Professional Pilot, July 2016

FBOs have few assets They generally operate on leased land have leased equipment and they sell someone elses fuel inventory be it their fuel suppliers or a contract fuel provider Even the smallest details such as line service employee uniforms and the coffee machine in the lobby are often leased Further an FBOs customers while not recession proof are simply not as affected as the average consumer Finally though FBOs operate on thin margins they generate enormous amounts of cash and transact at high multiples It is these business features that attract the attention of private equity Carefully planned FBO acquisitions at a slower pace lie ahead It was the recent transaction by BBA Aviation Signature of Landmark Aviation that really caught the attention of private equity investors on the sidelines Within the FBO industry when a single FBO changes hands it is a topic of discussion But outside the FBO industry a single FBO sale just isnt news However when 68 FBOs trade hands the acquirer is a publically traded company and the transaction involves billions of dollars private equity takes time to read the footnotes to find what opportunities they might seize One such organization just capitalized on those details Heretofore unknown in the FBO industry KSL Capital Partners is a US private equity firm dedicated to investments in the travel and leisure businesses according to their tagline As the acquirer of the 6 FBO locations that were required to be divested by the US Dept of Justice as a condition of the BBA Landmark transaction KSL has since assembled a team of FBO veterans to grow the business including former Ross Aviation CEO Jeff Ross If the name seems familiar it should In August of 2014 Ross Aviation sold 20 locations to Landmark Aviation which in turn sold to BBA Aviation early this year which in turn divested 6 locations ANC FAT HPN IAD SDL TRM to KSL Capital Partners for 190 million At least 3 of the 6 locations were in fact Ross Aviation locations less than 2 years ago KSL again according to their web presence aims to increase cash flow while strategically looking at growth opportunities through development ancillary 14 PROFESSIONAL PILOT July 2016 revenue and add on acquisitions Loosely translated KSL will likely move quickly to acquire additional FBO locations and grow their holdings to a small chain status If past is prologue they may then sell the portfolio of FBOs upon reaching critical mass some years later in much the same way Ross Aviation did Yet KSL merely epitomizes the next new frontier of ownership in the FBO industry There may be a host of private equity companies entering the FBO acquisition market These companies will be responsible for many of the forthcoming FBO transactions and will captain an overall change of the industry in the coming years How is it possible that companies no one has heard of that arent even in the market could be predicted to suddenly become a growing force in the FBO industry Simple The signal intelligence community uses a term called chatter to broadly describe the volume of intercepted communications from 3rd parties Though anecdotal the uptick in communication from private equity firms has grown noticeably since the BBA transaction of Landmark FBOs and industry veterans alike are reporting that Harvard grade MBA financial analysts sitting in New York are calling them asking if they can spare an hour to help them learn more about the FBO industry The chatter is growing and private equity is searching for yield They want in Wilson Air Center has created an FBO niche for itself through the contract management of airport owned FBOs Wilson Air Center owes its service heritage to Kemmons Wilson founder of the Holiday Inn chain KSL Capital Partners Chairman Mike Shannon above brought industry veteran Jeff Ross right former Ross Aviation CEO to manage and grow the 6 former Landmark locations divested as part of the BBA transaction KSL is the newest entrant of what is expected to be more private equity firms engaging in FBO acquisitions for the first time