STAR flying high with double deal

STAR Capital Partners, a UK-based fund that specialises in capital-intensive infrastructure investments, has bought and merged two flight simulator businesses as it continues to tap into the airline industry’s trend towards outsourcing.

STAR Capital Partners, a London-headquartered private equity firm, has paid $275 million (€212 million) for two companies that provide flight simulator training for pilots.

STAR has acquired a majority stake in General Electric’s Commercial Aviation Training division, and also bought the Flight Academy business of Scandinavian airline SAS, in a deal which values the two companies at $275 million.

It now plans to merge the two businesses, which had combined revenues of $110 million in 2006, to create one of the world’s leading flight training companies.

The former GE division is the second biggest pilot training operation in Europe, operating 23 flight simulators that are used by the likes of First Choice and BMI. It also has access to 55 simulators through a network of global partners, including Cathay Pacific and Air Canada.

Flight Academy focuses largely on Scandinavia, where it is the market leader with 17 flight simulators. Scandinavian Airlines is its biggest customer.

The combined operation will be run by Brian Simpson, current head of the GE division, “supported by” Flight Academy head Olaf Barve. Paul Gough, a director at STAR who led the deal, said the business tapped into two key trends: the shortage of trained pilots and the continuing drive by airlines to outsource support services.

STAR has previously enjoyed success in the same industry with SR Technics, an airline maintenance group that it bought as part of a consortium in December 2002. The company yielded a 4.5 times return on STAR’s initial investment when it was sold to a group of United Arab Emirates-based investors for about €1 billion last September.

Frank Turner, a former chairman of SR Technics who has been appointed chairman of the combined group, said the divisions did match STAR’s investment profile. “Both companies represent businesses that, when funded and run in-house are highly capital intensive and require significant management input.” STAR could now enhance the offering through economies of scale, he added.

GE will retain an equity stake of just under 20 percent in the combined operation.