Bloomberg reported that Jeppesen could top Boeing CEO Kelly Ortberg's list of non-core assets being sold to shore up the planemaker's balance sheet. Bloomberg, quoting unnamed sources, said the company is looking for $6 billion for the world's largest provider of aviation charts and air navigation materials. It paid $1.5 billion for the company in 2000 and it's been a reliable cash cow ever since. Boeing also owns digital chart provider Foreflight, which serves Jeppesen data, but there was no mention of Foreflight in the Bloomberg report.
Boeing is not in a position to negotiate the sale of anything. They will get pennies on the dollar for the sale of anything IF anyone really wants to buy anything.
This comes as no surprise to me. Back in the 1990s, a guy by the name of Peter Lynch wrote a book titled âOne up on Wall Streetâ, an instruction manual on investing for the layman. Lynch was the top investment manager of the Fidelity Magellan mutual fund, the largest and most successful mutual fund at the time. One of the chapters delved into the life cycle of corporations and how to recognize investment opportunities there. One of the tendencies of a rising and expanding business was to diversify, or âdiworseifyâ, in Lynchâs terminology, into extraneous businesses that may or may not fit into their core business philosophy. Sometimes this tactic would help the business grow and expand, but often it simply diverted funds and attention away from the main corporate direction. Then, as time passes, the company begins to experience a loss of direction, and its value begins to stumble. Upper management sees some turnover until someone comes in that announces the company is returning to its âcore competenciesâ - corporate speak for dumping assets that arenât really in step with where the company should be heading. Sound familiar? Whether this approach will put Boeing back on track remains to be seen, but I view it as a good first step. Mending fences with their employees would also help a lot.
Once these hedge funds get involved, we will all be screwed. Take a look at Hartzell as an example. Prices have gone through the roof after they were acquired. They are not stopping there either. I would expect them to be in the bidding war for Jeppesen and probably Foreflight as well. I expect the price to go much higher than $6B as there will be lots of bidders.
Saw the same things happen to many of the companies scooped up by GE (Walter being one). Parts prices for 601s went up 2x to 10x overnight. The entire world economy is being screwed over by finance since businessmen and entrepreneurs no longer own and run companies.
Speaking of ForeFlight, when Boeing purchased them, there was a lot of speculation whether the service would change for the worse. Competitors looking to woo us over offered special pricing for those who would switch. At the time, I looked hard at the other platforms but ultimately decided to stay put. Nevertheless, if prices go further north, I will reconsider.
I considered ForeFlight since everyone here is using it. I stuck with WingXPro as an early adopter, and now have a Dynon glass panel, which reduces my need for the features of ForeFlight. I know a number of pilots who switched from ForeFlight. There are other up and coming competitors too such as Airmate which is more featureful but has some rough edges with database updates and is coming along nicely. I have subscriptions to both WingX and /Airmate based on Dynonâs offerings.
Thereâs also the impact of not fully understanding the business and stultified thinking that is not ruining the original business - yet, but harms the acquired business.
And choice of business - in diversifying decades ago Boeing invested in hydrofoil boats, but they were not suited for wet coast waters as foils could be collapsed by hitting the logs common in waters in those days (from logging activities). Expertise in making big boats was in Seattle already. They succeeded elsewhere in at least small numbers, such as Hawaii.
Before that Boeing was early into turboshaft gas turbines for ground and air use, I forget what that was hived off into (not Solar AFAIK).
Of course manufacture and design quality are crucial. BC ferries failed badly with a fast catamaran ferry because:
high costs welding aluminum, despite much expertise in the Vancouver BC area with fishing boats and yachts
chose diesel engines that did not provide enough power
and were not reliable in uses where power demand varied (they were probably OK in stationary applications)
wake turbulence impacted shorelines along the route, as did a smaller venture in the Seattle area
They were sold off dirt cheap, still sitting in Egypt unused, in part because they were not designed for open water use.
(Fast boats work best on long runs away from shore, on coastal ferries docking and undocking dilutes theoretical time saving.)
The fiasco was caused by Premier refusing to listen to advice from an admittedly prickly engineer (does Russ recognize one? ;-).
To provide an ancillary service. I think the idea at the time was to provide every kind of product or service someone buying an airliner might need. Given the recent news about gigantic credit lines / new stock being approved for Boeing I wonder why theyâd be in a hurry to sell a âcash cowâ that seems to perform well and certainly is a market leader.
The loss of Jepp to Boeing, and the inability to work out agreements to support legacy Garmin product is just another reflection of the how the finance bros are ruining aviation. Boeing also owns Aviall, which lost its way as well. Transdigm (Champion Aerospace) and Tailwind Technologies are other private equity blood suckers. Tailwind resold Hartzell to Arcline Investment Management in 2023. Hartzell has monopolized the starter business, where all units are over $1000. To add insult to injury they add a core charge to new starters. Another hedge fund, Vance Street operates Victor Sierra Aviation in the GA Space, and they own: Aviation Products Systems, Airforms, Great Planes, McFarlane Aviation, Tempest Aero Group and PMA Products.
A tiedown at Pompano is $450, and more at Boca! GA is a small world and our kids are being GOUGED for choosing it as a career.
Jeppesen can hardly be characterized as âdiverting funds and attention away from the main corporate direction.â It is a low-risk, well-established and profitable operation that brings in steady revenue and doesnât need a lot of administrative attention. While simplification = better is a valid paradigm, spinning it off to give the appearance of simplifying administrationâwhen it wasnât complicating operations at allâwould be blindly following the recipe in a cookbook for the sake of keeping overseers happy.
