Plenty of Runway: Private Aviation M&A Opportunities

Structural Changes, Sustained Growth

The pandemic drove a paradigm shift in private aviation, in which travelers who previously had not flown private began to do so for safety, convenience, and accessibility reasons. “The subsector is on a different growth trajectory today, with an elevated level of operations compared to pre-pandemic activity,” says Rogers. “We are confident the space has structurally changed for sustained operations in the long-term. Those that became private aviation customers out of necessity now see its enduring value proposition.” 

Commercial aviation continues to face labor and capacity constraints, resulting in fewer routes and more frequent delays. These factors bode well for continued usage of private aviation. While the macroeconomic environment ahead may be more challenging for the broader economy, including private aviation, Kinard is optimistic. He believes the sector will continue to grow, but at a decelerated pace.  

“Growth almost has to slow,” he says. “To keep up the incredible growth pace the sector has recently experienced, there would need to be a huge expansion of the number of people flying. However, we think the core user demographic consisting of higher net worth individuals will continue to pay up for the benefits that private aviation offers.”  

Given industry and economic dynamics, the Harris Williams team sees three interesting areas to watch. 

Ongoing FBO Platform-Building Opportunity

A significant amount of consolidation has taken place among fixed-based operators (FBOs) in the last 18 months. There are now many well-capitalized platforms with growth-oriented infrastructure funds behind them. Smith notes that FBOs are widely viewed as infrastructure assets because they provide high barriers to entry, long-term earnings visibility, and opportunities for additional profitable capital investment projects.  

“Just about every financial sponsor that is backing an FBO network is an infrastructure fund,” he adds. “It’s really core infrastructure with growth opportunity.” Smith anticipates that the sector is primed for another round of FBO platform creation, both by infrastructure funds and other financial sponsors backing proven FBO platform builders.

Continued Digitization and Aviation Software Adoption

Szyndlar also sees investor opportunities arising from the private aviation sector’s continued digitization and growing adoption of various aviation software. Many FBOs and private aviation service providers are working to modernize operations through the implementation of new technologies ranging from back-office accounting, procurement, and full ERP systems to flight scheduling software.  

X-1FBO, for example, provides a fully integrated suite of software modules designed specifically for modern FBO companies. Flight Schedule Pro is a platform for flight schools, flying clubs, and universities to manage scheduling, billing, and training needs. “With many players in this segment offering highly specialized applications, there could be consolidation opportunities that allow providers to offer a more comprehensive solution,” adds Rohman. 

Private Aviation MRO Consolidation

The rapid growth of private aviation activity has exacerbated the lack of capacity within private aviation maintenance, repair, and overhaul (MRO) infrastructure to accommodate expected fleet growth and subsequent maintenance needs. While there has not been significant consolidation among MRO providers to date, looking forward there is potential for platform-building investment.  

“Large, independent MROs such as West Star Aviation and Duncan Aviation are few and far between,” says Rogers. “This fragmented marketplace presents opportunities for platforms to roll up smaller service providers to expand geographically, add new service capabilities, and diversify the aircraft platforms they’re qualified to maintain. This may be something we start to see more of in the near future.” 

Conclusion

The surge in demand for private aviation over the last two years created long-term structural change in the private aviation sector, which continues to be an area that can bring investors the benefits of both stable infrastructure and growth. In sum, there’s still significant runway for investment in the sector.  

Fragmented, diverse, and tied to essential end-markets, the aerospace, defense, and government services industry provides a wealth of opportunities for investors. Our Aerospace, Defense & Government Services Group, led by professionals with robust experience in the industry, works with investors and high-growth companies worldwide to realize growth potential in a complex space. Our clients depend on our deep understanding of the M&A market in their industry to unlock value in their businesses. 

We have a strong track record advising companies in sectors across the industry, including maintenance, repair, and overhaul; aviation services and support; defense electronics; logistics services; and more.