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Direct Infrastructure Investment in Aviation Assets – Part 2

In part 1, we discussed that institutional investors are increasingly turning to direct investment in aviation infrastructure and operating companies to enhance their portfolio holdings. Airport infrastructure and aviation service companies have many characteristics that institutional asset managers find compelling—they typically consist of real assets with long lives, high barriers to entry, low risk of sudden disruption and strong cash flows. These types of assets and businesses include airport facilities, Fixed Base Operators (FBOs), Maintenance Repair and Overhaul (MRO) and Aircraft Charter and Management (ACM). While dedicated funds of private equity firms and merchant banks have been acquiring assets in this space for many years, pension funds, endowments and family offices are now anxious to invest directly in aviation infrastructure.

Additional key considerations for direct aviation infrastructure include:

Control with Professional Management—with direct investment, sponsors do not cede control to a third party investment manager. With professional aviation management they do not have day-to-day management of the assets themselves, but have complete investment control (including the right to replace management when deemed necessary).
Reduced Execution Risk—given the fragmented nature of the aviation services industry, consolidation of existing operations is the primary theme. While these entities may individually be relatively small, a platform of 10-20 assets usually creates significant value through scale. The execution risk of building up a platform is materially lower than that of starting a new platform from scratch and expecting to achieve the same scale.
Holding Horizon—because these assets have long lives (usually 30+ year leaseholds with operating rights which may be renewed or extended), there is no need to have a short term (3-5 year) holding window. These assets can be and often are generational, passing from one generation to the next. This flexibility provides an institutional asset manager greater freedom to choose opportunities without the restrictions of a formal private equity fund charter.

Global Aviation Infrastructure, LLC (GAI), lead by Steven Levesque of Charleston, SC provides management and advisory services for institutional investors interested in aviation assets such as airport infrastructure, aviation service companies, and aviation infrastructure development. Professional asset managers benefit from GAI’s independence and access to proprietary industry benchmarks. Call today to learn how we can help you maximize the value of your aviation asset holdings.