From a $27,500 Charter Company to a $4 Billion Private Jet Giant | Kenn Ricci, Flexjet
- Ricci’s central financial lesson is that private aviation runs on balance-sheet strength and free cash flow. Flight Options generated $100 million in sales in its first three months and $400 million the following year, yet growth created financing problems he did not initially understand. “Forget income, forget EBITDA”: profitability could coexist with insufficient cash.
- Fractional ownership improves aircraft utilization while requiring substantial spare capacity. Ricci credits Richard Santulli with recognizing that corporate aircraft flying roughly 300 hours annually could support multiple owners and floating dispatch. Flexjet still keeps about 70 of its 365 aircraft as unsold “core fleet” to support customers, especially on peak days.
- Industry validation unlocked financing that Ricci’s own pitch could not. After probably 35–40 banks largely rejected his borrowing proposal, Buffett’s $750 million NetJets acquisition in June 1998 changed lenders’ willingness to participate. Ricci secured almost $300 million in debt that summer: “Accidentally wealthy” includes benefiting from somebody else legitimizing the market.
- A lucrative exit did not compensate Ricci for losing the business he loved. Warburg Pincus valued the business at $360 million, and Ricci offered $180 million for Raytheon’s half; Raytheon instead bought him out in 2002. He owned 16% and calls the loss the “worst day of my life.” An intervening FBO investment, bought for $80 million and sold for $615 million, helped finance his return.
- A merger bought time during cash trouble, while later integrations imposed years of cultural and operational work. Ricci bought Flexjet for $180 million in 2014, then spent four years integrating it with Flight Options. His current objection to acquisitions is explicit: buyers frequently pay for capabilities they could probably build themselves while putting their existing culture at risk.
- A contractual restriction unexpectedly removed $600 million of unfunded aircraft commitments. Ricci agreed to buy fifteen $40 million Globals without knowing how he would finance them; Bombardier subsequently said its NetJets agreement prohibited the sale. That released the heavy-aircraft commitment and opened the way to Gulfstreams, of which Flexjet now operates 85.
- Ricci treats early wealth transfer as an opportunity to teach judgment and build trust. He gifted family-partnership interests while his children were young and discusses unequal outcomes openly. The siblings devised their own investment-sharing rule: the originating sibling can fund 60% while offering each other sibling 20%, with participation optional.
- Trust becomes an operating advantage when employees can resolve expensive failures immediately. An employee earning $80,000 can authorize a $300,000 trip compensation without supervisor approval. Ricci also paid $30 million to exit a proposed public listing; his explanation for remaining private centers on purpose beyond wealth accumulation and serving others.
1. Wealth transfer works better while the founder can still teach
Ricci’s family story makes changing circumstances concrete. Each child spent eighth grade traveling on six three-week trips built around a curriculum. By the youngest child’s turn in 2017, he had never flown commercially. On a flight to Tokyo, his reaction was: “Hey, Dad, there’s people on this plane I don’t know.”
For Ricci, parenting depends on demonstrating trust, including discussing money. He sees three forces behind restrictive inheritance arrangements: professionals earning fees, entrepreneurial “lions” wanting continued control, and parents fearing wealth will destroy ambition. His challenge to that last assumption is pointed: “You couldn’t parent through that?” He wants to watch his children enjoy wealth and help them make decisions while alive.
He established a family limited partnership in 1990 and gifted interests as his children were born, retaining flexibility over distributions as general partner. Their holdings appreciated differently because the oldest began receiving wealth twelve years before the youngest. Family meetings therefore start with “you’re not equal,” which he separates from how much he loves each child.
Senra recalls asking Charlie Munger how wealthy founders should handle children raised in very different circumstances. “You give them the money,” Munger answered; “They’ll hate you if you don’t.” Senra recalls Munger conceding that gifts could reduce ambition when either he or another dinner guest pressed the point. That concession did not change Munger’s answer.
2. The children built their own rules for protecting family relationships
Asked whether early transfer had downsides, Ricci answers, “Not one. Not one.” Financial education began around ages five or six with charitable giving, before taxes or compounding. His youngest initially wanted to give to Disney; Ricci had to explain that it was not a nonprofit. Personality assessments later helped the children understand their different approaches before discussing the estate.
When the youngest was around sixteen, meetings expanded into spreadsheets covering assets, transfers, control and banking arrangements. The five family members now disclose their estates and spending to one another. The children themselves decided against including spouses in these meetings: each sibling would determine how to share information within their own household, rather than introduce newcomers into a long-established process.
Reading about families that dissipated wealth led the siblings to focus on the third generation and jealousy from unequal investment success. Their solution: whoever originates an investment can supply 60% but must offer 20% to each sibling. Nobody must participate. “I gave you the opportunity to come in” becomes the answer to resentment; Ricci emphasizes that this was their idea.
3. A flying career became a business because Ricci needed a job
After overhearing that his parents could not afford Notre Dame, Ricci investigated financial aid during a campus visit. The deadline had passed, but ROTC still had openings. He initially sought the Navy because he wanted to fly; an Air Force colonel redirected him. Aviation began as a way to finance college, with early flying in Cessna 152s and 172s.
Military flying led to cargo work and briefly Northwest Orient, where a furlough left him unemployed. His father regarded pilots as “airport jockeys” moving between unstable jobs and encouraged a fallback profession. Ricci entered law school, taking part-time flying work with J&J Aviation to support himself.
J&J’s promoter was running a fraud, Ricci says: selling nonexistent Citation aircraft for $750,000, attracting investors with a 10% investment tax credit, then fabricating lease statements and payments. One fictional statement showed $90,000 revenue, $78,000 expenses and a $12,000 distribution. When investors finally demanded to see their aircraft, the promoter disappeared.
At twenty-six, Ricci bought the remaining charter operation to preserve his flying job. The price was $27,500; the company held $27,000 cash. When his father asked about the remaining $500, Ricci replied, “Well, why do you think I called you?” Renamed Corporate Wings, it began with four remaining aircraft and still exists today.
4. A narrow aviation niche attracted aircraft without requiring his capital
Ricci distinguishes people who understand business generally from people whose expertise comes from loving a particular activity. His route was the latter: “I love to fly.” His diversification joke is “cash and airplanes.” Timing also mattered: he counts 5,000 private jets when he entered the industry in 1985 versus 35,000 today, growth he had not predicted.
A relationship with Chapman Freeborn, which transported concert equipment, supplied an initial niche flying performers including Elton John, Bruce Springsteen and Barbra Streisand. Ricci remained the pilot. A three-month tour could pay $20,000 monthly against an ordinary pilot’s $7,000, leaving the rest of the year to develop the business.
Aircraft owners supplied the assets. Ricci’s proposition for a Gulfstream II was that leasing it for three months could pay its annual cost while preserving the owner’s use otherwise. “There’s no Kenn capital at this point.” International celebrity flying established credibility for managing other aircraft, and the managed fleet eventually reached the low twenties.
Geography reinforces his preference for concentrating on the market he knows. Ricci puts the US at 85% of the private-aviation market and contrasts about 800 US flights with three flights a day in Asia. Asked about an Asian strategy, his response is categorical: “Don’t need an Asian strategy.”
5. Fractional ownership combined higher utilization with floating dispatch
Ricci traces Santulli’s fractional model to unsold aircraft after the 1991 Gulf War. Manufacturers then built inventory before securing buyers, creating “whitetails.” Santulli offered to take twenty Hawkers on consignment and sell fractional interests. That structure let him establish supply without putting up the aircraft purchase capital himself.
The utilization insight was straightforward: a typical company flew its aircraft around 300 hours annually, while an aircraft could fly 1,000–1,200 hours. Ricci adds that sitting idle causes mechanical problems. Santulli initially sold 200-hour quarter shares; Ricci says the “QS” ending on NetJets registrations comes from that original quarter-share proposition.
Floating dispatch changed the customer’s bill. A Cleveland charter customer traveling to Florida previously paid to return the aircraft home. Santulli could drop that passenger and serve another customer elsewhere. Watching customers migrate, Ricci developed a competing used-aircraft offering: comparable service and aircraft types, but a purchase buy-in around half the new-aircraft price. His preferred description is “previously enjoyed.”
Ricci says Flight Options started with “probably twenty-five” aircraft across three fleets, roughly eight per type to demonstrate availability. These were supporting aircraft; additional customer purchases led him to buy additional planes. The principle persists: about seventy of Flexjet’s 365 aircraft are core fleet, supporting sold ownership interests and absorbing demand when multiple owners want to travel simultaneously.
6. Buffett unlocked the debt, but sales growth exposed the cash problem
Ricci’s first institutional funding search reached probably thirty-five or forty banks. He thinks he needed $30 million or $40 million in borrowing, but lenders struggled with collateral consisting of fractional aircraft interests. After twelve or fifteen months, he had perhaps $7 million of opportunities if he pledged an equivalent amount of assets: “The worst financing ever.”
Buffett’s June 1998 purchase of NetJets for $750 million “christens the industry,” in Ricci’s telling. Suddenly the same proposition looked credible. Bombardier Capital, Boeing Capital and Fleet Bank supplied credit lines, often $50 million at a time. He obtained almost $300 million in debt financing that summer and launched Flight Options on October 13, 1998.
Sales reached $100 million between October and December and $400 million the next year. Customers sometimes sent approximately $800,000 before completing documentation: “Send me the paperwork. I want to fly tomorrow.” The bargain was compelling, but Ricci describes having “a tiger by the tail and no clue” about the complexity accompanying that growth.
The lesson arrived through financing pressure: “The balance sheet is the whole game.” In capital-intensive aviation, “forget income, forget EBITDA”; free cash flow and balance-sheet strength drive survival. He brought in equity partners, but the 2000 dot-com downturn strained cash even while volume held up. He stresses that he had not understood these distinctions when launching.
7. A rescue merger ended with Ricci losing his company
Flight Options merged 50/50 with Raytheon’s fractional-aircraft business, which Ricci says was losing $30 million annually. Flight Options was around break-even and generating accounting profits without free cash flow. Consolidating back offices and presenting lenders with a new strategy bought time; Ricci describes that as one alternative to closure or a distressed sale.
His current assessment of acquisitions is much harsher. Paying ten times cash flow for market share may be inferior to investing directly in winning customers; he thinks companies could probably achieve the objective themselves 90% of the time. Adding 10% to a workforce can permit cultural integration, but adding 30% or 40% is “culturally impossible,” in his view.
The joint venture included “shareholder’s roulette”: either side could propose a price and the other could choose to buy or sell at that price. After eighteen months, Warburg Pincus backed Ricci at a $360 million valuation. He offered Raytheon $180 million for its half, expecting gratitude. Raytheon instead thought he was buying cheaply and bought him out in 2002.
Ricci owned 16%, but calls the exit the “worst day of my life”: “I lost my throne.” Senra presses the contradiction between becoming wealthy and feeling devastated, challenging the founder prescription “Start, scale, sell.” Ricci describes wanting the company to succeed for his friends and his original idea, while also wanting proof that it needed him.
8. Aviation investing supplied the capital for his return
Warburg offered Ricci $250,000 annually as an executive in residence, plus participation in deals. He declined because it would give Warburg approval power over opportunities he sourced. Instead, he established Directional Capital, pursuing transactions before choosing financing partners. Existing industry knowledge and relationships meant entrepreneurs did not have to explain operating metrics such as dispatch availability or cost per hour.
With Allied Capital, he bought Mercury Air Centers for $80 million in 2005. The approximately eighteen-location FBO business provided fuel and facilities for private aircraft; its earnings came from the spread between fuel purchase and selling prices. It fitted his expertise and sat outside the operating activities restricted by his noncompete. Allied owned 80%; Ricci held 20%.
Mercury expanded through acquisitions of smaller operators, sometimes costing $3 million or $4 million, at around six times EBITDA. After roughly doubling its size, the business sold to Macquarie in 2007 for $615 million and became part of Atlantic Aviation. Ricci contrasts those purchase multiples with the fifteen to twenty times he says FBO businesses command today.
He also accepts responsibility for helping create an industry structure he now dislikes. Ricci calls FBO ownership a duopoly and criticizes private equity’s focus on investor returns without the wider disclosures public companies make. His example is discretionary “event fees”: “A lunar eclipse, let’s charge an event fee.” “In many ways I created this monster,” he says.
9. Buying aircraft unexpectedly turned into buying Flexjet
Ricci says Raytheon lost $600 million during its ownership before selling Flight Options back to him in December, after the financial crisis erupted in September. The headline price was $135 million; accounting for liabilities and payables, he describes roughly $42 million: $15 million cash and a $27 million personal note, approximately three years long. “A personal guarantee of everything” included his home.
Replacing the neglected fleet brought him to Bombardier’s eight-passenger, transcontinental Challenger 300. Twenty aircraft at about $15 million each represented a $300 million order, but Bombardier-owned Flexjet had exclusivity. That prompted discussions about buying the subsidiary instead. Ricci says he acquired Flexjet in 2014 for $180 million, accompanied by aircraft commitments ultimately totaling $1 billion.
Those commitments included fifteen Globals costing $40 million each. Ricci signed without knowing how to finance that $600 million. Before closing, he feared a requested meeting meant NetJets had outbid him. Instead, Bombardier claimed it had not known that its NetJets contract prohibited selling him Globals. His outward response—“Oh, that sucks”—concealed relief at an obligation disappearing.
Removing Globals also released the requirement to buy Bombardier aircraft in the heavy-jet category. Ricci subsequently bought Gulfstreams in 2017, securing exclusivity according to his account. Flexjet now operates 85, which he says makes it the largest Gulfstream operator globally, ahead of the US government. The competing aircraft commitment had unexpectedly opened that opportunity.
10. Integrating Flexjet took four years, and Ricci chose to keep it private
Flight Options had lost half its customer base, damaged its reputation, neglected aircraft interiors and fallen behind on bills, Ricci says. Flexjet offered the stronger name and better aircraft. But combining fleets was difficult: Flexjet customers did not want older Flight Options Hawkers. Ricci acknowledges that integration was “a lot harder” than expected.
Each company had around 300 pilots, with competing identities and different attitudes toward union representation. Even distributing new uniforms required a coordinated crossover date. Integration ran through 2018 and included a vote for self-representation, which Ricci calls unique in pilot-union history. Those experiences inform his objections to combining cultures.
Ricci says the business has quadrupled since 2018 and retains complete confidence in fractional ownership: comparing operating models, he calls it “the only operationally dynamic model.” He also paid $30 million to leave a proposed public listing, calling that a “Thirty million dollar mistake.” Asked why remaining private mattered, he points to a purpose beyond accumulating wealth.
11. Service gives the business its purpose and its operating rules
Ricci told Father Ted Hesburgh that understanding balance sheets felt like “a shitty gift” compared with curing cancer or helping the poor. Hesburgh framed it as a lifelong choice between selfishness and service. His prescription for significance was “be true to your God, be as good as your parents, and champion the causes of underdogs”—with “God” reflecting the individual’s own understanding of existence.
In 1992, inspired by reading about a tribal chief required to relinquish his possessions, Ricci says he gave away all his assets. He wanted to prove that wealth accumulation would not run his life. He distinguishes that earlier wealth from today’s scale: his wealth is now forty times its 2006 level, he says, and “the temptation gets greater.”
Senra offers Henry Ford’s formulation, “Money comes naturally as a result of service,” and Ricci says it captures his outlook. His own ethic is “be passionate about what you do, compassionate about how you do it.” Friendship concerns what you do for friends; approaching each morning with possibility helps avoid missing “the best five days of your life.”
That philosophy becomes concrete in service recovery. “Customer service is about what you do when things go to hell,” Ricci says. The employee answering a customer’s call can compensate the trip without supervisor approval: someone earning $80,000 annually can authorize a $300,000 trip compensation. “There is no approval process.” He treats that authority as a demonstration of organizational trust.
Full transcript
I just interrupted you before we started recording.
Yeah.
You brought up your kids.
You were talking about the addiction of flying privately.
Okay.
1. Teaching His Kids to Travel
I have 3 children, and they’re 6 years apart, so there are 12 years from the oldest to the youngest. When I was building the business, remember, I was flying, too. So I would fly and run the business.
When you raise a child, you start with a blank slate and figure out what the relationship is going to be like. Did I spend enough time? Did I miss Little League games? I decided I was going to give them a love of travel, so I had them all skip eighth grade, and we traveled during their eighth-grade year. We didn’t leave for the whole year. We’d go on 6 three-week trips, and during that time I would homeschool them.
Mm-hmm.
I’d make them build a curriculum around where they wanted to go. We didn’t take them to Paris and London. We took them to places connected to their curriculum. Who wanted to learn about World War II? Who wanted to go to India? Who was fascinated with Asia? So we built these curriculums around that.
Actually, the 2 places I made them all go were Auschwitz and North Korea. I’m probably the only person who’s been to North Korea 3 times. But life changed. From 2005 to 2017, think of the 12 years in between. When the youngest one did his trip in 2017, I realized he had never been on an airliner.
Oh, an airliner—you mean a private jet?
No, no. He’d never been on an airliner because life for me had changed.
Oh, he’d never been—
Life for me—
He’d never flown commercial.
He’d never flown commercial.
Okay.
I decided that was a bad way to raise a child. His name’s Austin, so I said to him, “We’re going to go commercial.” We were going to Tokyo. We got to the airport, and we’d never done this before. We waited in line, checked our baggage, waited for our seat to be called, and sat down. You don’t take your shoes off. All the things you do—security and so on.
We finally sat down and were getting ready to take off. I looked over at Austin and said, “Austin, what do you think?” He goes, “Hey, Dad, there’s people on this plane I don’t know.”
Oh.
What he didn’t get was the public part of commercial transit.
It’s funny that you—we were talking about this right before we started recording. I was like, “We gotta hit play,” because I’m so interested in what you started talking about. A lot of people who build successful companies like you do have this huge doubt in their mind. They’re hugely driven and have a goal in life, but there have to be things sacrificed for that goal. Obviously, time with their children is one thing people sacrifice.
One of the things you didn’t even know I was going to ask you first was that you decided to share your wealth with your kids—not when you die, not when they’re older, but right now. You have a very interesting perspective on this. Can you explain what you’re doing?
2. Trusting Children With Wealth
I came to believe that we have the wrong perspective on raising children. We seem to think it’s about the time we spend with them, so we develop this helicopter mentality. We go everywhere with the kids. We don’t want them out of our sight anymore. When I was growing up, I left at 9 in the morning on my bike, and I just had to be home for dinner. My mom didn’t chase me around Cleveland, Ohio. Those days are gone.
We tend to think that the essential thing is putting time into them, when what we really need to put into them is showing them that we trust them and that they can trust us. Think about wealth transfer: if you don’t tell your kids about their financial arrangement, you’re saying you don’t trust them.
I told my wife, “You know, we’re taught as parents to talk more about sex than we are about money, and the reality is money will get you in a lot more trouble than sex will.” I had 3 observations about wealth transfer. First, there’s a whole cottage industry around trusts and the management of generational wealth transfer, and there’s big money in it. The system wants you to think you have to control wealth because that brings in the trustees.
Mm-hmm.
That brings in the law firms and the banking firms and all those necessary professionals to skim away your wealth. Second, the Chinese have a saying: “The son of a lion is a lamb.” I think people who create a lot of wealth, particularly entrepreneurial wealth, tend to be very, very—they’re lions.
Yeah.
And lions are control freaks. So why not buy into the system where you control your children? That’s why these trusts are set up: at 25 they get this, at 35 they get that, at 45 they get this. This is a way to control from the grave, for the patriarch or matriarch of the wealth to still be influential even when they’re not around, because—
They’re used to being in control.
They’re egotistical people.
Yeah.
They want to be in charge. They want to be important. They don’t want to lose their relevance. And then finally, the most bizarre one to me is the idea that if we give our kids wealth and tell them about it, they’ll become lazy. Well, man, does that mean you must have been an awful parent if that was the one thing that flipped the switch? You couldn’t parent through that?
So I decided, most importantly, I love my children, and I love watching them be happy. I want to watch them spend their money. I want to watch them be wealthy, but most importantly, I want to help them. I know a little bit about wealth. I’m accidentally wealthy. I didn’t get here with some strategic financial plan.
Hold on. We’re going to dive deeper on that, but give me some background. Did you grow up middle class? Poor? What was your childhood like?
3. A Middle Class Beginning
My father was a 12th-grade graduate who worked for the U.S. government. He was actually a spy. He had a fascinating background. He came out of World War II, worked in the OSS, worked in naval intelligence, and then, in the early ’60s, Bobby Kennedy set up the Organized Crime Division through the Treasury Department. My dad was part of that group, which investigated domestic organized crime, mostly the Mafia, in that era.
His undercover name was Richard Dill. He was investigating a lot of Italian cases. He was Italian, and they changed his name to Dill. That’s the government at work. In 17 years of undercover work, he only worked on 3 cases, which shows you the time it takes to be an—
So his undercover name was Dick Dill?
Richard Dill.
Dick Dill. Richard’s always short for Dick.
Yeah, yeah, yeah. He was investigating the police chief of Lincoln, Nebraska.
For ties to organized crime.
I was 7 years old at the time.
And he can’t tell you.
I don’t know much about it, but I knew we had to go live in Nebraska for 2 months because he was there undercover with his family. This was the greatest time of my life. We stayed at a Holiday Inn. It had a pool. I’d never been anywhere with an outdoor pool.
Okay, so that hits on it. Somewhere around middle class—
Yeah.
—didn’t have a pool.
Exactly.
The reason I wanted to start on this—and I’m still going to pull on this thread, if you don’t mind—is because I have this other podcast called Founders. I read biographies of history’s greatest entrepreneurs. People have struggled with this all the time. It’s in these books going back 200 years: “I was the son of a poor man. My kids are the son of a rich man. What do I do here?”
I had the luck of a lifetime to have dinner at Charlie Munger’s house right before he died, probably 6 months before he died. One of the questions I asked him was about that. He and I had read hundreds of biographies. I was doing the same. That was my craft and the main thing I was focused on before I started this show. I was like, “What’s your answer to that? You read the same books I do. What’s your answer?”
He grew up—he wasn’t poor, but they were homeowners. It was a normal life. And he goes, “You give them the money.” Munger is just no bullshit, straight to everything.
Right.
Like, straight to everything.
Yeah.
And I go, “Why?” He goes, “Because what?” Then he goes, “They’ll hate you if you don’t. And what’s the point of building a relationship and making all this money, and then at the end of your life, your kids hate you?”
Right.
That was his very simple way of looking at it.
Fantastic. Fantastic insight, right? Like I said, I want to watch them enjoy their wealth.
He did say one funny thing, though. I think I may have asked him a follow-up, or somebody else did. I said, “Yeah, but won’t that make them a little less ambitious?” He goes, “Yes.” In his case, I think he gave a couple hundred million to nine kids or something like that.
Yeah.
He’s like, “Yeah, some of them have $250 million, and they’re not as ambitious.”
Right.
Like, so what?
They’re different. Every kid is different. In fact, one of the things we talk about in our family meetings once a year is why families rip apart over wealth. It’s really about two things. One of them is feeling somehow entitled to be equal, but they’re not. I have a child who started inheriting wealth 12 years before the youngest one. Don’t you think his estate has appreciated at a different rate than the youngest one’s?
So I start every meeting by going, “Look, guys, you’re not equal. It doesn’t mean I don’t love you. It’s just how things are, and the sooner you get over that fact, the happier you’ll be. It wasn’t set out that way.”
So have you already given them all the wealth you’re going to give, or do you keep giving? How does that work?
Well, yes, pretty much, because we gifted shares of a family limited partnership when they were very young.
Did you get this idea from Sam Walton?
No.
Do you know that’s how Sam Walton avoided a lot of estate tax? He didn’t do it to avoid estate tax.
Yeah.
He’d say, “Well, if you want to avoid estate tax, you give the—”
Very early.
Give your kids the asset before it appreciates.
It appreciates. It’s so logical.
Yes. The crazy thing is, his father-in-law gave him the idea. I’ve read every single book on Sam Walton, and his father-in-law gave him the idea. They did this when the value of Sam Walton’s company was, I think, the shares he gave to his four kids were $5,000 each.
Ditto. Okay? I started the family limited partnership in 1990. I had my first child in 1995, so I could see what it was going to do five years before it happened. As soon as I could, I gifted shares. When they were born, I gifted them shares.
It’s a family limited partnership, so the general partner, which is me, still has all the flexibility in the world to make distributions. It’s a phenomenal vehicle, so Walton had it right. It’s a great vehicle. They’re not created equal. I want to watch them happy. I want to watch them use their money, but I also want to guide them. I want to be here alive—
Yeah.
—when they’re making stupid or good decisions with their money. I’ve made stupid decisions and bad decisions with money, too. So why can’t I be the one to guide them? Otherwise, assuming they still love me when I’m dead—and they tend to love you more when you’re dead—in any case, assuming they still love me, they’re going to go, “What would Dad have done?” Isn’t it better to be here alive when they ask you, “What should I do, Dad?”
That’s the foundation of it. I think sometimes we want to rule from the grave. You have this trust environment, and if this is going to spoil your kids, then you really weren’t that good of a parent. If that was the one thing that did it, they couldn’t handle this. Or maybe that’s all the more reason to give it to them when they’re alive, so you can guide them through it.
Yeah.
Right? As opposed to when you’re dead and you can’t do anything about it.
Have you seen any downsides to this decision?
Not one. Not one. In fact, I’ve seen many things I didn’t think would happen. When they were young, I started talking to them about money. At five or six years old, we weren’t talking about tax effectiveness or compound interest, but what I taught them early on was giving. Our early family meetings were all about who we should give money to and why.
My daughter loved animals, my son loved Catholicism, and my youngest son—when I remember the first time we were giving, he was maybe six years old—always wanted to give it to Disney. I was like, “Well, Austin, Disney’s not really a nonprofit.”
Yeah. They’re doing okay.
Yeah, they have their own methodology. So I taught them first to give.
Mm-hmm.
Then, before we started really diving into the estate, I got into that when the youngest one was around 16. We started going through a spreadsheet every year: Where’s the money? How does it transfer? Who has control of it? Where’s the bank? All the stuff you need to know.
Yeah.
Everything. But before we did that, we did a personality test, and everybody reported on their personality, because kids are different.
Mm-hmm.
Who thinks left brain, who thinks right brain? I wanted the kids to understand how they could get along, so I started with that. Then we started talking about money, how it transfers, and what we would do with it. Two surprising things: Number one, it creates this trust, and I have this amazingly trusting group.
Mm-hmm.
The kids, in the group of five—my wife, me, and the three children—they report. They show us their estate and what they spent money on, and we share that.
How old are the kids now?
Thirty-seven, 31, and 25.
Okay.
Yeah, okay. So it’s been going on for a while.
Yeah.
But the other thing is, as I mentioned, I’m accidentally wealthy. You have to realize that even when we were talking about this, we weren’t talking about it at the volume we’re talking about now. My personal net worth has accelerated in the last six years, along with Flexjet, which is one of the largest assets I own and protect.
One of? It’s got to be the largest asset you own.
Well, it’s the largest one, yes.
Okay. What else you got that I don’t know about?
Well, I mean, I always say I’m an inch wide and a mile deep.
Yeah.
I’ve made a lot of investments, only in aviation.
Yeah.
I probably know more about aviation than anything else. I’ve invested in and owned SIMCOM, which I sold to CAE. I also owned what is today Atlantic Aviation.
Hold on. Let’s—
Yeah, yeah.
This is exactly where I want to go. I want to start talking about the business, because I think I understand what you did with your kids and why you did it. Again, anybody who’s wealthy has to think through these things, and I think discussing them openly is a service to other people.
Oh, I’m sorry. Let me finish what I learned.
Go for it.
Number one, they developed this amazing trust amongst themselves. They started investigating and reading biographies of families that blew it, and they came to realize that the third generation is the tough one. So they’ve started talking amongst themselves—
“Shirt sleeves to shirt sleeves in three generations.”
Right. They’re the ones who talk about that.
This is something very durable throughout human history.
They’ve come together to talk about the next passing of wealth and generational wealth. In the last year, two things have come up. One is that they decided not to include spouses in these meetings. Two of them have spouses, and one doesn’t. They decided that each of them would decide how to share financial information in their own family.
Hmm.
This isn’t a group share. This is us five, and we’ve been doing this for 10 or 12 years. We’re not going to toss people into the middle of it, because we don’t know their personalities. We didn’t have 10 or 12 years of grooming to get them to this point. So that was number one.
Number two, when they look at generational wealth transfer and why families come apart, one thing that happens is they feel they weren’t treated equally. They’re mad at the patriarch for not treating them equally, which we’ve gotten over. But another thing that happens is one of them does really well, takes the money, and makes a great investment, while the others do less well. Then there becomes a little jealousy amongst them. So they came to the idea that any investments they all make, they’re going to share. The person who has the investment—
The three kids.
The three kids.
Between the three kids. Wow, okay.
The person who has the investment can put 60% of it in, but has to offer 20% to each of the other siblings. They’re not required to participate. That way, they can avoid the opportunity for jealousy. Look, I gave you the opportunity to come in. You came in or you didn’t, or we share the upside together. That was their idea, not mine.
That’s really interesting.
Okay.
Okay. So let’s go to the source of the wealth.
Yeah.
You were a pilot, okay?
Mm-hmm.
Take me back. First of all, how old were you when you learned how to fly planes?
4. A Reluctant Air Force Pilot
You talked about my upbringing with my parents a little bit. My dad was a government employee, and I went to a Jesuit high school, St. Ignatius. At the time, in the ’70s, they sent 30 people to Notre Dame. They moved them right from there to Notre Dame, and I loved it. I wanted to go there. I got admitted, and then I was going up for a visit.
You know how houses have two-by-fours? Ours had one-by-twos. I’m an only child, and I could hear my parents talking the night before I was going to Notre Dame. My mom said, “You have to tell him we shouldn’t let him go. What if he goes up there and likes it, and then he wants to go, and we tell him we can’t afford to send him?” My mom said, “I wouldn’t let him go,” and my dad said, “Let him go. Maybe he doesn’t like it. Then he comes back and says, ‘I don’t want to go anyhow,’ and we don’t have to have this subject.”
But when I went up for that class visit, it didn’t matter how much I liked it. I knew what was coming when I got home and said whether I wanted to go or not, so I was inclined not to go and put my parents in a bad position. When I got there, I asked them on campus, “Is there financial aid available?” They said, “Well, you missed the deadline. This is March.”
The Vietnam War was still very ripe, very raw. People did not like the military. They said, “If you’re willing to go into ROTC, they’re always short of candidates. They’re never fulfilling their quota.” For some reason, don’t ask me why, I decided I wanted to be a Navy pilot. Maybe I liked the double-breasted suits. Whatever. So I went down to the ROTC building. There were no cell phones, and I was looking through the glass window, trying to read upside down on the phone what number to call Monday morning to tell them they had a new naval aviator.
Why’d you pick aviation? You’d never flown a plane or anything? You just said—
No, I had to go in the military.
So you—
I knew I had to go ROTC.
Okay.
I figured if I had to go into the military, flying looked like a lot of fun to me.
Yeah.
I was copying the number down, and somebody tapped me on the shoulder and said, “Can I help you?” I said, “Yes, sir. I’m an incoming freshman at Notre Dame, and I want to join the Navy because I want to fly.” He said, “You’ve been admitted to Notre Dame?” I said, “Yes.” He goes, “I’m shocked, because they usually admit smarter people than that. The Navy has ships, and the Air Force has planes. I’m Colonel Muller. I’m head of the Air Force detachment, and I’m enrolled in the Air Force.”
I never heard how my parents reacted, but I came home and—
Because then they’ll pay for school.
Yeah.
School, yeah.
Yeah. I don’t know that I’ve ever told this story. It was the first time I learned how to defraud the government. I was a freshman at Notre Dame. I was enrolled, and I had my hat and my uniform. The sergeant who administered that said, “Now, I know you’re a plebe here, but here’s how you get a $100-a-month stipend for general expenses. But there’s other income. You go to the bookstore, buy all brand-new books, and bring me the receipt. I’ll reimburse you for the new books. Then you take them back to the bookstore and buy the used books.” My first interaction with the military was being taught how to take advantage of the U.S. government.
Do you take time off from Notre Dame to learn how to fly?
No, no. You learn it concurrently.
Okay.
One day a week—and this was the tough one—you had to stay in uniform. Believe me, in that post-Vietnam War era, that was not an easy task, because people did not like the military at all. You had all these courses around the Air Force. In the summer, you went to whatever your summer program was, your summer school, and so on. That’s where I learned to fly.
What kind of planes do you fly the first time you’re flying?
You fly Cessna 152s.
Okay.
Cessna 172s.
They’re not putting you in an F-16 for—
No, that comes after you graduate. In fact, when you graduate, you go to general flight training, which at that time was done in T-37s and T-38s. Then you get assigned. It’s a year and a half before you get control of a jet in the Air Force. There’s the primary training, then the training you go into.
Okay, so you mentioned, “I’m an inch wide, but I’m a mile deep.” All my businesses focus on this. We’ve mentioned Buffett and Munger a bunch of times. I don’t know if we said it on the show or if we were talking before, but both of us have mentioned Buffett and Munger a bunch of times, and their whole thing is to know your circle of competence and stay inside that circle.
Right.
So this sounds like what you did.
Mm-hmm.
Your first—
I always say my portfolio of investments is unbelievably diversified. It’s cash and airplanes. That’s my diversification strategy.
So what’s the first business you do in aviation?
First of all, I don’t think of myself as a businessman.
Okay.
In fact, I’ll often say there are 2 kinds of people who are very successful in business. One is a person who just gets business. They could run a yogurt store, they could run a steel manufacturing plant. They just get business. They understand how things are connected. They see market strategy, and business is just very clear to them.
The other ones are just passionate about what they do. You’re passionate about your podcast. You’re successful in business because this is what you love to do.
Yeah.
I’m successful because I love to fly, and I learned everything about airplanes. That’s what put me here. But I never had a goal to become wealthy or build a business.
That’s the accidental wealthy part you’re touching on.
Sure, of course. In many ways, it was accidental that I even formed a business. When I went into private aviation, there were only 5,000 jets in the world, and today there are 35,000 jets. So part of my luck—
Wait, wait, wait. Say that part again.
Yeah.
When you started—
So, in 1985, think about it—
There were only 5,000 jets?
There were 5,000 jets in the world, and today there are 35,000 private jets in the world. Part of my luck was just being there when this industry grew up. I entered an industry because I could have been an airline pilot, or I could have stayed in the military, but I was attracted to private aviation. It was freer to me, more spontaneous, more interesting. I could meet people. There was no cockpit door, so I could have conversations with passengers and learn from them.
Who knew in 1985 that private aviation would be this unbelievable growth industry over the next 40 years? I didn’t know that. That’s part of it. But what I’m really doing is flying. I left the military and became a cargo pilot, flying air freight. Then I went to Northwest Orient. I was there a very brief period, and then they had a furlough, so I lost my job.
So wait, Northwest Orient doesn’t exist anymore?
No, no. They went bankrupt.
It’s an airline.
It was an airline, yeah.
So you’re an airline pilot.
It was, you know, the airlines were Pan Am, TWA, and Northwest. They were the airlines that flew all around the globe. They were the good airlines, the prestigious ones.
Okay, so you’re at Northwest Orient. You said you got furloughed, which is another name for fired.
Yeah, it’s a fancy term for not having a job. So I came back to Ohio.
Ohio, birthplace of the—
Yeah.
—the Wright brothers, who flew—
Yeah, well, not the—
Dayton?
That’s in southern Ohio, but—
Yeah.
Yeah.
But I think Dayton, right?
Yeah, something like that.
Okay.
But my father didn’t see it as a very stable career. He said, “I know a lot of pilots, and they’re all airport jockeys. They just move from place to place, and they end up taking whatever job they can. It’s just not a stable industry.” So it was at that time that I went to law school.
So you love flying and pilots.
Yeah.
Your dad’s giving you what—
I’m a little—
—in hindsight, bad advice.
Yeah.
Considering where your life has turned out.
Well—
And you’re going to do something you don’t love.
Correct. Correct.
Okay.
For prestige or money, whatever reason.
He even said, “You needed something to fall back on in case this aviation thing doesn’t work out.” Well, the aviation thing worked out okay, but—
Did he live long enough to see it?
He died in 1991, so kind of.
Okay.
Kind of. He saw me have a business. He saw me fly. He flew on one of my first Learjets and loved it. But he never saw this coming.
Yeah.
No, he never saw this coming.
Got it.
The only job I could have in law school was as a part-time pilot, so I was a fill-in pilot for a company called J&J Aviation. J&J Aviation was a fraud. I was just an employee there, but what they did was, in the early ’80s, there was an investment tax credit of 10%. If you bought an aircraft, you got an immediate 10% credit.
They would sell these Citation jets for $750,000. They had a fleet of about 6 airplanes, and they’d sell these Citation jets to investors on the West Coast, a long way from Cleveland. The investors would get the $75,000 investment tax credit, then pay $750,000 for the plane. The head of J&J was a guy named Jeff Tolk, and every month he would pretend these aircraft were on lease. But they weren’t. The aircraft didn’t even exist.
He would make up a dummy statement and say, “It flew 40 hours this month. The revenue was $90,000. The expenses were $78,000. Here’s your $12,000 check.” So he simply put the $1.5 million for the 2 aircraft in the bank and dribbled out the interest in a fake statement.
After about a year and a half, the owners said, “We gotta see our jets,” and they were always in the air. They were never around. But one day they caught him, and he flew the coop. This little company, J&J Aviation, had about 3 employees: a secretary and a dispatcher.
And is it just charter? What’s the—
Yeah.
Just, okay, just charter.
It was charter.
Charter. Okay.
It was using these managed airplanes—
Yeah.
—or these phantom airplanes.
Yeah.
But there were 6 of them. There were Navajos and these tiny piston-engine aircraft. The dispatcher, Rick Michaels, called me up and said, “Nobody here wants to do this, and I’m not smart enough to do it, but you seem to know a little about aviation. You should buy the company.” So I called my dad.
And how old were you at the time?
26.
And you never thought you were going to be an entrepreneur?
No. In fact, I didn’t even buy this company to be an entrepreneur. I bought it so I could still have a job. I needed to make sure these airplanes didn’t go away so I could keep flying. That was the whole goal. Rick said he could do it by himself, so I knew I had to employ the dispatcher and run it. It ended up that 2 of the planes left, so I had 4 airplanes when I started.
I called my dad and said, “Dad, I want to buy this company, J&J Aviation. I’m actually going to name it Corporate Wings.” He goes, “Oh.” I said, “It’s $27,500.” He said, “Well, how are you gonna pay for it?” I said, “The company has $27,000 in the bank, so I think I can just use their own money to buy it.” He goes, “Oh. Well, what are you doing for the other $500?” I said, “Why do you think I called you?” That was really how I bought Corporate Wings, and that company’s still here today.
Explain how you get from Corporate Wings to Flash Jets.
Right away, I decided to figure out where the niche was for Corporate Wings. Everybody had a charter plane, but how could I get into bigger niches? Life is timing. I met someone who worked for Chapman Freeborn. I don’t know if you know this company.
No.
They move all the rock stars around. They move the freight. Every rock star comes with a stage. Part of that stage can go by land, and part has to go in big aircraft, depending on the situation. It’s a cargo-moving system. Along with it, they had this ancillary business to move the star, to move the celebrity.
I’m watching this documentary on the Eagles, the band. They have a bunch of success early on.
Yeah.
And one of their favorite things about being in a band and being a rock star is that they have this private plane.
Absolutely.
It’s a little turboprop plane, or whatever.
Yeah. The big groups went in those turboprops—
Yeah.
—because they needed 15, 18 seats.
Yeah.
It’s the single performers that went in the corporate jets. Elton John, Bryan Adams, Bruce Springsteen, Tony Bennett, Barbra Streisand. Those were my clients. With Chapman Freeborn, whenever they got a cargo movement and needed to move the celebrity, I made a deal with them to do that.
That was your initial niche.
But it was really because I wanted to fly.
Oh, you’re piloting this?
Yeah, of course I am. Of course I am. It was a good gig, because a pilot at that time got $7,000 a month. If you flew a 3-month tour, you would get $20,000 a month.
Yeah.
Of course, you had no work for that. It was kind of perfect, because I could fly the tour for 3 months, and then the rest of the time I’d work on the business, learn the business, and figure it out. I was building the business concurrently with doing these celebrities. Then I had these big planes, so I started to go more international. I flew Richard Branson for a year and a half.
I lived in London. It was the best flying because I got to learn the world.
Wait, so you’re flying Richard Branson. Now, this is a corporate private jet?
Correct.
But remember, to get the celebrities, I had to go to people who wanted to buy a large aircraft, like a Gulfstream II at the time. I had to tell them, “You use the aircraft. I’m going to lease it out 3 months a year, which will pay for the aircraft for the whole year.”
Okay.
And so I got people to give me airplanes on that financial agreement.
They’re putting up the money?
Yes, correct.
That’s how you’re doing this with very limited money.
Correct.
Okay.
Yeah, correct.
I understand.
I’m doing it without any capital. There’s no Kenn capital at this point. I don’t even have anything; I got the $500 from Dad. Going into the ’90s, concurrent with building this business, once you have the large cabin, filling in the rest of the fleet is kind of easy. People think, if you can do the big stuff, if you can travel the world handling my airplane, you must be qualified.
So we start to build a managed fleet of aircraft until it gets to the low 20s. When you build businesses, there are these steps, right? Without any other help, I could run 3 airplanes myself. But if I want to run 15, that’s kind of the next step. I need 17 people to run 15.
Mm.
And then I need 17 until I get to 30, and when I get to 30, I need 35 people.
Mm.
There are these steps of infrastructure. So I’m about where I need to be. In the early ’90s, we don’t even realize this today, but big manufacturers—Gulfstream, Bombardier, Cessna—pre-sell their aircraft, and they don’t build them if they’re not sold.
But going back to the ’90s, they looked at it like the car industry. Cessna had a dealer network. To be a dealer, depending on the level, if you bought 3 single-engine planes and 1 twin-engine plane, you were this level. If you bought 4 twin-engine planes, you got this commission structure and were a larger dealer. But when the business didn’t sell, there were all these white tails.
Sorry, what’s that?
A white tail is a plane that doesn’t have an N-number on it.
Mm-hmm.
They don’t know who to title it to because it’s not sold.
Okay.
It was like the auto industry. They kept building, kept the manufacturing run going, and if sales couldn’t keep up, they parked the planes in a lot and called them white tails. The Gulf War happened in 1991, and Hawker had these white tails. Richard Santulli, who was the founder of NetJets, went to Hawker and said, “You can’t sell the airplanes. I’ll take 20 of them and sell them on consignment, fractionally.”
Is that the first—
This is the invention of fractional leasing—
That is the invention of—okay.
That’s the invention of fractional ownership. Rich Santulli, brilliant, realized that the average company flies an airplane 300 hours a year. A plane wants to fly 1,200 hours a year. So why don’t we get 4 people to share them?
What does it mean, a plane wants to fly 1,200 hours a year?
If you look at a lot of things, number 1 is an airplane doesn’t like to sit around. They break when they don’t fly.
Mm-hmm.
The fluids leak out, so they want to fly, number 1. Number 2, they had the capacity to fly 1,000 to 1,200 hours a year. An average corporate owner at that time was leaving the plane in the hangar 5 days a week, so why not utilize that dead asset? That was his vision. Initially, he thought, “If I get 4 people to each put 200 hours on the plane, that’s kind of perfect. So I’m going to sell the planes in quarters,” which is why, if you see NetJets’ N-number today, it still ends in QS: quarter share.
Ah.
Originally, they only sold 200 hours. Now today you can buy 100 hours, 75. But that was his vision, and he sold these white tails, these consignment aircraft. He never put up any capital. He said, “If I sell them, I’ll give them back to you.” All of a sudden, this becomes in vogue, and where is he stealing customers from? Me, the charter operator.
Oh.
In the charter business at that time, if you took my plane and went to Florida, I had to charge you to return the plane to Cleveland. Otherwise, how did I get it home?
Yeah.
He had the idea of this floating dispatch: “I’ll drop you in Florida, and then the next client, I’ll figure out how to get them from here to there.” That was attractive to a lot of different companies, and so he was starting to steal business. I got a little nervous. Between 1993 and 1996, I watched this unfold and said, “He’s selling these brand-new assets because he’s getting them from the manufacturers on consignment. I’m going to go into the used market, and I’m going to buy them used—pre-owned, previously enjoyed, I like to say. And I’m going to have the exact same airplanes he did.”
Whatever NetJets had, I had a used version. If they bought brand-new Hawkers, I had a used Hawker program. If they bought brand-new Citations, I would emulate them and have a used Citation program. That was my vision. I would buy them used at half price. The service is the same: you can fly, and you only pay for it when you’re on board. The buy-in is just going to be 50%.
But unlike him, I couldn’t buy these on consignment. I had to have capital to do it. In 1996, I put together—this was my first time really starting to look at a business. It was the first time I kind of understood the deck I had to present, the presentation, looking at cash flow and projections. I went to different banks, probably 35 or 40 of them, with the idea: fund me the amount of money I need to start the business. I think I needed to borrow $30 or $40 million.
They looked at me, and the banks were like, “We don’t get it. Where’s our collateral? We have the tail of the airplane you’re selling.” I’m like, “How do I have a quarter of a plane?” None of them were a buyer. At the end of 12 or 15 months on the road, I had maybe $7 million of opportunities if I put up assets equivalent to $7 million. It was the worst financing ever.
In June 1998, Warren Buffett bought NetJets for $750 million, and he christened the industry. I just happened to be the guy who saw the banks last, and that summer I got almost $300 million of debt financing. So again, accidentally wealthy.
Because they’re like, “Well, Warren is—”
“If Warren’s—”
“He’s doing what he wants.”
“—is enjoying it.”
It’s a good idea if Warren’s doing it.
That Kenn had a good idea.
Yes.
Yep. All of a sudden, Bombardier Capital, Boeing Capital, Fleet Bank—all gave me lines of credit, $50 million here, $50 million there. That allowed me to buy the initial fleet, and I went active on October 13, 1998.
But what is the company? Is it still Corporate Wings?
No, I formed a company. I branded that product Flight Options. That was the brand.
So that’s Flight Options. You start with how many planes with Flight Options total?
Once I got the financing, probably 25.
Okay, why’d you pick a number like that?
There were 3 different fleets: 2 light jets and a medium jet. You need about 8 aircraft to be your core fleet. In other words, if you and I are both going to buy a share of an aircraft, we recognize there can only be 1, because if you and I want to fly the same day, who gets the plane?
Yeah.
You had to show the potential customer that you had a fleet. Eight was about the number where people would say, “Oh, you have eight Citations. I’ll buy one, and then you can service us.”
If you had 25 planes to start, how many customers could you serve? When do you hit your limit? Is 100 people too many? What’s the limit?
No, because remember, these are core fleet. These planes never get sold. If 4 people buy a Citation, I buy another Citation.
Okay.
So these 24 aircraft were always—
So you don’t stay at 24 or 25 for very long.
Yeah. And you know what? That’s still a model we use today. If you look at our fleet of 365 aircraft, we’d tell you that about 70 of them are core fleet. They don’t get sold; they’re there to support our customers’ ownership in a share of a jet.
Okay.
We need that because on peak travel days, we’re going to have more demand than there are airplanes to go around. So we still have that core fleet model.
Okay, so this is called Flight Options.
Yes.
How do we get from Flight Options to Flexjet?
It’s a little longer than you probably hoped, but we had $100 million in sales between October and December.
Wait. The first 3 months of—
David, this was the most amazing thing I’ve ever seen in my life. People thought it was such a great bargain. I think the buy-in at the time was about $800,000. People would send me a check for $800,000 and say, “Send me the paperwork. I want to fly tomorrow.” They loved it so much, they knew they couldn’t fly until I had the money, and they’d send me the checks and say, “Send me the paperwork. We’ll get to that stuff later. Just let me fly.”
Yeah.
We had $100 million in the first 3 months, $400 million the next year, and all of a sudden, I’ve got a tiger by the tail and no clue. A business that grows that fast is immensely complicated, particularly for cash flow. I don’t think I realized that in capital-intensive industries, particularly aviation, the balance sheet is the whole game. It’s not the income statement; it’s the balance sheet. Forget income, forget EBITDA. It’s free cash flow and how strong your balance sheet is. That’s what drives that business. I didn’t know that in 1998. I was in my early forties when this was happening, and then I brought in an equity partner. So now I had equity partners around the table. In 2000, we had the dot-com bomb.
Uh-huh.
I’ve been through 4 recessions. That was number 3. The business was struggling a little bit. Cash flow was struggling, not volume. When a business is in trouble, there are 3 things you can really do. You could close it down. You could sell it for a song. Or you could strategically change direction. You go to the bankers, because your problem is always the credit markets. It’s always about who’s out there for you. You say, “I have a new strategy. I’m going to merge with this company. Here are the projections.” And you buy yourself time to see if you can put these companies together. Acquisitions and mergers are incredibly difficult. I hate them. I don’t do them very often. Culturally, they’re damaging.
Why do you hate mergers?
I hate them for me because I think they’re a sign of weakness: you can’t build your business on your own. Whatever this company is offering you—let’s say it’s market share—let’s say they have a part of the market and you have a part of the market, and you say, “Gosh, we’ll capture the market.” Do you really need to spend 10 times cash flow to grab the market? Would you invest that money yourself and grab the market share, or do you not have a good enough product to do it? I don’t think we analyze enough what it costs to accomplish whatever your logic is for bringing that company in. Give me the logic for why you’re doing it, and I’d tell you that 90% of the time, you could probably do it yourself without the acquisition.
Once you do the acquisition, culturally, if you have a business built on culture—which is essential for me and for us—it’s impossible. You can integrate a culture if 10% of the workforce is being added. Adding 30% or 40% is culturally impossible, and then you’re going to destroy your culture. So you probably overpaid, I don’t know if your reasoning is sound, and you really put your culture at risk. That’s why I don’t like them.
Okay, so—but you were—
I’m in trouble. I’m in trouble financially.
So you have to.
Yeah, I haven’t figured this out yet.
Okay.
You’re asking me about what happened 26 years ago. I have knowledge that’s accumulated since then. We merged with a company that was also in trouble, called Traveler. It was a division of Raytheon, and we put it together with Flight Options 50/50.
Were they in the same business? What were they—
Yes. Raytheon had a company called Traveler—
Mm-hmm.
—which had a brand-new product line, but also fractional ownership.
Okay.
Raytheon owned Beechjet at the time—Beechcraft, Beech Aircraft. They had merged it with Hawker Beechcraft, and it became Hawker Beechcraft. They were trying to use Travel Air as a distribution channel for their aircraft. It wasn’t making money; it was losing $30 million a year. They put it together with Flight Options, which was marginally breaking even. We were making money, but not free cash flow.
Mm.
So we consolidated the 2 companies and got rid of the back office. Raytheon wanted to focus on missiles and submarines. In the process of putting the 2 companies together 50/50, we came up with shareholder’s roulette. Are you familiar with that term?
Yeah, where you have to—
You have to make an offer to buy—
Either you buy or sell at the same price.
At the same price.
Yes.
So I had 18 months to underwrite the transaction. I went to Warburg Pincus. I needed an investment partner to do this. They saw the model and valued the business at $360 million. I went running up to Lexington, Massachusetts, to tell Raytheon, “I’m here with your $180 million. This company was a piece of shit, and now I’m here. Where are you putting the Kenn Ricci statue? I found all this money for you.” They looked at me and thought I was stealing the business, and they bought me out.
Oh.
And I was gone. In 2002, I’d lost my throne. It was the worst day of my life. I was passionate. I loved this business. My friends were in the business.
Hold on. We have to pause here—
Yeah.
—because it’s very interesting. How much of the $180 million goes to you personally?
You hit the nail on the head. You have a knack for asking the exact right question. I own 16% of the company.
Okay.
Fast-forward to today: the punchline is that I bought this company back, and now I have a controlling interest. Who would’ve thought the worst day of my life—
But still, let’s go back. You learned how to be a pilot when you were in college. You grew up middle class in Ohio.
Yep.
Now you have millions of dollars, and you just said it was the worst day of your life. This is really, really important because the whole point of this show is that I usually talk to people who do things for a very long time.
Uh-huh.
There’s this new industrial entrepreneur ecosystem, and it’s driven by investors. They give founders the worst advice ever: “Start, scale, sell.”
Yeah.
I’ve talked to all these entrepreneurs who sold.
Yeah.
They all talk about it like this.
No, no, no.
If you sold something you loved, they’re like, “Yeah, but you’re Travis from Uber—”
Yeah.
—who was in that chair. He made billions of dollars and lost Uber. Ask him how he felt when he had $4 or $5 billion dropped on his head.
Hated it.
He didn’t give a shit.
Didn’t give a shit about it. Absolutely didn’t give a shit about it. Start, scale, get a new investor.
It’s crazy.
Yeah.
So, okay, worst—
Yeah.
—day of your life. Take me to that.
You were like, “I thought I was going to have this company.” They bought you out.
First of all, no one was going to be more passionate about building that business than me. I don’t care who Raytheon put in there; they were never going to be as passionate. These businesses have small margins. They’re highly technical. There wasn’t an MBA program at Harvard on how to run private aviation, at least not at that time. It’s become a lot more popular now.
You’re in your 40s at this point?
Yeah, 42.
Married with children?
Yes, at the time.
How many kids?
Two children at the time.
Okay.
Yeah.
So you got tens of millions of dollars, whatever the number is. What’s your thought process? Where do you go from there?
Well, first of all, I always say it was the worst day of my life. I lost my throne. I lost my passion for living. I lost the vision. I didn’t have any vision, like, “What am I doing now?” And when you do this, it’s horribly conflicting because you don’t want the company to succeed without you, right? You had to be the binding force. So you really don’t want it to succeed, but on the other hand, you don’t want it not to succeed. You built this baby. Your friends are there. If it doesn’t succeed, then your whole idea was for shit.
Yeah.
So it’s very conflicting, and I got so tired of being in Cleveland and at a restaurant, people asking, “What happened?” At the time, there were 800 employees, mostly in Cleveland. So I decided I was going to move.
This is what we were talking about before. I was like, “Where do you live?” You’re like, “Arizona.”
Yeah.
I was like, “How the hell did you wind up in Arizona?”
5. Starting Over in Phoenix
I just decided I was going to go west of the Mississippi. I was going to be in a big town. It was Denver, LA, or Phoenix.
Yeah.
LA was a red-eye to get back East, and Denver was a little cold, so I ended up in Phoenix and have been there since 2003. So now I had nothing to do. I was in Phoenix. At least I wasn’t being asked what the hell happened. Warburg Pincus obviously took a liking to me. That’s why they backed me. They said, “We want to get more into this space. We’d like to give you $250,000 a year. You’ll be our executive in residence. You’ll find deals for us, and we’ll give you a little piece of the action on whatever you do in private aviation.” And I was like, “Well, wait a second. Why would I do that first? Why don’t I go find the deals and then decide who I want to bring in? Why would I just line up with Warburg?” Because then they get to say yes or no on a deal. In other words, I come to buy your company, and now I have to call Warburg and go, “Can I buy them?”
Mm-hmm.
Whereas if I just do this myself, I could come in, make the deal, and then go find the capital. So that’s when I started Directional Capital, a company meant, again, to be an inch wide and a mile deep. Our thesis was we only invest in an area we know a lot about. I knew people in the industry who needed capital at the time, and they came to me because they knew they didn’t have to explain to me what our cost per hour was, what dispatch availability was—
Yeah.
—or what the occupied rate was.
You knew the ins and outs of the business already.
Yeah, and they trusted me.
And you’re getting equity in return for cash? Is that what you’re doing?
Yeah, absolutely.
Okay. Okay.
Absolutely. It’s venture, it’s private equity.
Okay, got it.
Right? And then they always liked my story. “Well, Kenn, what mistake did you make that helped me finance my company? And don’t make that mistake.”
Yeah.
I played on that. Look, I can tell you where the bodies are buried.
Mm-hmm.
And lo and behold, I was working on two or three different deals. My partner Mike Rossi, who came in with me in the early ’90s when I transitioned out of being a pilot and started working more on the businesses, and I were approached by Allied Capital. There was a company called Mercury Air Centers, based mainly on the West Coast. They were in default on their debt with Foothill Capital, a division of Wells Fargo, and we bought this company for $80 million in concert with Allied Capital.
What does Mercury do?
They’re FBOs. They only own FBOs.
And just—
Fuel—private fuel facilities for private jets.
A lot of people are buying up FBOs right now, is what I hear.
It’s horrible.
Why?
Well, here’s the problem. I started the industry, so in many ways I created this monster.
Mm-hmm.
Well, because they’re only going to private equity, and we could get into my whole philosophy on private equity. Sarbanes-Oxley changed in 2000, right? Those Sarbanes-Oxley rules made it so hard to be a public company. But even those companies that are public, if you read their annual reports, they have some mandate besides greed. They have environmental policies. They have social policies. They have policies regarding their employees and their leadership. Private equity has to disclose none of that. They’re solely based upon a return to investors, so they’re solely about greed. And so they’ve taken an industry and just tried to monopolize it. It’s a duopoly now in the FBO industry. Again, I started it because I sold the business to Atlantic Aviation, which is one of the duopolists. They’re just pushing the envelope: What’s the most amount of money we can abscond with from these wealthy people that buy jets? They’ve had this new thing called event fees, which they make up in the morning. A lunar eclipse? Let’s charge an event fee. It’s just horrible, and I think there have been real repercussions in the industry now. But we digress.
But you buy it in the early 2000s.
I buy this—
You buy Mercury—
—Mercury Air Centers, this FBO chain—
Okay.
—with 18 or 19—
What did you like about their business that you wanted to buy it?
Well, first of all, it was in the vertical I knew, so I knew how to market to corporate pilots. I knew why people wanted an FBO.
Mm-hmm.
The business made money on the spread between what they bought fuel for and what they sold it for, so it was a relatively easy business to understand. I had a non-compete. I couldn’t necessarily compete in the operating side of the business, so it was available. The non-compete didn’t cover fuel distribution or hangars and so on. I could see that it was a very fragmented industry. We had 18 FBOs. It was the second-largest at the time. So we could go out and buy these little mom-and-pops, giving them $4 million or $3 million. We were buying at 6 times EBITDA at the time. Today, these businesses—an FBO business—will trade at 15 to 20 times.
Mm-hmm.
We did that, bought it for $80 million in 2005, and then sold it in 2007 to Macquarie, which is now called Atlantic Aviation. We built it, about doubled its size, and sold it for $615 million.
Oh, so that’s where you’re getting a huge chunk of cash now.
Right. I owned 20%. Allied Capital had 80%.
Okay.
Okay? So Mike and I—
That’s really good in 2 years, considering you had to do something, and you couldn’t do what you really wanted to do.
Right. Right. So again, the worst day of my life. Let’s just have faith in the future. I had seen none of this coming. I saw none of this coming. But that’s where I get the capital. And what do you think happens next? Raytheon’s had enough fun with Flight Options. They’ve lost $600 million in the years they’ve owned it. The company’s become unionized, and it’s a problem. It’s going to crap. So who do they call? “Kenn, you want to take this piece of shit off our hands?” And what do I say? “Of course I do.” I want my company back. I don’t care which shitty position it’s in. I want my company back. Think about this one: The financial crisis happens in September. I buy it in December. So how dumb am I? I’m the dumbest guy in the world. I buy this company back in the nadir of the financial crisis.
And what do you have to pay for it?
$135 million. The reality is, because there were payables and liabilities we were assuming, it was around $42 million. I borrowed $27 million, gave a $27 million personal note, and put in $15 million in cash.
What did you back up that personal note with?
Just me.
How’d you do that?
The seller took a note—
Oh, okay, okay.
—for $27 million.
Okay.
Not a long note. I think it was 3 years.
Okay.
A 3-year note. I had invested in a couple of other small businesses at the time.
I had assets. I had a home.
Did you have to pledge the home or no?
Oh, yeah.
Okay, that’s what I was—
A personal guarantee of everything.
That’s what I thought.
Yeah.
Okay, that’s what I was going to say.
Yeah. And I did have the $100 million from that. I used some of it. But I had some net worth out there that was viable.
Is this the company that becomes Flexjet?
Yes. One more step and we’re done.
Okay.
So I inherit Flight Options back. I decide no capital has been invested, and I need a new fleet of planes. I look around the industry: who’s got the best fleet? It’s Bombardier. They have these Challenger 300s, which are super-midsize. This is where the market is going. They’re eight-passenger, transcontinental—kind of the perfect fit for the shitty planes I had at the time.
Can I pause there?
Yeah.
Because you said earlier there were about 5,000 private jets when you started in the industry, in the ’80s, or whenever that was. Now there are 35,000.
Yeah.
I think I read almost all of them are in America. What is America’s share of that?
85% of the market.
That’s incredible.
Yeah. People always ask me, “What’s your strategy for Asia?” You don’t need one. You don’t need an Asian strategy. There are 3 flights a day over there. I’m doing 800 flights in the U.S. What’s my strategy to get those last 3 flights? What are you thinking?
Okay, so you need new planes, and you go to Bombardier.
Right.
Okay.
So what I really want is the Challenger 300, but they have a company called Flexjet, and they have exclusivity. They only have Challenger 300s.
Okay, but Flexjet is also fractional ownership at this time?
It’s fractional ownership.
But it’s owned by—
By Bombardier.
Okay.
It’s based in Dallas. But I caught a good sales guy. I caught the head of sales, and when I told him I wanted to buy 20 Challengers, which at the time were about $15 million apiece, I came up with a $300 million order. He scratched his head and thought, “Am I really going to lose a $300 million order because there’s this non-compete with a company we own?”
So he goes to Pierre Beaudoin, who was the head of Bombardier. The Beaudoin family has owned that company for years and still controls it. I had known Pierre through YPO. He liked me, and he said, “Well, Kenn knows aviation. Why don’t you see if he’d buy Flexjet?” He tells Steve, the head of sales, to see if I’d buy Flexjet. I went to buy planes, and they sold me Flexjet in 2014.
Why did they want to get rid of it?
Well, because, again, they’re in the manufacturing business. To be honest with you, they were financially struggling after the crisis, so picking up $180 million was probably something they needed at the time. I paid $180 million for Flexjet. With that came an order to buy 20 more aircraft.
Mm-hmm.
By the way, with the deal, they made me expand the order to include Globals, which I had no idea how I was going to pay for. I had to buy 15 Globals, and they were $40 million apiece. I did not have that $600 million.
So where did you come up with that $600 million?
Well, again, life is funny. We sign the deal. We’re going to buy Flexjet.
You signed the deal not knowing how you were going to pay for the Globals?
Well, I knew how to pay the $180 million. No, I did not know how I was going to pay for the Globals. So, with the $180 million purchase, I placed a $1 billion order for Challenger 300s and Globals, and actually some Learjets, which they owned at the time, too. I placed the order, fingers crossed that we’d figure out how to pay for those airplanes later. I had to get Flexjet in here.
They call me up in September—we’re going to close in October—and say, “By the way, I need to come see you.” I’m thinking, “I’m toasted. I’m fucked on this deal,” because they’re coming to tell me NetJets has beaten my offer. There were only a few companies left at the time: Flexjet, Flight Options, and NetJets. There was CitationShares, too, but those were the 3 big companies.
Yeah.
The number 2 and number 3 are about to merge, and I figure Warren Buffett isn’t going to let this happen. He’s in there. He’s coming in to up my bid. I know they’re coming to tell me, and sure enough, they sit down and say, “We have a problem with NetJets.” I’m like, “Oh, no.” They had Globals there, too. Bombardier claimed they weren’t aware that the contract when they sold the Globals to NetJets prohibited them from selling them to me. So the message they had to convey was, “We can’t sell you the Globals.”
That’s not a bad problem—
Whoa, $600 million I didn’t have to worry about. Of course, I went, “Oh, that sucks.”
No, oh—
Are you kidding me? This destroys everything I had envisioned. Fast-forward 2 years, and we do the Gulfstream. Part of that deal is that we get exclusivity, so now we’re the only people who can operate Gulfstreams.
Oh, I didn’t know this.
Yeah.
So wait, Flexjet had—so NetJets uses Globals to this day?
Well, see, if they hadn’t pulled that card on me—
Yeah.
—I would have had to commit to buying Bombardier products in each category: light jet, midsize jet, and heavy jet.
Got it.
That was the deal. They didn’t want to lose their distribution channel. But they took heavy off the table because they couldn’t sell me the Globals. That opened up the opportunity to buy the Gulfstreams, which I did in 2017.
Awesome.
And now we still buy them today. We’re the largest Gulfstream operator in the world. We have 85 of them.
Wow.
Yeah. We have more than the U.S. government.
That’s a great stat.
Yeah. So now I own Flexjet.
Yeah, and then why do you decide, “Okay, I’m going to use that name instead of—”
Well, because Flight Options was for shit, okay? It had a bad reputation. It wasn’t paying its bills.
Flexjet is a better name.
Yeah.
Flight Options because—
Yeah.
—because they had fucked it up.
Yeah.
Yeah.
They had lost half their customer base because they gave shitty service. They never invested in the planes, so the seats were torn. The name had a bad reputation, and they were unionized.
Yeah.
And there was this bad union reputation, so Flexjet was the much better way to go forward.
Okay, what year are you buying Flexjet?
2014.
2014?
Yeah.
Okay.
It took me the next 4 years to integrate the 2 companies, including getting rid of the union.
Why 4 years?
Well, culturally, the companies were different. They were exactly the same size, about 300 pilots each—600 pilots total between the 2. Remember, you had these shitty Hawkers at Flight Options and the nice Challengers at Flexjet, and the Flexjet customer didn’t want to be on the shitty Hawker. Integrating the systems and working out the economics of putting them together wasn’t that easy.
It was a lot harder than you expected.
Yeah.
Okay.
A lot harder.
Yeah.
Culturally, Flexjet was like, “We hate the union,” and everybody identified themselves: “Well, I’m a Flight Options pilot. I’m a Flexjet pilot.” Just think about it: how do you get uniforms to 600 pilots?
Yeah.
Right? What do you have to pick? Uniform crossover day. For a while, you’ve got 2 different-colored groups of pilots flying. You’ve got the blue pilots and the brown pilots. It was just very complicated, okay?
But even though you’re going through this difficult 4-year period—and now that I’ve got the whole history of why you hate mergers and acquisitions, and you’ve had a couple of bad experiences—
Yeah, I have good ones, too.
—but are you still really… You strike me as a supremely optimistic guy. You’re just like, “I’m going to sell this contract. I’ll figure out where the $600 million is coming from later,” right?
Yeah.
Do you still have a lot of faith in the fractional ownership business?
Absolutely.
So you’re like, you know, this is what you’re going to do for…
This is your life's work.
Yeah, not for this program, but if I showed you the economics of how a charter operator works, how a management company works, and how a fractional company works—and showed you the top line, bottom line, and margin—it’s the only operationally dynamic model. It’s the best model.
Right.
Rich Santulli invented this model, and it was brilliant.
Okay, the 4-year period—now we’re in 2018.
Yeah.
Now you’re under Flexjet. You have the union pilots.
The union’s gone.
The union’s gone. You get the—
Only time we’ve ever—only time a union’s ever voted for self-representation in the history of pilots.
Oh, wow. Okay.
Only time. Yeah.
Now you have the planes that you want.
Yeah.
The kind of planes that you want.
Yeah.
Okay. The state of the business there, though—let’s say that was 8 years ago. Has the business doubled in size, tripled?
Well, quadrupled.
Quadrupled.
Quadrupled.
Okay.
Okay?
It’s a private company. We’re not even going to get into the fact that you almost took it public and they were like, “Fuck that.”
Yeah, they would shoot me, but go on.
Yeah, and you paid, I think, $30 million to get out of the deal.
$30 million to get out of it.
Yeah, to get out of the deal.
A $30 million mistake.
Well, first of all, why was it so important to you? I’m obsessed with family-owned businesses and private companies. To me, that’s the ideal situation. I have a bunch of friends who are public company CEOs.
Yeah.
And they all secretly hate it, by the way. But aside from the reporting and how difficult it is to run a public company, why did you want to keep your company private?
6. Finding His Purpose
Because I believe in a higher being. I think there’s a purpose we have beyond wealth accumulation. There has to be. I went to Jesuit high school, so I have the guilt gene. I’ve always struggled with the question, “Why am I here?” It took me until 2018 to really find who I am and why I’m here, for it all to come into alignment. It’s crystal clear in my life today. I always struggled with it.
I could go back to conversations in the late ’80s and late ’90s, when I was starting the business, and I’d ask, “How does this business serve others?” Fundamentally, I think I always knew my life had to be about serving others, but I always shied away from wealth because it didn’t seem like wealth served others. It serves me, right? Wealth seems to be very tempting. So it took me a long time to find my life’s—
Before we get to 2018, when you figured this out, take me to some of these conversations where you’re questioning this. Are you sharing these thoughts with other people?
Yeah. If you were to ask me about some of the most influential people in my life, one of the most influential was Father Ted Hesburgh, who led the University of Notre Dame for 35 years. He ran this amazing institution. He grew it from going broke during World War II because they had no students to becoming one of the most prominent universities in the world today. He did that over his 35-year tenure as president.
He had an amazing business sense, as well as being a priest. He was an amazing resource and had amazing insights. I remember going to him at a time when he had retired as president, so he was very available. I ran the student government when I was there, so I knew him from my days at Notre Dame.
And so you go to him.
I asked him a question. I said, “I’m pretty sure that Jesus was not a capitalist. I’m pretty sure he had to be a socialist, because I don’t recognize anything in what I was taught about why we are here in the life of capitalism. I don’t see that. I’m not finding that.”
I said to him, “I got a shitty gift. If I could cure cancer, that would be a great gift. If I could heal the poor, there are a lot of good gifts, a lot of very altruistic gifts. I don’t have that gift. I got the gift for looking at a balance sheet and understanding how the business can translate to the balance sheet. I understand that. That’s my special gift.”
He said to me, “God thought enough of you to give you that gift. You’re going to be tempted your whole life with being selfish with this gift or thinking about how to continuously use this gift for others. But God had enough confidence in you to give you that gift, so run with it. And number two, don’t overthink this. Life is really simple. We want to make it so complicated. To have a life of significance, you only have to do 3 things: be true to your God, be as good as your parents, and champion the causes of underdogs.”
He didn’t say, “Be a Catholic.” He didn’t say, “Be a Christian.” He said, “Be true to whatever you think is why you’re here in existence. Be as good as your parents.” Our parents are flawed in so many ways. He didn’t say to be the perfect parent, but parents come with a genuine acceptance that they want to give life, right? He said, “Be as good as your parents, and champion the cause of underdogs. Always look around the room, find the underdog, and go to them.”
Okay, so you’re having these conversations with people you trust and with yourself for several years. Then you said you didn’t really figure out why you’re here until 2018.
Yeah.
What was the answer that arrived in 2018?
I’ll tell you my immediate reaction. Remember, I’m still doing a little bit of flying. I’m flying these rock stars. I’m flying Bill Clinton at the time, actually. I’m reading, because when you’re a pilot, you have a lot of time to read. You’re waiting a lot.
I read a biography about an Indian chief. To become chief of his tribe, he had to prove that he was worthy of the tribe, and that meant giving away all his worldly possessions. Somehow, this stuck with me. I had the conversation, and in 1992, I decided to give away everything. To prove to myself— I saw one of your guests talk about having a tooth procedure without Novocaine to prove he had courage.
Everybody’s seen this. That clip got tens of millions of views.
Okay, that’s how I know it. That wasn’t my courage. My courage was to give away all of my assets.
And then build them back up?
Well, it didn’t matter. I had to prove to myself that the accumulation of wealth wasn’t what was going to run my life, that I had the courage to use the talent I had not for self-accumulation.
Okay, so this is kind of what we were talking about before we were recording. I told you about this fantastic lunch I had with Sam Zell. His whole thing was, “I know all the rich guys. You’d be surprised how miserable most of them are. They have more money than they’ll ever spend. They trade time, which they can’t get more of, doing things they don’t like for more money they can never spend.” He’s like, “There’s only one true luxury in life, and that’s get-to-private-jet money.”
Yeah.
That’s the advice he gave me.
Right.
He’s bought everything in the world, and he’s just like, “It doesn’t matter.”
Yeah.
The thing that made him happiest wasn’t his compound in Malibu or his place in Chicago. Every year, between Thanksgiving and Christmas, he took his entire extended family—about 35 people—to this little village in France for a few weeks and was able to pay for and provide that experience for every single person.
Yeah.
Right?
Yeah.
His whole thing was that you’re not going to be happy from the things that you consume. It’s the things you do for other people.
You’re happy with what you give away.
Exactly, what you do for other people.
You’re happy with what you give away, not what you take in.
So bring me to this realization. You did that in ’92, but bring me to the realization in 2018, where you’re like, “Now I know for sure.”
Well, let’s say 2 things. In ’92, even though I was giving away everything—
Yeah.
So I had nothing. That was a proof of Ken.
But I didn't have a lot of wealth. I had that—
Yeah.
Nice event. I had the nice event in the mid— I mean, don't get me wrong. I'm wealthy, but I'm not this wealthy, okay?
Yeah.
Today, it's a factor of 40 compared to what it was in 2006, right? But that just means the temptation gets greater.
No, no, it's not the temptation.
It's just like one of my favorite lines from the history of entrepreneurship. It comes from Henry Ford. He says, “Money comes naturally as a result of service.” His whole point is that you want to make more wealth, and that's fine.
Don't ask me why.
Find a way to make somebody else's life better.
Yes.
Then the way you make more wealth is to increase the number of people's lives you make better.
Correct.
If you just focus on service, the money will come back to you.
All right. Interview's over. You just captured everything, right? I mean, I will tell you, if you asked me, I would say six things: Be passionate about what you do, compassionate about how you do it. Memories are worth whatever they cost to create. Friendship is a one-way street. It's only what you do for your friends. It's not what they do for you. Don't miss the best five days of your life. You never know what they're going to be, so wake up every day with the idea: What a wonderful day this could be. Those are the things that cross my mind. By the way, there's no downside in doing something for somebody you don't like—doing something good for somebody you don't like. No downside in that.
I think it's excellent advice.
Man.
That's a perfect place to close our first conversation. I really enjoyed meeting you.
Great.
I've heard nothing but great things about you. I'll end a little differently than I normally do. What I'll say about your business is that a lot of my friends use Flexjet, and they all talk about the same thing: You have remarkable customer service. These are highly disagreeable, high-powered entrepreneurs who are not easy to please. You should be very proud of the business you've built, and it's growing rapidly right now.
Yeah.
I hope you hold onto it. I know you just sold about 20% of it—
Yeah.
—but I think there are good things in the future of Flexjet.
7. Trust at Every Level
Let me say one thing about customer service, because you brought it up. One of the keys to customer service is that if there's a problem—because customer service is about what you do when things go to hell. It's not about what you do when things are going well. Within our organization, there is no approval process. The person you talk to on the phone when you call and schedule your trip and say, “We had a breakdown. I gotta get this,” has all the authority to comp your trip, to give you whatever money they need. They don't have to call a supervisor to say, “David needs help.” I empower everyone in the organization, at whatever level. First of all, it says trust, which is the foundation. I've said, “I trust us,” throughout the organization. That carries trust to that person. This is a person making $80,000 a year who can comp you a $300,000 trip. That's how we think about customer service.
I love it. Thanks.
Great, great.