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Wednesday, Oct 4, 2023

Questions Fly In Airport Sale

The sale of Maguire Aviation’s operations last month will leave Signature Flight Support dominating the business of providing fuel and other services at Van Nuys Airport. It also could draw the attention of the Justice Department, which has scrutinized similar deals with Signature in the past. The Orlando-based aviation company, the largest fixed-base operator (FBO) in the country, is growing from one location to six, the most by a single leaseholder at the airport. Airport observers say that smaller aviation firms may not be able to compete. “If I were a small operator I would be very concerned,” said Bob Rodine, a Sherman Oaks consultant who works with clients in the aviation industry and a long-time observer of the airport. Signature acquired Maguire’s aviation businesses for $69 million, which includes three facilities that sell fuel, service aircraft and provide hangar space; a 43,000-square foot building that TWC Aviation leases as the tenant; and the terminal building constructed by Maguire with business aircraft operator NetJets Inc. as the tenant. Maguire, owned by real estate developer Robert Maguire, still retains entitlements to make roughly 480,000 square feet of improvements in hangar and office space at some properties. In total, Signature, owned by BBA Aviation plc, a global aviation company headquartered in London, will have nearly 2 million square feet of hangar, ramp, passenger lounges and offices space over 57 acres at the airport. The deal still needs to be reviewed and approved by the Los Angeles Board of Airport Commissioners, which oversees operations at the city’s three airports, including Van Nuys. What’s more, past Signature acquisitions have drawn the attention of the U.S. Department of Justice. In 1997, 1999, 2001 and 2008, Signature was required to sell off operations it had purchased at various airports around the U.S. because the firm would have monopolized fuel sales and other services at those airports. Robert Maguire and representatives from Signature declined to discuss the deal in detail as it had not yet finalized. However, Van Nuys Airport General Manager Jess Romo said he does not believe that the deal with give Signature a stranglehold on the fuel and aviation services business at the airport. “The market dynamics are showing that as long as the FBOs themselves can maintain an attractive product there is business there for all the facilities on the field,” he said. The other facilities selling fuel at the airport are Clay Lacy Aviation and Castle & Cooke Aviation Services. Castle & Cooke did not respond to calls for comment. However, the sale is being backed by the other fixed base operator, Clay Lacy. “Signature Flight Support is a long-standing and reputable fixed-base operator at Van Nuys Airport,” said Brian Kirkdoffer, president of Clay Lacy Aviation. “All investments that promote job creation and a healthy business environment are good for both the airport and local community.” Money problems In buying up Maguire’s operations, Signature was able to capitalize on the financial struggles of its owner, a legendary figure in L.A. real estate who developed downtown’s U.S. Bank Tower in the 1980s. His side business of Maguire Aviation began taking on leaseholds at Van Nuys Airport in 2006 with its purchase of Petersen Aviation. The firm later added to its holdings by buying up other aviation businesses, financed mostly by loans. At the time, Maguire was buying into the busiest general aviation airport in the world. Then the recession hit and the airport suffered. Small aviation-related business such as flight schools and maintenance shops closed their doors. Airport operations dropped significantly for both business jets and propeller aircraft. That, coupled with debts from other real estate holdings, led to financial struggles for Maguire. His company failed to make improvements to airport properties as required by the leases. The heavy borrowing, including loans from Pacific Western Bank and the R.E. & M. Petersen Living Trust, also led to legal problems. Pacific Western went to court in June to force Maguire Aviation into receivership, which never went through. Also, Maguire personally lost a business park and undeveloped property in Texas to foreclosure in 2011 after defaulting on $360 million in loans. And he sold shares in his former company, now called MPG Office Trust Inc., to make debt payments to Wells Fargo & Co. In a prepared statement Maguire said “a portion of the proceeds (from Signature) will be used to retire all Maguire Aviation debt.” Signature entered the Van Nuys market in 2008 when it acquired the aviation facilities operated by Hawker Beechcraft at seven airports in the U.S. The Hawker acquisition was one of the deals scrutinized by the Justice Department which led to a lawsuit and a settlement requiring Signature to sell the Hawker facilities at Indianapolis International Airport where Signature already had a location. It wasn’t the first time that the company was required to take such action. In 1999, for instance, the company was acquiring AMR Combs Inc., another FBO chain. To get Justice Department approval, Signature had to sell flight support businesses at Palm Springs, Bradley International in Hartford, Conn. and Denver Centennial Airports. Signature and Combs were direct competitors at Palm Springs and Bradley. “Without the divestitures, customers would likely have paid higher prices for aviation services at all three airports,” the Justice Department said in a release at the time. In 1997, Signature also sold off a business at Palm Beach International Airport in Florida in order to consolidate operations, and in 2001 divested itself of a location at Orlando International Airport. Stiff competition But Romo, manager of the airport, said there were real positives in having fixed base operators with the size and reputation of Signature expanding its operations at Van Nuys. He called the acquisition a sign to the business aviation community that the airport remains a premier location. “That somebody is looking to do this now reinforces that the business cycle is positive for the long term,” he added. And while Rodine, the consultant, has concerns over Signature’s potentially dominant position in the market, he doesn’t anticipate the other operators will be going anywhere. He expects especially heated competition between Signature and Clay Lacy Aviation, the first charter and management firm at Van Nuys Airport when it opened in 1968. In the face of competing FBOs and economic downturns, Lacy has lasted at the airport it’s called home since the 1950s, Rodine noted. “Clay Lacy knows how to compete and has been able to survive,” he said. Meanwhile, Maguire is not out of the picture, with the Signature deal leaving him development rights to build some 480,000 square feet of hangar, ramp and office space. But it may be some time before any new construction occurs at the airport. The airport’s development plan calls for a measured approach to putting space on the market as demand calls for it. “It should not be built on spec, but built to suit so we are not all scrambling for the same piece of pie and damaging the viability of the airport,” said Curt Castagna, president of the Van Nuys Airport Association and president of the Aerolease Group that has hangar space at the airport.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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