Corporate Jet Investor – “Milestone Aviation Takes Off”

Corporate Jet Investor – By Alasdair Whyte

William Kelly, the chief executive officer of Milestone Aviation, is clearly enjoying himself. Having stepped down as CEO of NetJets Europe a year ago, he and the rest of the management team are relishing the new challenge.  Milestone, a dedicated helicopter and business aircraft leasing company, only launched in August but has already bought and leased two new helicopters and has four others deals that are close to signing.

“The fun part about any business is growing it,” says Kelly, the former CEO of NetJets Europe. “We took NetJets Europe from 16 aircraft and 89 customers to 165 aircraft and 1,600 customers. Managing a big company is enjoyable, but for me the really fun part is building the business even the times when you have to clean the toilet when there is no-one else to do it!”

While the company is in start-up mode it will not be a small business for long. With Richard Santulli, the founder of NetJets as chairman; Kelly; and five other former senior NetJets executives; $500 million in equity; and offices in Dublin and Columbus it has cash to invest; and is already hiring.

Milestone is principally a helicopter jet leasing company. Kelly says that it eventually expects its portfolio to consist of 80% helicopters and 20% business jets. But the company is keen to take advantage of distressed business jet prices and the management team’s expertise and contacts in the short-term.

“With helicopters our intention is to hold on to them following the expiration of the initial lease. At the end of the lease we will either seek to have the original operator extend the lease or we’ll look to place the helicopter with another operator,” says Kelly. “But with business jets our intention is to sell them at the end of the lease. As business jets are currently undervalued, distressed assets we hope to sell them for a profit of 5%-10%.”

They are only interested in buying pre-owned jets and only expect to concentrate on this market while prices are low. Although they have bid on several private jets they have not yet had an offer accepted. They are also talking with several banks about buying business jet portfolios but Kelly says that it is not a top priority.

Kelly says that they are looking to grow the portfolio to a value of between $4 billion and $ 5 billion within five or six years.

Launching the business

Although most of the team’s experienced is in business jets, Santulli has financed helicopters before NetJets when he ran RTS Helicopter which focused on offshore oil and gas leases in the Gulf of Mexico.

“Before NetJets Rich ran the world’s largest helicopter leasing company,” says Kelly. “After leaving NetJets he looked at the market again and realised that nothing had changed. Helicopters had got bigger and more expensive but no easier to finance.”

Santulli started working on Milestone in October 2009 with a number of colleagues. Kelly joined in March 2010.

Credit Suisse organised road shows in the Middle East and US in April and Milestone spoke to about 40 private equity companies and sovereign wealth funds in total.

Kelly says they had a number of offers but agreed a deal with, lead investor, The Jordan Company and Nautic Partners investing $500 million between them in August. Kelly says one of the things that attracted them to Jordan was that it was prepared to take a longer-term view than many.

The company is registered in Bermuda but based in Dublin to benefit from tax breaks and Ireland’s numerous double-taxation treaties which make it easier to lease foreign-owned assets like aircraft into different countries. Ireland is the base for most of the world’s aircraft leasing companies for this reason. To qualify for the tax advantages companies have to base a significant part of their operations in Ireland. It also helps that Kelly, the company’s CEO is an Irish citizen.

Financing Milestone

Milestone’s financing strategy is different to that of most start-up commercial aircraft leasing companies. This includes Avolon, led by Domnhal Slattery former head of RBS Aviation Capital who then tried to launch air taxi company JetBird, and Steven Udvar-Hazy, the founder of AIG -owned International Lease Finance and now CEO of Air Lease Corporation.

Avolon and Air Lease have chosen to raise debt now to allow them to leverage deals. While Milestone plans to borrow debt later at the moment it is only using the $500 million in equity that it raised.

Most private equity firms like aircraft lessors to use debt straight away to increase returns and lessors are typically looking for long-term debt to match long-term assets (helicopters can have economic lives of over 20 years).  Although pre-owned aircraft should give higher returns so leverage is less important.

“We wanted the $500 million so we could go out and close deals straight away,” said Kelly. “Customers know we can close deals quickly and have all the funding in place to invest $500 million anywhere in the world.”

He says that Milestone is likely to borrow debt in about 18 months to two years and that it will do it on a corporate basis rather than using the portfolio to secure deals. Milestone will be probably be leveraged by between 55% and 65% when they raise debt allowing them to grow a $1.1 billion portfolio with the $500 million of equity they have now.

Global opportunities

Kelly says that they expect 70% of the portfolio to be from outside North America. While most of the business jets they buy will be from the US or Europe, the helicopter business is focused on emerging, commodity rich, markets of Latin America, Africa, southeast Asia and Australia.

“While we see opportunities with the big operators our key market is small-to-medium sized helicopter operators,” says Kelly. “We are just as keen to do deals in Indonesia or Brazil as we are in the US.”

The other big advantage of these markets is that they are less competitive. Milestone is still competing with banks to finance aircraft and, of course, operator’s own cash. Kelly says Milestone’s focus on helicopters and pre-owned aircraft sets it apart from banks which view these as small niches. It is also offering 100% financing.

Unlike many commercial aircraft lessors, Milestone is not planning to place speculative helicopters orders with manufacturers. It will acquire new helicopters through sale/leasebacks with customers. As it is possible to rebuild much of a helicopter’s value through maintenance and replacing parts the average age of the fleet will be less important to Milestone that to commercial aircraft lessors.

Moving fast

This is the third business that Santulli has created since leaving his job running Goldman Sachs’ equipment leasing – RTS Helicopters, Executive Air – later NetJets – and all of them have been fast growing entrepreneurial companies where decisions are made quickly. One example of this at Milestone is its promise to get back quickly to all potential customers.

“We tell them that they may not like the decision but we will get back to them within five days with a decision,” says Kelly. He contrasts this with his time at Proctor & Gamble – which he stresses is a “great, great company” – where he would need to submit a 90 page memo to raise the price of shampoo by around 10 cents.

“We are still a small team so it does not take long for the team to review deals,” said Kelly. “As an accountant and former CFO I am having a fantastic time doing nerdy things like looking through customer’s financial statements.”

And he has not yet had to clean the toilet.

AIN – “Santulli Returns to Bizav with Leasing Company”

Aviation International News – By Matt Thurber

Richard Santulli, founder of fractional-share company NetJets, is back in the Aviation business with a new business jet and helicopter leasing company called Milestone Aviation Group.  Santulli, 66, resigned from NetJets last August but said at the time that he would remain a consultant to the company for a year.  Warren Buffet’s Berkshire Hathaway bought NetJets in 1998 for $725 million.

Milestone Aviation is headquartered in Dublin, Ireland, and Santulli is chairman of the new venture.  Before launching NetJets, Santulli was in charge of equipment leasing for Goldman Sachs Leasing and founded helicopter leasing company RTS Helicopters.  William Kelly, former CEO of NetJets Europe, is Milestone’s CEO.

Milestone is starting with $500 million of equity capital provided by private equity firm The Jordan Company, which is leading the investment team, and partner Nautic Partners.  Milestone will purchase aircraft selected by customers then lease the aircraft to the customer.  The lease covers new, pre-owned and sale-leaseback transactions and customers are responsible for all operating costs for the leased aircraft.

Milestone has already signed one firm customer and is working on deals worth about $110 million in Brazil, Canada and Nigeria, according to Santulli.  He expects about 80 percent of Milestone’s business to be helicopter-related, with business jets accounting for the remainder.  Milestone will lease only turbine-powered aircraft, and helicopters will be available only for customers who use them for revenue-producing purposes such as oil and gas work and aeromedical operations as well as private and government search-and-rescue activities.  About 70 to 75 percent of the helicopter leases will involve oil and gas operators, he said.  The customers that Milestone will partner with have excellent operational and maintenance records, he added, but their balance sheets might be stretched to the point that it’s difficult to obtain traditional financing, making it hard to bid on contracts.  “We are looking to play a predominant role in providing lease financing to companies that otherwise have a difficult time raising financing,” he explained.

Business jet buyers will be able to obtain short-term leases through Milestone, which will offer lease periods as low as one to three years and limit customers to about a dozen jet types.  No deals involving fractional shares will be considered.

Customers will be monitored closely and will have to meet Milestone’s standards for operating and maintaining their aircraft.

Santulli said that he decided to return to the aviation business because in consulting with Kelly and other team members he saw that there wasn’t much competition in the helicopter and business jet leasing arena.  “We felt that we had the ability to service that market well,” he said.  “I believe we will build a successful company and provide help to companies that otherwise would not be able to bid on these contracts.”

Press Release – “Milestone Aviation Group Launches Unique Helicopter And Private Jet Leasing Firm”

Richard Santulli Returns to Aviation with US$500 Million Financing

SUMMARY:

  • Chairman is Richard Santulli, founder of private jet fractional ownership, NetJets, RTS Helicopters
  • Unique focus provides much-needed lease financing to helicopter and private jet communities
  • Secures US$500 million of equity capital

DUBLIN, IRELAND AND COLUMBUS, USA, August 4, 2010 – Milestone Aviation Group, the first global specialty finance company focused exclusively on the helicopter and private jet markets, today announced that it has secured US$500 million of equity capital commitments to launch its business.  U.S. middle-market private equity firm The Jordan Company led the investor team, in partnership with Nautic Partners.

The launch marks the return of Richard Santulli to the aviation industry.  Milestone is the culmination of Santulli’s nearly 40 years of experience in helicopters, private jets and finance.  Santulli is best known for inventing the fractional jet ownership industry and growing NetJets into a successful multinational corporation and one of the world’s premier brands.  Prior to starting NetJets, he founded and grew RTS Helicopters to become the world’s largest helicopter lessor, and ran equipment leasing for Goldman Sachs.  Santulli serves as Chairman of Milestone’s Board of Directors.  He and the rest of Milestone’s management team have purchased, operated and financed more private aircraft than anyone in the world.

“Milestone brings together my experience in helicopters, private jets and finance to address an important and underserved market niche,” said Santulli.  “Starting a new business when I see a marketplace opportunity is what I love to do.  Today, many good helicopter operators worldwide cannot get access to capital despite a demand for their services.  At Milestone, we believe the quality of an operator should be defined by more than just its balance sheet.”

“No one knows this industry better than Richard Santulli and the Milestone team,” said John W. Jordan II, Chairman and Managing Principal of The Jordan Company.  “We couldn’t imagine a more highly qualified partner for this deeply compelling market opportunity.  In the future, I suspect that people will point to Milestone as yet another example of this management team’s visionary leadership.”

Unique Focus on Helicopters and Private Jets

Headquartered in Dublin, Ireland, Milestone is the first global specialty finance company focused exclusively on helicopters and private jets.  Milestone provides aircraft owners and operators worldwide with personalised financing options not otherwise available.  The Company offers 100% financing on new, pre-owned and sale-leaseback transactions.  Customers select their own aircraft and, following a credit review process of 3-5 days, Milestone purchases the aircraft and enters into a lease agreement with the customer.  Customers operate the leased aircraft and cover all operating costs without bearing residual risk.

“Our entire management team has experience in running an aviation company, which helps us uniquely understand our customers’ needs,” said William Kelly, Milestone’s Chief Executive Officer who most recently was the CEO of NetJets Europe.  “We understand safety, flight operations and maintenance.  We believe it is important to look beyond a company’s capital structure into the hangar and cockpit to evaluate the true quality of an operator.”

In the helicopter market, leasing enables customers to stretch their capital further and allows them to compete for lucrative contracts.  Key markets include:  oil and gas exploration and production; air medical service; search and rescue; law enforcement; environment; construction; Coast Guard and other government contracts; fire fighting; forestry; mining; and utility work.

In the private jet market, leasing allows customers to free up capital and avoid residual risk.  Target customers include public and private corporations, high net worth individuals and customers looking for an interim solution while they await a future delivery.

“Milestone offers us another compelling opportunity to invest in the leasing of transportation related assets,” said Richard Caputo, Managing Principal of The Jordan Company.  “We see strong growth drivers for the business and think the Milestone team is uniquely qualified to capitalise on this underserved market.”

Milestone’s Team

The Company is led by an experienced executive team that has purchased, financed and operated billions of dollars of private aircraft – more than any other group in the world.  The team includes individuals with a broad range of experience, including prior management experience in aviation and other industries, as well as leadership in top global financial, capital markets and legal firms.


NOTES TO EDITOR

About Milestone Aviation Group

Milestone Aviation Group is the first global aircraft leasing company exclusively focused on helicopters and private jets.  Headquartered in Dublin, Ireland, and with operations in Colts Neck, New Jersey and Columbus, Ohio, Milestone’s global aircraft leasing platform addresses the needs of a transforming marketplace.  Further information is available at www.milestoneaviation.com.

Full management team bios are available at www.milestoneaviation.com/about/.

About The Jordan Company

The Jordan Company (www.thejordancompany.com), founded in 1982, is a leading middle-market private equity firm with over $5 billion of assets under management and a successful track record of investing in and growing businesses across a wide range of industries.  The firm’s partners have been investing together for more than two decades, establishing The Jordan Company as one of the most experienced and stable investment teams in private equity.  Headquartered in New York, The Jordan Company also has offices in Chicago and Shanghai.

About Nautic Partners

Founded in 1986, Nautic Partners is a middle-market private equity firm with over $2.5 billion of equity capital under management.  The firm has completed over 100 transactions in partnership with management teams and delivered successful results to investors for over three decades.  Nautic invests in companies with proven business models, defensible market positions, and strong growth potential.  Areas of focus include business services, manufacturing, healthcare and communications.  Milestone is Nautic’s sixth investment from its most recent fund, Nautic Partners VI.  For more information visit www.nautic.com.

About the Private Placement

The Company intends to use the proceeds of the private placement to acquire and lease helicopters and business aviation aircraft.  Credit Suisse Securities (USA) LLC served as the Company’s placement agent for the transaction.  Milestone was advised by the law firms of Clifford Chance US LLP and Proskauer Rose LLP.  Acting as legal counsel for The Jordan Company were Mayer Brown and Winston & Strawn LLP.

Original Equipment Manufacturers

Milestone will be purchasing and leasing aircraft from the following companies:

HELICOPTERS

  • AgustaWestland (a Finmeccanica company)
  • Bell (a Textron company)
  • Eurocopter (an EADS company)
  • MD Helicopters
  • Sikorsky (a United Technologies company)

PRIVATE JETS

  • Bombardier
  • Cessna (a Textron company)
  • Dassault Aviation
  • Embraer
  • Gulfstream (a General Dynamics company)
  • Hawker Beechcraft

MEDIA CONTACTS

FOR MILESTONE: US
Kekst & Company
Eric Berman/Paige Gruman
+1 (212) 521-4894 or +1 (212) 521-4876

FOR MILESTONE: IRELAND
Pembroke Communications
Michael O’Keeffe/Nikki Latchford
Office: +353 (0)1 649 6486
Cell: + 353 87 8854072 or
Office: +353 (0)1 649 6486 Cell: +353 86 1026811

FOR THE JORDAN COMPANY
Stanton Public Relations & Marketing
Alex Stanton
+1 (212) 780-0701

Asset Finance Europe – “A “Milestone” For The Aviation Industry As Helicopter and Private Jet Lessor Sets Up In Dublin”

Asset Finance Europe – By Paul Walsh

Milestone Aviation Group (Milestone) the first global specialty finance company for the helicopter private jet market is setting up in Dublin after securing $500m in equity capital commitments.  US middle-market private equity firm The Jordan Company led the investor team, in partnership with Nautic Partners.

Santulli is back in business

With the launch, aircraft financing guru Richard Santulli returns to the aviation industry.  Santulli has nearly 40 years of experience in the helicopter and private jet business and will be chairman of Milestone’s board of directors.  Santulli is best known for inventing the fractional jet ownership industry and growing NetJets into a successful multinational corporation.

Before starting NetJets, he founded RTS Helicopters which quickly became the world’s largest helicopter lessor.  Santulli also ran equipment leasing for Goldman Sachs.  He and the rest of Milestone’s management team have purchased, operated and financed more private aircraft than anyone in the world.

“Milestone brings together my experience in helicopters, private jets and finance to address an important and underserved market niche,” said Santulli.  “Starting a new business when I see a marketplace opportunity is what I love to do. Today, many good helicopter operators worldwide cannot get access to capital despite a demand for their services.  At Milestone, we believe the quality of an operator should be defined by more than just its balance sheet.”

“No one knows this industry better than Richard Santulli and the Milestone team,” said John W. Jordan II, chairman and managing principal of The Jordan Company.  “We couldn’t imagine a more highly qualified partner for this deeply compelling market opportunity.  In the future, I suspect that people will point to Milestone as yet another example of this management team’s visionary leadership.”

Dublin is the place to be for aviation leasing

Milestone will be based in Dublin where it plans to create 40 new jobs.  Chief executive William Kelly, former chief of NetJets Europe said “For aviation leasing there is only one place to be based, and that’s Dublin,” said Kelly, who highlighted the importance of Ireland’s skill set and tax infrastructure.

The company will launch with a staff of four, but Kelly expects job numbers to grow to about 40 within 18 to 24 months.  Although Milestone executives sound confident about the future, the company is striking out in difficult terrain.  Its launch follows financier Domhnal Slattery’s failure to date to get his executive jet business, JetBird, off the ground. Jetbird planned to buy 100 very light jets (effectively small air taxis) and rent them out to top execu-tives all over Europe. This year it cancelled its original aircraft order with Brazilian aircraft manufacturer Embraer.

100% financing on new, pre-owned and sale-leaseback transactions

Recent statements from Milestone say it will succeed where others have failed. “Our entire management team has experience in running an aviation company, which helps us uniquely understand our customers’ needs,” said William Kelly. “We understand safety, flight operations and maintenance.  We believe it is important to look beyond a company’s capital structure into the hangar and cockpit to evaluate the true quality of an operator.”

The Company offers 100% financing on new, pre-owned and sale-leaseback transactions.  Customers select their own aircraft and, following a credit review process of between three to five days, Milestone purchases the aircraft and enters into a lease agreement with the customer.  Customers operate the leased aircraft and cover all operating costs without bearing residual risk.

Milestone will target any sectors where helicopters or private jet aircraft are needed.  These may include oil and gas exploration and production, air medical services, search and rescue, law enforcement, environment, construction, coast guard and other government services, fire fighting, forestry, mining, and utility work.

Capitalising on an underserved market

Leasing is popular for businesses interested in private jets because it allows them to free up capital and avoid residual risk.  Milestone says it will target public and private corporations, high net worth individuals and customers looking for an interim solution while they await a future delivery.

“Milestone offers us another compelling opportunity to invest in the leasing of transportation related assets,” said Richard Caputo, managing principal of The Jordan Company.  “We see strong growth drivers for the business and think the Milestone team is uniquely qualified to capitalise on this underserved market.”

Milestone is led by an experienced executive team that has purchased, financed and operated billions of dollars of private aircraft – reportedly more than any other group in the world.  The team includes people with a broad range of experience, including prior management experience in aviation and other industries, as well as leader-ship in top global financial, capital markets and legal firms.

Dow Jones’ Private Equity Analyst – “Jordan, Nautic Investing $500M in Milestone Aviation”

Dow Jones’ Private Equity Analyst – By Daniel Hausmann

Dublin — Jordan Co. is leading a $500 million investment in new aircraft-finance business Milestone Aviation Group Ltd.

Nautic Partners LLC also is investing in the deal. The specific breakdown of ownership stakes hasn’t been disclosed.

Richard Santulli, chairman of Milestone, was a co-founder of NetJets Inc. The company’s chief executive, William Kelly, was previously chief executive of NetJets Europe. Santulli, Kelly and others started putting Milestone together over seven months ago.

They met with a number of private equity firms and settled on Jordan and Nautic, Santulli said. He said he has known Jordan Chairman John Jordan for over 20 years.

The company will focus on providing financing for helicopters and private jets–a contrast from earlier private equity deals in aircraft leasing that focused on commercial planes.

“We know a lot about private jets, we know a lot about helicopters,” Santulli said. “This is more of a relationship deal.”

And in another difference from other leasing businesses, the company won’t acquire a bulk of equipment and attempt to lease it out. Milestone will work with customers on selecting aircraft, acquire those planes and helicopters, and then enter into lease deals with customers. Kelly estimated the company could own $3 billion to $4 billion in assets in the next five to six years, with expected debt financing.

The customers would operate the leased aircraft and bear operating costs. Milestone targets operators at the small-to-medium-sized space that may not have the balance sheet freedom to finance the purchase of aircraft but need to compete with larger operators, Santulli said.

Jordan officials weren’t available for comment.

In the last eight months, there has been a flurry of activity in the aircraft sector. Carlyle Group and other investors committed $600 million behind RPK Capital Partners, a newly formed aircraft-leasing company. CVC Capital Partners, Cinven Group Ltd. and Oak Hill Capital Partners combined to put $1.4 billion, including debt, behind Irish aircraft-leasing company Avolon. Oaktree Capital Management LP committed $500 million to Sky Holding Co., a new venture in the space, late in 2009.

Nautic officials couldn’t be reached for comment.

Milestone, of Dublin, was advised by Credit Suisse Securities LLC, Clifford Chance LLP and Proskauer Rose LLP. Jordan was advised by Mayer Brown and Winston & Strawn LLP.

Reach Jordan Co. at 212-572-0800; Nautic Partners at 401-278-6770.

http://www.milestoneaviation.com

http://www.nauticpartners.com

http://www.thejordancompany.com

Aviation Week – “NetJets Execs Launch New Leasing Firm”

Aviation Week – By Kerry Lynch

Fractional ownership pioneer Richard Santulli and former NetJets Europe CEO William Kelly have resurfaced in the aviation industry with a newly established helicopter and business jet leasing firm, Milestone Aviation Group.

The company today announced it has secured $500 million of equity capital commitments to formally launch the business. The Jordan Company, a middle-market private equity firm, is the leading investor with equity firm Nautic Partners.

The company will have bases in Dublin, Ireland, and Columbus, Ohio, which is the home of Santulli’s previous venture, NetJets. Santulli was widely believed to be a rising star in NetJets’ parent Berkshire Hathaway, when he stepped down a year ago as chairman and CEO of NetJets amid mounting losses.

Santulli had formerly created RTS Helicopters, a helicopter leasing company that primarily served the offshore oil and gas industry. In 1986, however, he turned his attention to the concept of selling fractions in aircraft, an enterprise that initially was met with substantial skepticism.

But after several years, the fractional ownership company, then called Executive Jet Aviation, began to take off and was acquired by Berkshire Hathaway’s Warren Buffet for $725 million. The company was renamed NetJets in 2002.

In his newest venture, Santulli returns to the helicopter/business jet leasing business. “Starting a new business when I see a marketplace opportunity is what I love to do,” Santulli says, calling the helicopter and private jet financing niche an important, but underserved market. “Today, many good helicopter operators worldwide cannot get access to capital despite a demand for their services.”

The business will be headquartered in Dublin and provide up to 100% financing for new and used aircraft transactions. Milestone will purchase the aircraft and lease to the customer.

“Our entire management team has experience in running an aviation company, which helps us uniquely understand our customers’ needs,” says Kelly. “We understand safety, flight operations and maintenance.” Kelly joined NetJets in 2002 and took over the NetJets Europe operation in 2006. He left the company last fall.

Bloomberg News – “Buffett Protege Santulli Back in Aviation With Helicopter Fund”

Bloomberg News – By Andrea Rothman

Aug. 4 (Bloomberg) — Richard Santulli, who quit as chief of Warren Buffett’s NetJets Inc. unit last year, raised $500 million to return to aviation with a venture that will help provide helicopters for oil companies and police.

Milestone Aviation Group, based in Dublin, aims to become a multibillion-dollar company financing the purchase of rotorcraft for competitors to the four main helicopter operators in North America, Santulli said in an interview today.

“We intend to be the predominant player,” Santulli said from New York. “We’ll be providing capital to a marketplace that really needs it. There are good operators out there who can’t compete with the big four on major contracts.”

Santulli left NetJets last August after the business he founded and sold to Buffett in 1998 slid into losses during the recession. Milestone will focus on helicopters and jets, with 100 percent financing for new, used and sale-and-leaseback deals, he said. Target markets include oil and gas exploration, medical services, law enforcement and construction, he said.

North America’s main helicopter operators are CHC Helicopter Corp. of Canada, the largest provider of flights to offshore oil rigs and platforms and owned by First Reserve Corp.; Houston-based Bristow Group Inc.; and PHI Inc. and Era Helicopters LLC, both based in Louisiana. Milestone said it will also aim to provide financing for those companies.

Buffett Contact

While still at Columbus, Ohio-based NetJets, Santulli was regarded by analysts as a possible successor to Buffett at Berkshire Hathaway Inc. He said the two remain in touch.

“I just spoke with Warren yesterday,” said Santulli, 65, a one-time head of Goldman Sachs Group Inc.’s equipment-leasing group. “He asked me to send him materials about the company.”

Berkshire’s NetJets allows clients to buy fractional ownership in private jets. Gains at NetJets helped boost the parent company to a $3.6 billion first-quarter profit, Berkshire said May 7.

Milestone is talking with helicopter manufacturers including the Eurocopter unit of European Aeronautic, Defence & Space Co., Finmeccanica Spa’s AgustaWestland division and United Technologies Corp.’s Sikorsky brand, with initial purchases “close to fruition,” Santulli said.

While the military-helicopter market is booming, with sales up more than 30 percent in 2009, civil demand fell 12 percent last year and may decline further in 2010, partly because of difficulties in financing, said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consultant.

‘First Effort’

“To the best of my knowledge, this is the first effort at creating a business of such magnitude in this market,” Aboulafia said. “There’s still a credit crunch for smaller businesses, but demand is high as oil prices drive the need for exploration.”

Santulli said his initial $500 million comes from U.S. private-equity firm Jordan Co. LP, together with Nautic Partners. He and Milestone CEO William Kelly have also contributed funds. Longer term, Santulli said he expects to tap capital markets for debt as the business expands.

Milestone will provide operators with leases that span the same period as their service contracts, and also bear residual risk beyond the immediate operating costs, Santulli said.

AIN Online – “Santulli Back in Bizjet Business”

AIN Online – By Matt Thurber

Richard Santulli announced today the launch of a new business jet and helicopter leasing company, Milestone Aviation Group, headquartered in Dublin, Ireland. Santulli in the mid-1980s founded fractional share company NetJets, which was sold in 1998 to Warren Buffett’s Berkshire Hathaway. Santulli left that company last year. He is now chairman of Milestone. Before launching NetJets, Santulli was in charge of equipment leasing for Goldman Sachs Leasing and founded helicopter leasing company RTS Helicopters. William Kelly, former CEO of NetJets Europe, is Milestone’s CEO.

Milestone is starting with $500 million of equity capital provided by The Jordan Company,a private equity firm. It is leading the investment team and partner Nautic Partners. Milestone will purchase aircraft selected by customers then lease the aircraft to the customer. The lease covers new, pre-owned and sale-leaseback transactions, and customers are responsible for all operating costs for the leased aircraft.

According to Santulli, Milestone has already signed up one firm customer and is working on deals worth about $110 million in Brazil, Canada and Nigeria. He expects about 80 percent of Milestone’s business to be helicopter related, with the rest business jets. Milestone will lease only turbine-powered aircraft, and helicopters will be available solely for customers that use them for revenue-producing purposes, such as oil and gas work, aeromedical operations and private and government search-and-rescue activities. The customers that Milestone will partner with must have excellent operational and maintenance records, he said, but their balance sheets might be stretched to the point where it’s difficult to obtain traditional financing, making it hard to bid on contracts.

Business jet buyers will be able to obtain short-term leases through Milestone. “We’re not competing with Bank of America,” Santulli said, “which does a spectacular job. We’ll tend to be a creative player in the airplane space.” Milestone will offer lease periods as short as one to three years and limit customers to about a dozen jet types. No deals involving fractional shares will be considered, however.

Santulli said that he decided to return to the aviation business because, in consulting with Kelly and other team members, he saw that there wasn’t much competition in the helicopter and business jet leasing arena. “We felt that we had the ability to service that market very well,” he said. “I believe we will build a successful company and provide help to companies that otherwise would not be able to bid on these contracts.” Both Santulli and Kelly have an equity stake in Milestone Aviation. Berkshire Hathaway is not financially involved in Milestone.