Did I–or Did I Not– Just Purchase an Airline?

07-19-2016   When a major business news network reported that our Consultancy had purchased an airline, electric fans everywhere issued warnings for upcoming attacks of semi-solid material. That age-old quote about “what’ hits the fan” tended to escalate within minutes. And the best part was, none of it was true to start with—we didn’t purchase an airline. But we learned quickly that media reports, put out by so-called “reputable media sources” are often not only accepted and reported at face value, but, instead, take on a life of their own, growing either exponentially or logarithmically—whichever is typically faster. I forget. You get the drift. One media source depends on another source, which depends on another source—maybe stretching the story just a bit to gain more traction. Do you remember that old schoolyard game called “telephone” where you start a message at one end of a line of people and see what comes out at the other end of that line? That seems, quite often, to occur in today’s media. “First-est with the most-est” doesn’t always mean “most-est with the best-est.”

So, one asks, what in the world started this inane process and built us into a corporate raider…a powerhouse in finance…a “regional airline giant?” Here’s what we explained to Counsel, who woke me up in a panic shortly after 7 AM, sharing that “XXX is reporting you have purchased an airline. Did you intend to advise me about this at some point?”

The Principal Facts

Indisputable Fact # 1: We had participated with another Consultancy in bidding for the upgrade of an airport facility in the Caribbean. One of our group knew of, and suggested we include, a renowned facility design group from Europe; we added in lenders from a hedge fund and an insurance group we knew from both the USA and Europe who had expressed some interest in offering funding resources, an experienced airline advisory team–which principally knew of idle aircraft available worldwide, and a couple of other groups who lent specific knowledge and expertise to the project. In other words, a fairly standard project team for what might turn out to be a $35 to $45 Million project.   Our principal participation partner knew the various governmental employees managing the project from their side, to whom we were introduced—and we had several meaningful and successful discussions.

Indisputable Fact # 2: During one of the far-ranging discussions, the topic of airline management, growth, strategic planning and necessary metrics for success arose, and with various members of our group having worked with two start-up airlines at that point—one domestic and one international—we shared some simple basics of the airline business as we knew them, comparing results of a government-owned airline with a privately-owned entity as to both differences and expectations. Our Consultancy is often called upon to offer expertise across a variety of areas, sometimes on a paid basis, and sometimes pro-bono. It’s always been our belief that all good Consultancies should do this.

When the airline next reported financial results—beyond dismal, to say the least– a theoretical question about what one might offer for a large equity chunk of the airline was put. After several valuation attempts to arrive at a number we believed might be acceptable but—more importantly–fundable, we shared what we believed the value represented–as offered—might be worth. We believe that Purchase Value represents what a willing buyer will pay to a willing seller, and our comments were tailored to that argument.

Here’s where the “media spiraling out of control” definition is clearly dictated, especially as it applies to airlines.

Indisputable Fact # 3: Even without formal tenders, bid documents, loan guarantees, or any type of due diligence on our Consultancy of which we were aware, government officials decided to take it upon themselves to announce to the working press that we were in final negotiations and were expected to be welcomed as the new owners of a large equity portion of XXX airline.   Shortly. As a matter of fact, the evening news, on their local TV, called me that very day for comment—wanting to interview me on the telephone, which I allowed—speaking as a Consultant and unafraid to speak to work product that I had already produced. I understand that TV used my Linked In photo as the static photo for their segment, leading me to advise you, at no charge, to always be sure you use your best selfie on social media.  You just never know where it will show up.

A Bit More Questionable Factoids: Media, however, reported our attempt to be helpful as a sale and a “done deal,” causing great consternation among airline executives, pilots, mechanics, and union leaders, who—for reasons completely unknown to me—decided I was anti-union, anti-employee, and bad for business opportunity. My image was already being built in the media as a corporate raider based on one interview and a photo; the most anyone had seen of me was a headshot. Within 12 hours, media reported that we had purchased the airline and were closing the deal immediately. And instead of my alarm clock the next morning, Counsel called, asking if I had any plans to advise him of the purchase.

To Wit: Needless to say, we didn’t purchase the airline.

Where Was the Fail? Aside from the fact we didn’t purchase anything, one has to back up and decide—at what point did our group made a mistake? The ultimate answer is — we didn’t. But mistakes were made.

Lessons Learned: Although our Consultancy offers all of our clients clear and compelling expertise in various strategic processes required to minimize costs and maximize profits, and we do understand the importance of airline scheduling/ pricing/ linkage and control, somehow we just didn’t see it as critical to raise several millions of dollars to take over and guarantee a large chunk of existing and new debt. Nor are we experts in fuel hedging or aircraft types and benefits.

  • We did learn an immense amount about dealing with the media.
  • We learned that there is a “process” for dealing with the media on a newsworthy event.
  • We gained an immense amount of knowledge about the “political process”—how things happen– and we are now clearly able to see what occurred with us then, and what is happening around us every day, now, as we are bombarded by stories which are so often spinning out of control.
  • We have learned to assess a story and to try to understand what the “narrative” for a story might be and either get ahead of that narrative, or use the narrative for a client’s benefit. Or—do what we so often will do– simply go with a third option.

Summation: If you hear our group has bought an airline, don’t believe it until you confirm it with us.

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