Gama Aviation Plc,
the global business aviation service provider, has
announced the merger of its US aircraft management
and charter business with that of BBA Aviation Plc
as of 1st January 2017.
With the addition of
over 90 aircraft to Gama Aviation’s current US
managed fleet, the combined business, with over 200
aircraft under management, will become the US’s
largest aircraft management business.
Customers will
benefit from the scale of the combined business
through enhanced national and global service
coverage and improved buying power resulting in
lower costs. They can also benefit from the
comprehensive line maintenance support provided by
Gama Aviation’s US Ground business as well as the
market-leading FBO services provided by BBA
Aviation’s ‘Signature Flight Support’ network.
The merger creates
a market leading platform for Gama Aviation and BBA
Aviation to expand their presence in US - the single
biggest business aviation market in the world - and
provides national geographical coverage with BBA’s
predominantly West Cost based fleet. This
complements Gama Aviation’s currently East Coast
centric business, creating a national network to
enable further growth in this highly fragmented
market.
With an extended
and diversified client base, significant additional
growth is expected for Gama Aviation’s US Ground
business through the ability to cross sell
maintenance services to the additional aircraft now
under management.
Significant cost
synergies of not less than $2 million over two years
are highlighted, together with an expectation to be
earnings neutral in 2017 and 2018 and earnings
enhancing thereafter, before the benefits of cross
selling maintenance services into the enlarged
fleet.
Gama Aviation’s
current US aircraft management and charter business
interests are operated by its 49% owned associate
Gama Aviation LLC, whilst those of BBA Aviation are
operated by its 100% owned subsidiary Landmark
Aviation through its air carrier operating
subsidiary, Sterling Aviation LLC.
Pursuant to the
agreement reached, Landmark Aviation will contribute
100% of its ownership in Sterling Aviation LLC into
Gama Aviation LLC. Gama Aviation Plc will transfer
its 49% ownership in Gama Aviation LLC into a new
holding company, GB Aviation Holdings LLC, which
will be owned 50:50 by Gama Aviation and BBA
Aviation reflecting the near equal contribution of
current profits by each party. Historically, in the
year ended 31st December 2015 through a combination
of branding fee and its 49% interest in Gama
Aviation LLC a contribution to Group profit before
tax of $4.3 million was delivered by Gama Aviation’s
aircraft management activities; in the same period
BBA Aviation’s US aircraft management activities
delivered profit before tax of $5.5 million.
Gama Aviation LLC
will continue to manage and operate the combined
businesses going forward and will trade its new
service offerings under the brand name Gama Aviation
Signature Aircraft Management. Gama Aviation’s US
Ground business remains a 100% wholly owned
subsidiary of the Group.
Under the terms of
a new licensing and branding agreement, Gama
Aviation LLC will continue to use the Gama Aviation
brand and IP, and will also be able to use BBA
Aviation’s Signature Flight Support brand name. The
annual fee has also been increased and fixed and
will be shared between BBA Aviation and Gama
Aviation. This will reduce the existing branding fee
contribution to the Group whilst increasing the
contribution to the Group’s income from associates.
After taking into
account the build up of cost synergies, the
transaction is expected to be earnings neutral in
2017 and 2018 and earnings enhancing thereafter.
This is before any benefit from cross selling of
Gama Aviation’s comprehensive maintenance services
into the immediately enlarged fleet or the future
growth opportunities expected to be derived from
Gama Aviation Signature Aircraft Management’s
market-leading platform.
Gama Aviation will
issue a trading update for the year ended 31st
December 2016 on Monday 9th January.
Commenting on the
transaction,
Marwan Khalek,
Chief Executive of Gama said, “We are delighted to
announce this exciting deal and to be teaming up
with BBA Aviation in the US. The enlarged business
creates a market leader and an unrivalled platform
for growing our share of this massive business
aviation market. The combination diversifies our
customer base and extends our network coverage
nationally whilst simplifying the financial
arrangements with our US partners. As part of this
strategically important transaction, we are also
excited by the potential to cross sell our US
maintenance services into the enlarged fleet.”
Simon Pryce,
Chief Executive of BBA Aviation added, “This
agreement marks another milestone for BBA Aviation,
creating a leading charter and fleet management
company, whose scale will benefit both us and our
customers. We look forward to working with our
partners at Gama Aviation to develop and grow the
new company in the years ahead.” |