Wheels Up's Acquisition Of TMC Jets Heats Up The Battle For Private Jet Fliers

“Won’t you come and join the party. Dress to kill”  – The Who

Add the indomitable Kenny Dichter to the dance card. Monday, Wheels Up announced it had completed a deal to purchase Elkhart, Indiana-based Travel Management Company, often referred to as TMC Jets. It adds 26 Hawker 400XP light jets to the Wheels Up fleet of 72 King Air 350i turboprops, 15 Citation Excel/XLS midsize jets, and six Citation X super-midsize aircraft, filling a hole in its on-fleet offering for members.

It’s just the latest move in the frothy river of mergers and acquisitions activity in the sector of companies wanting to provide private aviation solutions for wealthy consumers, companies, and maybe even expand the market to the merely affluent.

In the case of TMC, it will be operated as a wholly owned subsidiary and will continue to serve its existing network of on-demand charter and jet card brokers, Dichter said.

Alasdair Whyte, editor of Corporate Jet Investor says the deal underscores the increasingly blurred lines of competitors and customers. On one hand, Wheels Up is competing with charter brokers and jet card providers for consumers to join its membership programs, yet at the same time via TMC it will be providing inventory to those same competitors.

Dichter joins Thomas Flohr with a ticket to the dance. The chairman and founder of VistaJet cemented his place buying XOJET and its fleet of 43 Citation Xs and Bombardier Challenger 300s along with its $100 million off fleet brokerage business last year, and more recently completing an acquisition of one-time unicorn JetSmarter, whose once high-flying CEO Sergey Petrossov will now likely be a footnote.

Before the deals, which included creating a Dubai-based holding company under the Vista Global banner, VistaJet already owned a fleet of 70 sleek silver Bombardier ultra long haul, large cabin and super-midsize private jets. Later this year it will take delivery of its first ultra long-range Bombardier Global 7500, the newest toy for billionaires and global CEOs.

For Flohr, JetSmarter’s appeal seems less its now pay by the seat jet-sharing, but rather its technology platform that can provide a digital front door for his fleet of nearly 120 private jets.

Both will be battling Living Legends of Aviation inductee Kenn Ricci, who from his office overlooking Cleveland’s Cuyahoga County Airport continues his deal-making which brought Flexjet, Sentient Jet, and last September U.K.-based tech-driven broker PrivateFly to Directional Aviation’s portfolio of private aviation solutions.

Corporate Jet Investor recently reported Ricci is readying a billion dollar order from Gulfstream while Aviation International News says he plans to build the Flexjet fleet in Europe.

With estimated revenues of only around $30 million, Whyte says the PrivateFly deal underscores the shifting sands of future competition. “It’s not just about owning aircraft. It’s about owning customers,” he says.

While PrivateFly doesn’t own or operate any aircraft, serving purely as a middleman, in an era where Google search is often the store window for consumers seeking private flight options, it brought Ricci over 40,000 U.S.-based monthly visits driven by organic content.

According to Semrush, that puts the U.K. start-up second to only NetJets, the largest operator of private jets in the world. It estimates the paid search cost of buying PrivateFly’s U.S. traffic alone would be close to $1.8 million annually. After the acquisition, Directional folded its own online broker Skyjet under the PrivateFly banner.

In addition to the U.S. and U.K., PrivateFly has local language sites in 17 more countries, including France, Germany, Russia, Canada, Italy, Australia, Switzerland, and China.

Of course, in a way, everyone is lined up against NetJets, and Warren Buffett’s ubiquitous entry into the field shows no signs of planning to give ground to the insurgents.

During business aviation’s major conference last year in Orlando, its chairman and CEO Adam Johnson told a packed press briefing NetJets had taken delivery of an eyebrow-raising 230 new private jets over the past four years.

At the same time, he said he is prepared to order as many 325 Cessna Citation Longitude and Hemisphere jets. There are also large orders underway with Bombardier, including for the Global 7500 and with Embraer for its best selling Phenom 300 light jets.

Not unlike the field of Democratic presidential primary candidates, there are still more entrants who believe they belong at the dance, and several executives, including Whyte, believe there is space for more than one winner.

Omaha-based Jet Linx Aviation and its Midwestern nice CEO Jamie Walker last month acquired the fleet management business from Elliott Aviation, which will give it more planes – it already has over 100 under management – and a location in Minneapolis.

This year the company is adding bases in New York, Boston, Chicago and Austin with plans to move into Florida and California, two of the biggest markets for private jet users, possibly via buying other companies.

While Jet Linx may not be a household name – yet, its high touch, high-end offering to its management and jet card customers includes its own locally managed terminals in nearly 20 locations, each a bit like a private club with open bar and snacks. No vending machines, please.

In Dallas, near Love Field, where the late Herb Kelleher built Southwest from an intrastate airline to one of the largest and most profitable in the U.S., there’s JetSuite founder and CEO Alex Wilcox, who cut his teeth under aviation entrepreneur Sir Richard Branson before helping David Neelman launch JetBlue. In April 2018 he received a second round of investment from JetBlue and gained a new backer, Qatar Airways, which via its Qatar Executive subsidiary is a major player in private aviation as well.

His JetSuiteX subsidiary of by-the-seat corporate shuttles on the West Coast recently added Seattle and Phoenix, and in some key markets like Burbank to Las Vegas now has a dozen daily flights. By eliminating big and crowded commercial terminals for private facilities, the scheduled semiprivate operator cuts travel time on short flights in half enabling passengers to turn up at the airport 20 minutes before departure.

After Monday’s announcement, Dichter told me, “We’re officially in a deal-making mode.” Wheels Up is already a formidable digital presence, the most searched private aviation services provider, according to Google Trends, outranking even NetJets.

For Dichter, who founded Marquis Jet Partners in 2001 and helped popularize jet cards before selling to NetJets in 2010, his January announcement that he had hired Goldman Sachs and Bank of America to advise Wheels Up on strategic options caused some to think he might be preparing an exit through buyout instead of a talked about IPO.

Who else will be at the party?

While there won’t be the type of consolidation that has taken place in the commercial segment, where four players account for over 85% of domestic capacity here in the U.S., it does seem like there will be more moves as the major players look to fill gaps in their offerings in the battle to be one-stop solutions. It’s estimated that 70% of private users have at least two providers.

Whyte notes with Wheels Up, “Even though they have their own fleet, they do a lot of off-fleet charter as well. Members sign-up and where the King Air or Excel/XLS wasn’t a fit, they are using other operators as a broker, so the key is really getting the customer into your system.”

Some point to Air Charter Service, a privately held U.K.-based broker, which has a turnover of close to $700 million and more than 20 global offices as well as New York-based Apollo Jets, one of the largest on-demand brokers in the country.

Names like Google, Amazon and Uber are mentioned as potentially deep-pocketed suitors who might see existing companies as a way to break into a space that could change dramatically in the next 10 to 20 years with eVTOLs and pilotless planes.

Despite the flurry of transactions, several executives say the market is not overheating. “From what I can see, these are value deals. You’re not seeing bidding wars. In fact, you might even say, it’s an example of what’s one man’s trash is another man’s treasure,” one former CEO told me.

Whyte agrees. He says, “All of the key players have lived through the downturn. I don’t think anyone is doing anything crazy.”

Still, he describes the result of the deals as “increasingly muddy waters and confusing. You have harsh competitors on one side and collaborators on the other side.  Consolidation is vertical, horizontal, every direction.”