As reported yesterday in MEBA Convention News, Gama Aviation and Hangar8 have announced a merger that will create one of the world’s largest managed business aircraft fleets. The deal is scheduled to be signed on January 6, following approval by Hangar8’s shareholders. The new entity, Gama Aviation plc, is to be headed by current Gama CEO Marwan Khalek and will have 144 aircraft under management in 15 countries.

“For us it’s a great platform,” Khalek told AIN at Gama’s MEBA booth. “This is the start for us.” Scale is one factor driving the merger. “We’re in an industry that’s very fragmented,” explained Khalek. “Even the larger operators don’t have much market share. We have a growing market again, but meeting regulations can be expensive. I don’t see this business being sustainable with fewer than 15 to 20 aircraft.”

In Europe approximately 80 percent of AOC holders operate fewer than five aircraft. To make the jump beyond that requires investment, said Khalek. “This business needs to mature. For the small operator it’s difficult to cross the boundary. The jump requires access to funds, and there’s a lot of risk.”

Gama Aviation plc will be a publicly traded company (as Hangar8 has been for several years). According to Khalek, transparency of finances will attract investment more easily and also make the company more attractive to other entities in terms of mergers and acquisitions.

Growth through further mergers and acquisitions is one avenue that the new company will explore, although organic growth remains central to its plans. “New owners are favoring scale operators,” noted Khalek. “With our size we hope to take on a larger chunk of that business, as well as competing for re-tendered contracts.”

Although aircraft management and charter are the most visible and glamorous elements of the business, Khalek stressed that the new company will also concentrate on “bread and butter” activities, for example contract work for clients such as the UK MoD and clients in Africa, which already contribute significantly to revenue, along with its MRO, ground support and FBO activities. Further mergers and acquisitions could well be made in those sectors, Khalek indicated.

Hangar8 and Gama Aviation began exploring a merger at EBACE in May. Although both are based in the UK, the two companies make a good fit geographically, with Gama active in the U.S. and Middle East, and Hangar8 in Africa. Where the two overlap, principally in Europe, there are some opportunities to streamline operations. While the new company sees Africa as an important region of opportunity, Khalek warned that “We shouldn’t lose sight of the core markets.”