Creates Largest U.S. Aircraft Management Business

Gama Aviation Plc has announced the merger of its U.S. aircraft management and charter business with that of BBA Aviation Plc as of January 1.

With the addition of over 90 aircraft to Gama Aviation’s current U.S. managed fleet, the combined business, with over 200 aircraft under management, will become the U.S.’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 U.S. 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 U.S. - 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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.

"The enlarged business creates a market leader and an unrivalled platform for growing our share of this massive business aviation market," said Marwan Khalek, Chief Executive of Gama. "The combination diversifies our customer base and extends our network coverage nationally whilst simplifying the financial arrangements with our U.S. partners. As part of this strategically important transaction, we are also excited by the potential to cross sell our U.S. maintenance services into the enlarged fleet.”

"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," said Simon Pryce, Chief Executive of BBA Aviation. "We look forward to working with our partners at Gama Aviation to develop and grow the new company in the years ahead."

(Source: Gama Aviation news release)

FMI: www.gamaaviation.com