FlyExclusive announced this week that it will follow Directional Aviation’s Flexjet, Inc. and Wheels Up Experience on the New York Stock Exchange with a SPAC merger. His deal is with EG Acquisition Corp., which raised $225 million in its May 2021 IPO. Pre-deal net worth of $600 million is expected to generate up to $310 million in proceeds. While it’s easy to lump the three private jet companies together, a visit to Kinston, North Carolina, where FlyExclusive is based and discussions with its founder and CEO Jim Segrave, as well as other executives, explains clearly its reasons for becoming a publicly traded company. are as different as chalk and cheese.
It is true that the trio wants to compete with other major players in the field of flight providers, such as NetJets, Inc. of Berkshire Hathaway and VistaJet and XO of Vista Global. What the presentations and interviews reveal is that they each trace divergent flight paths.
Wheels Up, which went public in July 2021, is trying to aggregate demand and create an Airbnb-like market for charter customers, selling flights beyond its own fleet to the long tail of third-party operators like Expedia.
For Flexjet, going public allows it to add more private terminals at busy airports and long-haul jets to its fractional fleet as it seeks to expand internationally and perhaps secure deals. bigger deals in a bubbly M&A market. Its president Kenn Ricci notes four recent transactions exceeding 500 million dollars, including the purchase of Jet Edge by Vista. In 2013, the cost of acquiring Flexjet from Bombardier was just $185 million.
For his part, Segrave tells Forbes that going public with the company he founded in 2015 provides “generational opportunities” for his “working family” in eastern North Carolina. It’s where his family has lived since the 1800s, and it’s also a neighborhood that in recent decades has seen factories and businesses close or relocate. Segrave says that by deciding on SPAC, he avoided both private equity or the complete sale of the business, which Ricci, also a lifelong entrepreneur in business aviation, says he also let happen.
Part of FlyExclusive’s credo is to “be part of a larger cause”. This means making the company and Kinston, with its scenic rural landscapes, proximity to the ocean and low cost of living, a destination for top talent. It is also supporting the community. One example includes the Social House tab, a small producer of high-end vodka to supply its growing fleet, currently at 90 jets, but expected to grow to 154 planes by 2024. Segrave says he hopes the national exposure will help the spirits business as it seeks to grow its business.
At the National Business Aviation Association’s annual conference in Orlando this week, Segrave noted, “We’ve been evaluating a lot (what to do)…When you think of a private equity investment…they’re looking for an exit. When they make an investment, they say, “In three to five years, I want to get out. I’m not looking for a way out. I’m trying to build a generational company that the kids on the current team would be proud to come and work in. this business in the future. I’m looking to build a business that’s profitable, that’s successful, that provides world-class services, is a career destination for people, not a stepping stone, and ultimately, a generational business,” adding: “I don’t mean for my children, although it would be nice if that happened. I mean generational for the people who work here, their children and their children who would be somewhere to be proud of.”
In fact, FlyExclusive has sandwiched its SPAC announcement between a groundbreaking ceremony for a new 48,000 square foot hangar at its home base and an order for 14 more jets from Textron Aviation, its second this year. They are part of a new fractional ownership program he is launching that requires large deposits to secure planes years before they are delivered.
Segrave says FlyExclusive and Kinston are the poster child for what is good in the oft-targeted private jet industry. It ticks off the No Plane, No Gain statistics that business aviation is responsible for over one million jobs in the United States and generates over $200 billion in economic impact. He points out that, like many American cities, Kinston has long since lost scheduled airline flights, in its case despite having the longest runway east of the Mississippi River. He calls private aviation “an essential service for rural America. It’s making a huge difference in bringing new investment and business to rural America. Again, in bringing it back to us, we’re very proud of to be part of that community and to have high-paying jobs, and that we’re building a business.”
Government statistics show the average household income in Lenoir County is less than $40,000, compared to the national average of $70,784. However, the median value of owner-occupied homes is just $95,700, compared to $229,800 nationally. A 3,473-square-foot, four-bedroom Cape Cod-style home with an in-ground pool is listed at $249,900. While this sounds like a place you might want to put down roots, there are also significant talents from nearby military bases who want to stay in the area after leaving the service. While many companies are struggling to find workers, resumes are pouring in at FlyExclusive.
Over the past seven months, it has hired 150 service technicians and plans to add 100 more in the coming months. The overall workforce is expected to grow from the current 800 to more than 2,500. All new jobs are in Kinston, except for pilots, who are home-based, and a small technology center, opened last year in Raleigh, which draws on the talents of the Research Triangle.
Last year, FlyExclusive opened its own paint and refurbishment facility, which President and COO Tommy Sowers says is part of the company’s goal to become “the company of most vertically integrated private aviation”. That means flying 99% of its jet card members on its planes, with its pilots, serviced by its mechanics, painted and refurbished, you guessed it, in-house. Next is its own pilot training center, including full simulators. Training slot control removes a major bottleneck that for the industry has left jets idle while those guys with the stripes on their shoulders still have to get paid.
In numbers, FlyExclusive is the smallest of the three SPACs. While revenue this year is projected at $360 million, up from $135 million in 2019, its investor deck forecasts $729 million in 2024. It made less than $2 million in net income in 2019 and 2020 and made $7.9 million last year. It forecasts net profit of $9.6 million this year, $38 million next year and $102 million in 2024. Based on EBITDA, it forecasts profit of $32 million this year , doubling to $64 million in 2023, then to $130 million.
Stock pickers may not care about restoring jobs to rural America. However, Segrave says the strategy of flying customers on its planes, instead of chartering them from other operators, and the vertically integrated approach to training pilots to maintain and even paint its planes allow to FlyExclusive to both save money (it also expects to earn $20 million working with outside customers when not busy with its own fleet) and deliver a higher quality product to its well-heeled customers.
Of course, in today’s market, a good story is no longer enough. While FlyExclusive and Flexjet are both profitable, Gary Prestopino, an analyst who covers Wheels Up, warns: “(The) market is moving away from risk on assets like UP which are losing a lot of money. Anything that comes out of a SPAC is shot.