What’s Going On at Flight Options?
By Jeff Burger - June 1, 2010
When industry observers speculate about the future of the four biggest fractional-jet-share providers, the company that often prompts the most discussion is Flight Options. That’s because it has arguably undergone more change than its competitors while also lacking the protection afforded by being under a large corporate umbrella.
NetJets, the biggest and oldest of the four, suffered huge losses recently but has had the advantage of being part of Warren Buffett’s Berkshire Hathaway since 1998. And Richard Santulli, who introduced the fractional-jet-share concept in 1986, ran the company for more than two decades. (He stepped down last year and was replaced as chairman by David Sokol, who had headed another Berkshire-owned corporation.) Canadian aircraft manufacturer Bombardier founded Dallas-based Flexjet in 1995 and still owns it, while Textron’s Cessna Aircraft holds Greenwich, Conn.-based CitationAir (formerly CitationShares), whose CEO is founder Steven O’Neill.
Flight Options, while also currently run by its founder, is another story. Launched as an independent company in 1997, the Richmond Heights, Ohio-based firm merged with Raytheon Travel Air in 2001 and became a fully owned Raytheon subsidiary in 2005. That same year, the company’s pilots unionized and began four years of frequently acrimonious negotiations with Flight Options. (The pilots finally ratified a new contract this March.) Then, in November 2007, Raytheon sold the company to H.I.G. Capital, a private equity outfit. Meanwhile, Michael Scheeringa–who joined Flight Options in 2004 and became CEO two years later–replaced its whole senior management team and instituted changes that prompted half the sales force to quit.
More changes have occurred since then. For one thing, Scheeringa–who predicted to me in an interview for this magazine (February/March 2008) that H.I.G.’s involvement in the company would mean “only good things” for his future there–lost his job just months after we talked. (Scheeringa, now president of Signature Flight Support, declined to comment for this story.) In his place are chairman Kenn Ricci, who started the company, left in 2003 and returned in June 2008; and CEO Michael Silvestro, who worked at Flight Options from 2000 to 2005 and also came back in 2008.
Moreover, H.I.G. now holds only a minority stake in the corporation. About 75 percent of it has been owned since March of last year by Directional Capital, a firm led by Ricci, and Resilience Capital Partners, a Cleveland-based private equity outfit. Ricci, Silvestro and other members of the Flight Options management team also directly hold ownership stakes.
Like many of its competitors, the company has suffered in the economic downturn and is considerably smaller than it was just a few years ago. After several rounds of furloughs and layoffs, it has 687 employees, about the same number as a year ago but down from a reported 1,500 as recently as 2007. Its headquarters staff, which had totaled 500, is now less than half that size; and its fleet is shrinking. At this writing, it has 101 airplanes, down 20 from mid-2008.
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