[PE Now] Are Private Equity Firms Stingy with Capital Expenditure? ... Multi-Billion Dollar Investments Are Common

KKR Doubles Value with $2 Billion Investment in ‘Aviation Rest Stop’ Operator
IMM's AirFirst and Hahn & Company's K Car Stand Out as Korean Benchmarks

When driving on the highway, you inevitably come across a rest stop. At these rest stops, cars are refueled, people eat, and money is spent. During holidays or major national celebrations, rest stops are crowded with people. One might consider that operating such rest areas on a national scale could yield significant revenue.

There is a similar concept in the aviation industry. Private and charter planes refuel and undergo maintenance at Fixed Base Operators (FBOs), which are private aviation terminals. Since chartered or privately-owned aircraft are usually unable to use standard airport facilities, they must utilize FBOs that offer independent ground and refueling services. There is a case where these "rest stops" for aircraft have been successfully monetized: the exit (fund recovery) of Atlantic Aviation by the world's largest private equity firm, KKR (Kohlberg Kravis Roberts). Over five years, KKR more than doubled Atlantic Aviation's corporate value and sold it to another asset manager. The case stands out not as a simple cost-cutting restructuring or a cyclical economic recovery investment, but as a case of transforming a company into a dominant infrastructure platform through large-scale capital expenditure.

According to Bloomberg, KKR recently sold Atlantic Aviation—a U.S. FBO operator it had acquired in 2021 for about $4.5 billion (approximately KRW 5.301 trillion at the time)—for approximately $10 billion. Even after selling its controlling stake, KKR remains a significant joint controlling shareholder of Atlantic. KKR invested in Atlantic Aviation at a low point. Though demand for charter flights increased modestly as wealthy travelers turned to private jets over commercial airlines post-pandemic, there was still uncertainty regarding the sustainability of this demand.

Value Up by Investing Half of the Acquisition Cost...Securing Strategic Bases, Streamlining Systems

Nevertheless, KKR made a bold decision to invest further, arguing that long-term growth potential was high. Following the acquisition, it injected nearly $2 billion—almost half of the original purchase price—to drive up corporate value. Foremost, KKR expanded Atlantic’s physical presence from 67 locations to 108. Just as rest areas on high-traffic routes achieve high revenue, the location of an FBO at a busy junction is crucial. KKR selected only the best "prime" locations for its bases. As private jet clients are willing to pay extra to land as close to their destination as possible, FBOs in financial centers, affluent neighborhoods, or places that regularly host sporting or corporate events command particularly high value.

Atlantic's network includes key locations such as Las Vegas; Palm Beach, Florida; Louisville, Kentucky (where the world-renowned Kentucky Derby is held); and Sun Valley, Idaho (site of the Allen & Company Sun Valley Conference, which is attended by Wall Street heavyweights). Some of Atlantic’s existing prime locations were further optimized for spatial efficiency. Although variables such as the frequency of aircraft operations or private-sector consumption may cause fluctuations, Atlantic maximized profit per square meter by expanding hangar capacity to accommodate additional aircraft. For example, at Teterboro Airport—a gateway to Manhattan, New York—old hangars were demolished and new ones were built.

To enhance corporate value, KKR implemented a systematic overhaul, not only reorganizing support departments but also recruiting professional managers. The previously disconnected back-office functions across branches were entirely revamped, allowing for integrated sales, centralized procurement (enabling fuel cost reductions via bulk purchasing), and comprehensive price and revenue management systems. KKR also developed and rolled out a proprietary real-time operational system, enabling end-to-end tracking—from reservation and airport arrival to service requests such as fueling and maintenance, and finally to invoicing—by simply entering an aircraft's tail number. Field staff could update service requests instantly while standing next to the aircraft via tablets. In addition, KKR recruited talented personnel with experience in both the aviation and rental car industries. In 2023, KKR hired Jeff Poland, a former executive at United Airlines and Hertz, as CEO to take charge of integrated network management.

AirFirst, K Car... Korean PEs Boost Corporate Value with Aggressive Investments

There are similar cases in Korea. For instance, IMM PE redefined AirFirst, transforming it from a simple industrial equipment company into an infrastructure platform. In 2019, IMM PE acquired a 100% stake in Linde Korea’s general industrial gas business unit for KRW 1.4 trillion. After the acquisition, the company was renamed AirFirst, and the focus shifted to hiring technical talent and strengthening technical capabilities. AirFirst was selected as the industrial gas supplier for Samsung Electronics' Pyeongtaek semiconductor plant—a contract that drove approximately KRW 1 trillion in new facility investments. The company also forged ultra-long-term contracts (15- to 20-year terms) with major clients such as Samsung Electronics and SK hynix, structuring these deals to pass on raw material price fluctuations to contract prices. As a result, in 2023, global asset manager BlackRock acquired a 30% stake in AirFirst for KRW 1.1 trillion, allowing AirFirst’s corporate value to more than triple in just four years.

Another example of corporate value expansion fueled by platform-focused reforms is the case of Hahn & Company’s acquisition of K Car. Hahn & Company acquired the offline used car sales division, which had been spun off and divested by SK Group. The firm then initiated a program of digital transformation and centralized standardization. It introduced a 100% direct sales, fixed-price, and online ordering system to what had been a dealer-driven used car market. Offline stores were converted from simple used car showrooms into hubs responsible for online delivery and processing of refunds. Driven by this value expansion, K Car was listed on the Korea Exchange. Subsequently, Hahn & Company sold its controlling stake to the KG Group, achieving a valuation of KRW 1 trillion and recovering five times its original investment.

This content was produced with the assistance of AI translation services.