Flexjet to buy first long-haul planes as private flying grows
CHICAGO (Reuters) - Flexjet, the corporate jet leasing company, plans to add up to 50 long-haul aircraft to its fleet in a potential $3.2 billion deal that could mark its first use of Gulfstream aircraft, as a change in Flexjet's ownership may wean it from Bombardier jets.
Earlier this month, Bombardier Inc BBdb.TO agreed to sell its Flexjet unit, a move that will give Flexjet more flexibility in the types of aircraft it buys.
"Currently, Flexjet does not have a global Gulfstream 650 type aircraft in our fleet, so we are looking at purchasing that type of aircraft into our fleet in the near future," Flexjet president Deanna White told Reuters at an industry event in Chicago.
Gulfstream is a unit of General Dynamics (GD.N) and its G650 jet sells for around $65 million. Bombardier's Global fleet, which typically competes with the shorter-range Gulfstream 550, goes for around $40 million for the Global 5000 to $52 million for the XRS.
The Canadian company is working on its next generation Global fleet: the 7000 is expected to fly in 2016.
Based in Richardson, Texas, Flexjet was started in 1995 by aircraft and train maker Bombardier as a captive customer for its business aircraft, which includes Learjets and Challengers.
Bombardier agreed early in September to sell the company to Directional Aviation Capital Group, opening the door for Flexjet to purchase non-Bombardier jets. The $185 million sale came with an order from Flexjet for up to 245 Bombardier business jets, worth $5.2 billion at list prices.
The order for long-haul jets would be in addition to those, adding to Flexjet's current fleet of 80 planes capable of short and medium-haul flights.
Long-haul aircraft are those that can typically fly more than six nonstop hours and are used on international flights.
White said improvement in the U.S. economy is prompting Flexjet to focus on a growing demand among its customers for international travel.
Flexjet has long been No. 2 in market share to NetJets Inc - which is owned by Warren Buffett's Berkshire Hathaway Inc (BRKa.N). Netjets fleet includes the Gulfstream G550 and Bombardier's Global 6000, both of which are capable of flying long distances.
Ohio-based Directional Aviation, headed by Kenn Ricci, owns a group of companies in the aviation business. Speaking by phone with Reuters, Ricci said Flexjet plans an initial order of between 25 to 50 long-haul planes in 2014.
"If we make the orders early next year, it'd be about 18-24 months before we can begin service," Ricci said.
White and Ricci each said Flexjet was looking at products from both Bombardier and Gulfstream, but neither would say if the company was in advanced talks with either plane maker.
Bombardier did not immediately respond to calls and email for comment. Gulfstream spokesman Steve Cass said the company could neither deny nor confirm a potential deal with Flexjet.
White, who has been asked to continue to lead the Flexjet team after the deal closes, said Flexjet's domestic business has grown since the Dow Jones industrial average first hit 15,000 in May, prompting corporations to open their wallets and spend more on luxury products.
"There is demand and uptick in emerging markets and you see businesses going into emerging markets, someone has to take them there. Our business is growing as our clients expand into these markets," White said, adding that expansion was greatest in Asia, South America, the Middle East and in parts of Europe.
(Reporting by Nivedita Bhattacharjee in Chicago; Editing by Bob Burgdorfer)