00:50:52 · Kenn Ricci, David Senra
[00:50:52] S1: I and buy Mercury Air Center, these FBO chain, '18 or '19. [00:50:56] S0: What did you like about their business that you wanted to buy it? [00:50:58] S1: Well, first of all, it was in the vertical I knew. So I knew how to market to corporate pilots. I knew why people wanted an FBO. The business made money on the spread between what they bought fuel for and what they sold it for. So relatively easy business to understand. I had a non compete. I couldn't necessarily compete in the operating side of the business, so it was available. The non compete didn't cover fuel distribution or hangar and so on. I can see where it was a very fragmented industry. We had 18 FBOs. It was the second, one of the second largest at the time. And so going out and buying these little mom and pops and giving them 4,000,000, 3,000,000, we were buying at six times EBITDA at the time. Today, businesses, an FBO business will trade at 15 to 20 times today. Did that, bought it for $80,000,000 in thousand and five, and then sold it in 2007 to Macquarie, which now is called Atlantic Aviation. So we built it, about doubled the size of it and sold it for $615,000,000 [00:51:56] S0: Oh, so that's where you have a, you're getting a huge chunk of cash now. [00:51:59] S1: Great. I own 20%. Ally Capital had 80. [00:52:01] S0: Okay. [00:52:02] S1: Okay. So Mike and I [00:52:03] S0: That's really good. And two years considering you had to do something and you couldn't do what you
00:52:03 · David Senra, Kenn Ricci
[00:52:03] S0: That's really good. And two years considering you had to do something and you couldn't do what you [00:52:06] S1: really wanted to do. Great. Right. So again, the worst day in my life, I don't... I... You know, let's just have faith in the future. I've seen none of this coming. Right? I see none of this coming. But that's where I get the capital. And what do you think happens next? Raytheon has had enough fun with with Flight Options. They've lost $600,000,000 in the in the years they've owned it. The company's become unionized and it's a problem. And it's it's going to crap. So who do they call, Ken? You want to take this piece of shit off our hands? And what I say, of course I do. I want my company back. I don't care what shitty position it says. I want my company back. Think about this one. Financial crisis happens in September. I buy it in December. So how dumb am I? I'm the dumbest guy in the world. I buy this company back and they dear them the financial grace. And what do you have to pay for it? 135,000,000. Okay. Okay. Of which the reality is that because there's payables, there's liabilities, we're assuming. The reality is it was around 42,000,000. And I a '27, I gave a $27,000,000 personal note and 15,000,000 in cash. [00:53:14] S0: What'd you back up that personal note with? Just me. How'd you do that? [00:53:18] S1: The seller took a note of 27,000,000. Not a long note, I think three year, a three year note. But I had invested in a couple other small businesses at the time. Had assets, I had a home. Hadn't.
00:53:18 · Kenn Ricci, David Senra
[00:53:18] S1: The seller took a note of 27,000,000. Not a long note, I think three year, a three year note. But I had invested in a couple other small businesses at the time. Had assets, I had a home. Hadn't. [00:53:32] S0: Did you have to pledge the home or no? Oh yeah. That's what I gonna ask. Personal guarantee of everything. That's what I thought. Okay. That's what I was getting to. [00:53:37] S1: And it did have the $100,000,000 that from the, you know, used some of that, but I some net worth out there that was viable. [00:53:45] S0: Is this the company that becomes Flexjet? [00:53:47] S1: Yes. One more step and we're done. Okay. So I inherit Flight Options back. I decide the, the, capital's been invested. I need a new fleet of planes. So I look around the industry, who's got the best fleet? It's Bombardier. They have these Challenger 300s, which are super mid. This is where the market is going. There's these eight passengers, transcontinental, kind of the perfect fit for the shitty planes I have at the time that are... [00:54:11] S0: Can I pause there? Because like you said earlier, there like 5,000 private jets when you started in the industry in like the eighties or whatever that was. Then there's 35,000 today. I think I read like almost all of them are in America. Like what is America's share of that? [00:54:26] S1: 85% of the market. [00:54:27] S0: That's
00:54:27 · David Senra, Kenn Ricci
[00:54:27] S0: That's [00:54:27] S1: incredible. Yeah. People always ask me, what's your strategy for Asia? Don't need one. Don't need an Asian strategy. There's three flights a day over there. I'm doing 800 flights in The US. Like what are my strategy to get those last three flights? [00:54:43] S0: I mean, what are you [00:54:43] S1: thinking? Okay. [00:54:46] S0: So you need a new flight or you need new planes you go to Bombardier. Okay. [00:54:50] S1: So what I really want is the Challenger 300, but they have a company called Flexjet and they have exclusivity. They only have Challenger 300s. [00:54:57] S0: Okay. But Flexjet is also fractional ownership of this fund? [00:54:59] S1: Fractional ownership owned by Bombardier. Okay. Based in Dallas. But I caught a good sales guy. I caught this, I caught a guy who was head of sales that when I told him I wanted to buy 20 challengers, and at the time they were about 15,000,000 a piece. So when I came up with $300,000,000 order, he scratched his head and was like, am I really going to lose a $300,000,000 order because there's this non compete with a company we own? So he goes to Pierre Beaudoin, who was run the head of Bombardier, the family's owned Bombardier, the family's owned that company for years, still does control it. And I had known Pierre through YPO. He liked me. And he said, well, Ken knows aviation. And why don't you, he tells Steve, the head sales guy, why don't you see if he'd buy Flexjet? So I went to buy planes and they sold me Flexjet in 2014. [00:55:51] S0: Why did they want to get rid of it?
00:55:51 · David Senra, Kenn Ricci
[00:55:51] S0: Why did they want to get rid of it? [00:55:52] S1: Well, because again, they're in the manufacturing business. To be honest with you, they were financially struggling after the crisis. So picking up, I paid 180,000,000 for Flexjet. Picking that up was 180,000,000 they probably needed at the time. With the $180,000,000 came an order to buy 20 more aircraft. By the way, with the deal, they made me expand the order to have Globals, which I had no idea how I was gonna pay for. I had to buy 15 Globals and they were $40,000,000 a piece. And I did not have that $100,000,000 So where'd you come [00:56:21] S0: up with that 600,000,000
00:56:21 · Kenn Ricci
[00:56:21] S1: That's again, life is, life is funny. So we signed the deal. We're gonna buy Flexjet. Sign the deal, not knowing how you're gonna pay for the globals. Well, knew how to pay the 180. No. Like I did not know I was gonna pay for the global. I did not know how to do. So with the buying of 180,000,000, I placed a billion dollar order for Challenger 300s and Globals. And actually some Learjets, which they owned at the time too. So I placed the order, fingers crossed that we'll ever be able, we'll figure out how to pay for those airplanes later. I gotta get Flexjet in here. They call me up. We're going to close like in October. They call me up in September and I get the, by the way, I need to come see you. And I'm like, I'm toasted. I'm fucked on this deal because they're coming to tell me NetJets has beaten my offer. Because there's only three companies left at the time. There's Flexjet, Flight Options, and NetJets. These are the, or the citation shares too. But there's three big companies and that number two and number three are about to merge. And I figure Warren Buffett isn't gonna let this happen. He's gonna, he's in there. He's coming in to So up, take my I know they're coming to tell me. And they sure enough, they sit down and they go, we have a problem with NetJets. And I'm like, oh no. They had globals there also. And they were not, and Bombardier claims they were not aware that in the contract when they sold the globals to NetJets, it prohibited them selling them to me. So the message they had to convey was, We can't sell you the globals.