Business jet group Luxaviation to buy rival ExecuJet Aviation

Luxaviation, a business jet management and charter group based in Luxembourg, will on Tuesday acquire Zurich-based ExecuJet Aviation in a deal that will create the world's second-biggest corporate aircraft operator.

The takeover, which is expected to be worth hundreds of millions of euros, is the latest example of consolidation in an industry that was hit hard by the global economic downturn. The business jet sector is made up of hundreds of small operators struggling to comply with an increasingly onerous regulatory and training burden.

Under the terms of the deal, Luxaviation will acquire the entire share capital of ExecuJet, whose biggest shareholders include Irish entrepreneur Dermot Desmond.

ExecuJet has operations in Asia, Australasia, Africa, Latin America and the Middle East as well as in Europe. Its fleet of about 180 managed aircraft will bring the number of aircraft operated by the combined entity to more than 250. This is second only to the fleet of 700 operated worldwide by US-based NetJets.

Luxaviation has grown by acquiring four European operators since 2009, including London Executive Aviation (LEA) in 2014. Last week it agreed a deal with China Minsheng Investments, a Chinese investment fund that is the biggest shareholder in business aircraft operator Minsheng International Jet.

Patrick Hansen, Luxaviation chief executive, said the partnership with Minsheng would extend his group's reach into Asia beyond its commercial office in Singapore.

ExecuJet, founded in 1991, has activities including aircraft charter, management, and maintenance. It also operates 19 airport bases across the world.

Niall Olver, who will stand down as chairman and chief executive of ExecuJet after the deal but will continue in an advisory capacity, said the larger aircraft his company specialises in are less susceptible to the downturn. "The bottom end never recovered," he said. "The industry is not going to go forward significantly until there is consolidation."

Use of jet charter and management companies has grown recently, according to Neil Hampson, aviation analyst and partner at PwC in London. "Partly it is because of the economic recovery, partly because of the rise in the number of high-net-worth individuals, and partly because corporations have shed their own jets," he said.

Bigger operators mean that clients gain "economies of scale and access to more suitable aircraft for specific flights".

Luxaviation's strategy with its acquisitions has been to preserve their operational independence while benefiting from economies of scale in purchasing high-cost items such as fuel, insurance and training.

With the acquisition of the larger ExecuJet there is scope for further harmonisation of back-office functions, said Mr Hansen.

He added that it was a good time to look to Asia and specifically China for growth. Europe has been hit by the economic turmoil in Russia, with the charter market there down 35 per cent since last summer, he said.

But with the ExecuJet and China Minsheng deals, he said, Luxaviation was "on target for our goal of 500 aircraft under management by 2019".

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