Since 2010, when Patrick Hansen became CEO of Luxaviation, the company has gone from a struggling single-plane Luxembourg company to the world’s second-ranking business jet operator. Private equity attendees at the LPEA Insights conference on April 25th heard how it happened.

Passive investor to hands-on CEO

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Originally Patrick Hansen was supposed to be a passive investor in business jet operator Luxaviation, but in 2010 the country’s aviation authority gave him a stark choice: take over as CEO of the struggling, one-aircraft business with €843 in the bank, or see its operating licence revoked. So Hansen, a serial entrepreneur who had already launched Athome.lu and Monster.lu in the Grand Duchy, took the plunge – with a business model adapted to the complex nature of a business encompassing aircraft, business aviation terminals and maintenance facilities – and turned it into a global operation with more than 260 jets second only to Warren Buffet’s NetJets. And actually owning the planes is the least part of it – fewer than 10 are Luxaviation’s own property. The rest are owned by companies or wealthy individuals for which Luxaviation provides operational services and maintenance, and charters the aircraft out when they’re not needed by the owner.

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“Luxaviation grew from 1 to 260 jets in 8 years, second only to Warren Buffet’s NetJets.”

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Consolidation or broke

Luxaviation was short of money when Hansen took over – but so, he realised, was virtually the whole industry. Most business jet companies had just a single aircraft certified for operation, 160 had between two and four, and around seven had more than 20 aircraft. “It was very clear with one aircraft you cannot make money, and not easily even with five, so you had to grow - and fairly rapidly,” he says. In a market where purchasing power was important and many players were destined either to go bankrupt or be bought up by rivals, Hansen decided that being a consolidator was preferable to becoming insolvent. He and his colleagues started in 2011 with a German competitor that was bigger than Luxaviation, but on the brink of bankruptcy. But another crucial step was the purchase of Belgium’s Abelag, which came with a fixed-base operation and a business jet terminal monopoly – “a licence to print money” - at Brussels Airport, including a maintenance facility.

Going global

 

An injection of funds in 2015 from new investor China Minsheng Investments Group, which took a 30% equity stake, enabled Luxaviation to take a quantum leap by acquiring ExecuJet, giving it global scope – important given that business jet use in the northern hemisphere slumps during the winter months. Since then it has added helicopters to the service offering and now boasts annually around 40,000 flight movements and 53,000 flight hours, a workforce of more than 1,700, and €600m in annual revenue. The group’s ancillary businesses now include, in addition to ground handling and maintenance, fueling services and aircraft brokerage. But Hansen acknowledges that one market remains off limits: “We have shied away from the US for two reasons - one is regulatory, the other is NetJets and Warren Buffet,” he says. “He has deeper pockets than we will ever have, so I thought we won’t pick a fight with him.”