From: Flex Jet LLC Director of Operations
Sent: Tuesday, March 24, 2014 10:32 AM
To: All_PIC; All_SIC
Subject: Communication From Renn Kicci, Chairman
Please read the following communication from Renn Kicci, Chairman:
TO: All Active and Furloughed Flex Jet Pilots
COMPANY MOST PRIVATE
I am writing to inform you of an important development. As most of you know, since like me you lived through it, our industry suffered a 30% drop in volume in 2009. This had significant impact on Flex Jet including downsizing our operations and furloughing our pilots. Today we still have 49 pilots on furlough. In an industry that is dominated by fixed overhead and high capital costs, this drop in volume caused the competition to lower pricing and compete aggressively on terms in an effort to make the best of a bad environment.
I had said many times that after 2009, we suffered from too much capacity and it would be difficult to grow until capacity (defined as the number of aircraft trying to sell to our audience) was reduced and consolidated. This has been the cornerstone of my strategic vision. In the employee meeting in June of 2009, I said that one of our Company strategies would be to seek out strategic opportunities that would allow us to act as a consolidator in the industry. We have executed on this vision last year by buying Sentient, absorbing CitationAir?s assets and the announcement to wind down Flight Options. By making these strategic moves (along with Avantair?s collapse), we have been able to consolidate capacity in the fractional portion of our industry and put ourselves in a position to be the only true challenger to NetJets in that segment. I will have a lot more to say on this strategy as we get closer to the final closing of Flight Options, but suffice to say, that I couldn?t be happier with how we will be positioned in our industry in the next 18 months.
The new development is that we have also been working on a transaction to consolidate Flight Options remaining holdings into Flex Jet, just like we did when we folded CitationAir?s assets into Flight Options last year. As you know, we announced in late 2013 that Flight Options was exiting the fractional ownership market once its existing agreements expire. Subsequently, we have been systematically moving aircraft and customers from Flight Options to Flex Jet, while shrinking Flight Options and laying off their personnel including the majority of their pilots. Because Flight Options is now only a fraction of the size of Flex Jet, we are not planning to integrate operations. Instead, we will continue to wind down the operations of Flight Options over 9 months by gradually transferring its remaining aircraft to our Flex Jet fleet, taking over 300 customers of Flight Optons and giving us an additional 18,000 hours of annual flying. Because we will follow the pattern we set with CitationAir, we will not be hiring Flight Option?s pilots or integrating seniority lists, the new aircraft and flying will allow us to bring all of our remaining furloughed pilots back to work as well as providing upgrade opportunities to many of our active pilots along with hiring a substantial number of new-hires (not to include any former CitationAir or Flight Options pilots). The transaction could close as early as April 1st.
We are not insensitive to the situation of the Flight Options pilots but the unfortunate reality is that they will be out of work within 18 months regardless of whether we acquire the company or not. We also plan to provide the Flight Options pilots with benefits that include:
1. Significant severance for all their pilots commensurate with the compensation terms of being furloughed
2. Retention bonuses to help assist with flying through the transition period
3. Training bonuses for assisting with the safe transition of our flight crews.
Just like I stated during the CitationAir acquisition, I am not offering, nor am I willing, to integrate the Flight Options seniority list with the Flex Jet seniority list. It is regrettable Flight Options was unsuccessful in the market place once the superior product line of Flex Jet came under our management. I find it hard to think about the idea that pilots, even those currently employed by our sister company, would somehow get priority over our own group of furloughed pilots who have been loyal to Flex Jet and could now benefit from that loyalty. As you know, one of the fundamental principles of Flex Jet is to treat our employees as family and the time is quickly approaching when we will be able to help ourfamily. I have been waiting and working for more than 6 years to get to this point.
I am confident that the Flight Options pilots will fully understand my position, sine they so eagerly supported me last year when I did the same thing to the CitationAir pilots that I am now doing to them. Therefore, CEO Mike Silvestro has sent the IBT a letter explaining our position, along with a proposed agreement with the IBT, which I am confident will be signed. You may recall, the IBT eventually signed a similar LOA during the CitationAir acquisition in reaction to intense pressure to do the deal with us that came from both the active and furloughed Flight Options pilots. To avoid any misunderstanding or mischaracterization of our position, I have enclosed a copy of that letter so you can see the terms for yourself.
I anticipate the 1108 will feel no more of an obligation to the Flight Options pilots than the Flight Option pilots felt to the CitationAir pilots when they were in control; what goes around comes around. I applaud the 1108 for having made the correct choice in the past and am confident they will do so again. As with the CitationAir acquisition, I feel the obligation to protect the Flex Jet pilots is so paramount that I will not complete the Flight Options transaction if it could have a detrimental effect on the Flex Jet pilots.
Finally, we just came to terms with Flight Options on this transaction on Friday and I only have until March 28, to let them know if we will close. Given the tight time frame, we have opened a discussion blog that will answer any additional questions through Thursday evening. This blog will be on the pilot website at http://pilots.flexjet.com and you can access it by using your Flex Jet username and password and clicking on?Company News? at the top of the left menu.
As a reminder, the company did sign a confidentiality agreement not to disclose to those without a need to know, any information surrounding the transaction with Flight Options. Rumored information can often sabotage a deal. This is common in business and why many times we do not acknowledge a transaction during the negotiation phase. However, I see no need to keep this information confidential any longer?our experience during the CitationAir acquisition has shown that this kind of information will get out almost at the speed of light. Consequently, I hope you will openly discuss this matter outside our pilot group. The Flight Options pilots need to hear about the position I have taken regarding their future?even if it comes to them via the rumor mill while we are waiting to see how it will play out.
Finally, I do want to say that it is exciting that we have these questions and issues to ponder and discern. Growing the company again, strategizing about our future and thinking about bringing people back to work, are certainly more enjoyable issues to debate than the issues that have challenged us these past 5 years.
Thanks again for all you do and taking the time to consider the impact of this issue.
Renn Kicci
Chairman
Attachments:
1. Letter from Flex Jet to IBT 1108
2. Proposed Letter of Agreement
Sent: Tuesday, March 24, 2014 10:32 AM
To: All_PIC; All_SIC
Subject: Communication From Renn Kicci, Chairman
Please read the following communication from Renn Kicci, Chairman:
TO: All Active and Furloughed Flex Jet Pilots
COMPANY MOST PRIVATE
I am writing to inform you of an important development. As most of you know, since like me you lived through it, our industry suffered a 30% drop in volume in 2009. This had significant impact on Flex Jet including downsizing our operations and furloughing our pilots. Today we still have 49 pilots on furlough. In an industry that is dominated by fixed overhead and high capital costs, this drop in volume caused the competition to lower pricing and compete aggressively on terms in an effort to make the best of a bad environment.
I had said many times that after 2009, we suffered from too much capacity and it would be difficult to grow until capacity (defined as the number of aircraft trying to sell to our audience) was reduced and consolidated. This has been the cornerstone of my strategic vision. In the employee meeting in June of 2009, I said that one of our Company strategies would be to seek out strategic opportunities that would allow us to act as a consolidator in the industry. We have executed on this vision last year by buying Sentient, absorbing CitationAir?s assets and the announcement to wind down Flight Options. By making these strategic moves (along with Avantair?s collapse), we have been able to consolidate capacity in the fractional portion of our industry and put ourselves in a position to be the only true challenger to NetJets in that segment. I will have a lot more to say on this strategy as we get closer to the final closing of Flight Options, but suffice to say, that I couldn?t be happier with how we will be positioned in our industry in the next 18 months.
The new development is that we have also been working on a transaction to consolidate Flight Options remaining holdings into Flex Jet, just like we did when we folded CitationAir?s assets into Flight Options last year. As you know, we announced in late 2013 that Flight Options was exiting the fractional ownership market once its existing agreements expire. Subsequently, we have been systematically moving aircraft and customers from Flight Options to Flex Jet, while shrinking Flight Options and laying off their personnel including the majority of their pilots. Because Flight Options is now only a fraction of the size of Flex Jet, we are not planning to integrate operations. Instead, we will continue to wind down the operations of Flight Options over 9 months by gradually transferring its remaining aircraft to our Flex Jet fleet, taking over 300 customers of Flight Optons and giving us an additional 18,000 hours of annual flying. Because we will follow the pattern we set with CitationAir, we will not be hiring Flight Option?s pilots or integrating seniority lists, the new aircraft and flying will allow us to bring all of our remaining furloughed pilots back to work as well as providing upgrade opportunities to many of our active pilots along with hiring a substantial number of new-hires (not to include any former CitationAir or Flight Options pilots). The transaction could close as early as April 1st.
We are not insensitive to the situation of the Flight Options pilots but the unfortunate reality is that they will be out of work within 18 months regardless of whether we acquire the company or not. We also plan to provide the Flight Options pilots with benefits that include:
1. Significant severance for all their pilots commensurate with the compensation terms of being furloughed
2. Retention bonuses to help assist with flying through the transition period
3. Training bonuses for assisting with the safe transition of our flight crews.
Just like I stated during the CitationAir acquisition, I am not offering, nor am I willing, to integrate the Flight Options seniority list with the Flex Jet seniority list. It is regrettable Flight Options was unsuccessful in the market place once the superior product line of Flex Jet came under our management. I find it hard to think about the idea that pilots, even those currently employed by our sister company, would somehow get priority over our own group of furloughed pilots who have been loyal to Flex Jet and could now benefit from that loyalty. As you know, one of the fundamental principles of Flex Jet is to treat our employees as family and the time is quickly approaching when we will be able to help ourfamily. I have been waiting and working for more than 6 years to get to this point.
I am confident that the Flight Options pilots will fully understand my position, sine they so eagerly supported me last year when I did the same thing to the CitationAir pilots that I am now doing to them. Therefore, CEO Mike Silvestro has sent the IBT a letter explaining our position, along with a proposed agreement with the IBT, which I am confident will be signed. You may recall, the IBT eventually signed a similar LOA during the CitationAir acquisition in reaction to intense pressure to do the deal with us that came from both the active and furloughed Flight Options pilots. To avoid any misunderstanding or mischaracterization of our position, I have enclosed a copy of that letter so you can see the terms for yourself.
I anticipate the 1108 will feel no more of an obligation to the Flight Options pilots than the Flight Option pilots felt to the CitationAir pilots when they were in control; what goes around comes around. I applaud the 1108 for having made the correct choice in the past and am confident they will do so again. As with the CitationAir acquisition, I feel the obligation to protect the Flex Jet pilots is so paramount that I will not complete the Flight Options transaction if it could have a detrimental effect on the Flex Jet pilots.
Finally, we just came to terms with Flight Options on this transaction on Friday and I only have until March 28, to let them know if we will close. Given the tight time frame, we have opened a discussion blog that will answer any additional questions through Thursday evening. This blog will be on the pilot website at http://pilots.flexjet.com and you can access it by using your Flex Jet username and password and clicking on?Company News? at the top of the left menu.
As a reminder, the company did sign a confidentiality agreement not to disclose to those without a need to know, any information surrounding the transaction with Flight Options. Rumored information can often sabotage a deal. This is common in business and why many times we do not acknowledge a transaction during the negotiation phase. However, I see no need to keep this information confidential any longer?our experience during the CitationAir acquisition has shown that this kind of information will get out almost at the speed of light. Consequently, I hope you will openly discuss this matter outside our pilot group. The Flight Options pilots need to hear about the position I have taken regarding their future?even if it comes to them via the rumor mill while we are waiting to see how it will play out.
Finally, I do want to say that it is exciting that we have these questions and issues to ponder and discern. Growing the company again, strategizing about our future and thinking about bringing people back to work, are certainly more enjoyable issues to debate than the issues that have challenged us these past 5 years.
Thanks again for all you do and taking the time to consider the impact of this issue.
Renn Kicci
Chairman
Attachments:
1. Letter from Flex Jet to IBT 1108
2. Proposed Letter of Agreement
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