiples.
“There’s a story behind every multiple,” Fazioli says.
Valuation, he argues, is the result of detailed analysis around growth, capital intensity, and risk, rather than a fixed benchmark applied across companies.
Multiples provide a convenient shorthand for discussing transactions.
However, Fazioli says, they are ultimately an output of the underlying analysis, not the starting point for determining value.
The conversation also touched on aircraft values.
Values have risen significantly in recent years and continue to influence how investors and lenders view the sector, he says.
Fazioli explained that strong asset values support access to capital by improving lenders’ collateral coverage.
They provide an additional layer of comfort for investors evaluating risk.
He noted that even unsecured lenders consider underlying asset values when assessing creditworthiness, as they provide a residual cushion in the capital structure.
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Holland and Naor asked Fazioli how companies with losses and spotty financial performance can attract new investment.
Fazioli told listeners that investors are primarily focused on the future rather than the past.
Cumulative losses may appear significant on financial statements; however, they are often less relevant to investors.
He says investors focus on cash flow and growth potential.
Fazioli says, “Investors are typically very focused on the future of the business.”
In some cases, he says, historical losses can carry value as tax attributes, further complicating their interpretation.
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