Oct. 26--H.I.G. Capital is expanding its aviation interests -- making its first foray into the fast-growing private jet business.
The Miami-based private equity firm said Thursday that it is buying Flight Options from Raytheon. Neither H.I.G. nor Raytheon would disclose the purchase price.
Flight Options, based in Cleveland, is a private jet aviation company that operates a fleet of 130 luxury aircraft, and provides fractional ownership programs and a pre-paid card plan.
"The private aviation industry is growing at two to three times the rate of the overall economy," said Doug Berman, managing director of H.I.G. "And there are some strong underlying fundamentals at Flight Options that we think are very attractive."
Among them, Berman said, is that the company has recently reduced the number of aircraft types it flies from 13 to four, and invested in customer service programs.
And as the private jet aviation business consolidates, Berman said H.I.G. expects to expand Flight Options through internal growth or acquisitions, though nothing is imminent.
Raytheon spokesman Jon Kasle said it began its search for a buyer in the third quarter, and that the sale of Flight Options is consistent with its strategy of focusing on its core business. In March, the company sold Raytheon Aircraft Co.to Hawker Beechcraft, a new company formed by GS Capital Partners, an affiliate of Goldman Sachs, and Onex Partners, for $3.3 billion.
"The Flight Options business had been improving steadily, and we believe this quarter was the right time to divest of it, as we continue to focus on on our core defense and government business," Kasle said.
Raytheon, which reported the sale along with its quarterly earnings Thursday, said it would take a third-quarter after-tax impairment charge of $69 million, or $84 million pretax, in connection with the disposition process of Flight Options.
In the fourth quarter, when the deal closes, the Waltham, Mass.-based company expects to record an additional after-tax charge of about $45 million, to write down the assets of Flight Options to the expected final net sales price.
For H.I.G., the deal represents its latest in a string of aviation investments. The firm is the majority shareholder in Fort Lauderdale-based Amerijet International; Rotocraft Leasing Co., a Broussard, La.-based helicopter operator; and Dulles, Va.-based Gemini Air Cargo, an air-cargo operator.
A move into the private jet business is a good choice -- "It's a growth industry, a solid industry," said aviation consultant Michael Boyd, president of the Evergreen, Colo.-based Boyd Group.
"Fractional ownership and charter business -- take it to the bank," he said.
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