MIAMI—Flexjet planned to expand in 2023 with money generated from merging with a special purpose acquisition company (SPAC), yet even though it disbanded the deal before its expected second quarter close, its fleet and geographic expansion continues.
The company generated the capital for its expansion in the private market instead.
“I’m happy we didn’t go public,” said Andrew Collins, Flexjet co-CEO, speaking at Corporate Jet Investor Miami. He says the “short of it” is that going public wasn’t a good cultural fit for the company. “We’re very entrepreneurial and we move very fast,” he said. “We’re a 4,000-person company, but we act like we’re 400.”
Flexjet announced plans to go public in October 2022 by merging with Horizon Acquisition Corp., a SPAC, but pulled out of the deal in April 2023. The deal initially was valued at $3.1 billion.
Collins said that ceasing the SPAC deal cost Flexjet $33 million, “but we haven’t looked back.” While there were short-term opportunities, he said the Flexjet principals want to go long term and continue building the platform, brand and global reach.
The company’s strategy of vertically integrating will continue. A good example of this is maintenance. Flexjet employed 200 maintenance technicians 2.5 years ago and today that figure is 1,100 after buying Constant Aviation and Flying Colours earlier in 2023.
As Flexjet’s fleet has grown, keeping maintenance in-house helps the company control its own destiny, Collins says. And given the tight MRO market, “we bought a good chunk of it,” he adds.
Flexjet is not interested in selling maintenance as a third-party service. Rather, “it’s really about taking maintenance lines, running them seven days a week, 20 hr., getting our dispatch availability up on the fleet side and having control over that,” Collins says. “There is not enough quality third-party (maintenance) out there in our minds” that would offer flexibility in meeting the company’s maintenance needs.
Its new $50 million, 243,000-ft.² operations center opened in Cleveland in September to manage its 350 daily flights also is about integration. “It think it represents the future of how we think about service delivery and how we think about the scale of the operation.
We will be building a companion overseas.” He didn’t disclose details about the overseas facility but said Flexjet is thinking about how to tie its global entities together.
When asked for his forecast over the next 12-18 months, he said “you can’t buy the win.” He points to the preponderance of available capital a few years ago and said now “you can’t run the table and be the leader just by paying your way through.” This regulated industry is complex. “You’ve got to have all of your levers in a row,” including balance sheet and customer acquisition cost.
During the coronavirus pandemic, he says people learned “that people don’t understand our cost structure.” Given the higher cost of capital due to today’s interest rates, he thinks money will be invested more judiciously, and as the market normalizes post-pandemic, “I think you’re going to see that some people overextended themselves, and decisions made a couple of years ago” are going to generate “gotchas” and some consolidation that will be forced instead of opportunistic.
“I commend the people who were rational in a market where everybody was cranking up the bar bill, because once the bar bill came, there was a pretty big hangover,” Collins said.
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