777 Partners is betting on technology that works to simplify how low-cost airlines sell their products to customers.
The firm completed its acquisition of Air Black Box at a time when more PE firms are boosting their investing activity in the space.
The Miami private equity firm, which invests on behalf of general partners, a local PE firm and a few high-net-worth individuals, completed the purchase of founder-led Air Black Box in late February.
The deal, which was agreed in September, took months to complete due to consolidation of several entities in different geographies and jurisdictions, Juan Arciniegas, principal at 777 Partners, told Buyouts.
Air Black Box is a software company that aims to simplify cross-sales and product distribution for low-cost airlines.
The firm came across the opportunity when it was doing research on potential investments in aircraft leasing, but instead discovered a lack of affordable distribution options for low-cost carriers, Arciniegas said.
“We found that it is not very easy for low-cost carriers to start out and compete because distribution platforms are very costly. There is not really a product out there for low-cost carriers,” he said.
The business model of low-cost airlines is to unbundle products and to sell only a seat, while offering services like priority boarding, insurance or meals, a-la-carte.
Such carriers also rarely have an opportunity to pair their airfares with other airlines on connecting flights. Air Black Box is aiming to solve these issues by enabling cross-selling, dynamic pricing and flight pairing among different airlines on one platform.
The software also aims to decrease the distribution fees for airlines, Arciniegas said.
The technology behind Air Black Box works through airlines’ distribution channels, enabling airlines to sell more products without having to overhaul existing systems.
The platform also empowers airlines to work together. Currently, the Value Alliance, an Asia Pacific airlines alliance formed in 2016, is enabled by Air Black Box.
The alliance includes carriers like Cebu Pacific, JeJu Air, Scoot, Nok Air, Ceb Go, Nok Scoot and Vanilla Air and serves more than five million passengers across 160 destinations. According to Arciniegas, carriers would not be able to achieve this reach on their own.
“Airlines are often constrained by limited leverage with legacy distribution providers, which makes it difficult for them to integrate and cross-sell with other carriers,” he said.
The firm also plans to do more investments in travel technology space through add-ons.
“We view Air Black Box as an anchor for which we can pursue more acquisitions that can address not only low-cost airlines but also regular airlines and airports,” he said.
“Airports face similar connectivity issues to airlines. … They have very limited ability to develop the long-term customer relationships needed to drive revenue and increase passenger volume.”
In the past year, firms including Accel-KKR, Thoma Bravo, Silver Lake and 3i Group completed 10 deals in travel-focused technology, according to Pitchbook data. Buyouts in the space have increased 50 percent since 2014, according to Pitchbook. Read Buyouts’ past coverage here.
Recently, 777 Partners made an investment in Flair Airlines, the only independent ultra-low-cost carrier in Canada. The firm also said it is relaunching the historic World Airways brand as North America’s first low-cost, long-haul airline.
777 Partners, which is structured as a holding company, was founded by Steven Pasko and Josh Wander in 2015 as a result of a management buyout of Sutton Park Capital from PennantPark.
The firm typically makes control investments in companies across the specialized finance sector, consumer and litigation finance, insurance, aviation and in special opportunities.
Action Item: Contact 777 Partners in Miami at +1 800-494-9145