Podcast: Trailblazer—Kenn Ricci On Key Moments, Lessons In Business & More
Kenn Ricci, Directional Aviation Capital principal and Flexjet chair, speaks on key moments in his career, his biggest challenges, best business advice, a surprising way he educated his children and more.
Kenn Ricci: Welcome Molly. Glad to be here.
Molly McMillin: Thank you. Kenn, your bio says you began your aviation career at Notre Dame as an Air Force, ROTC Cadet, where you majored in accounting. You later earned a law degree, but you first became a corporate pilot in the aviation world, flying a variety of impressive clients. I was reading [that they included stars, such as] Elton John, Barbra Streisand, Bruce Springsteen. And you were Bill Clinton's pilot when he was governor of Arkansas and campaigning for president. So that's a long list of impressive people.
Kenn Ricci: A lot of interesting stories.
Molly McMillin: Right. And somewhere along the line, you founded your first business and then a long list of businesses such as Flexjet, Flight Options, Sentient Jet, Nextant Aerospace, and many others. I guess a basic question, is you entered aviation as an ROTC cadet, but what first drew you to aviation? Was it something as a child? Did something happen where you had a moment that said, "I think I want to do this?" Or what got you interested?
Kenn Ricci: So first of all, my father ran the Cleveland National Air Races. And growing up, I would have odd jobs. As a young teenager, I would be around the air show. So that was my first exposure. And of course at that time, the performers were either the Blue Angels, and later on my job was, I would drive them to and from their hotels. So, I got to be around this wonderful group of aviators, and people talked airplanes all the time. I didn't think I would have a career in aviation. That really wasn't my goal. When I got admitted to Notre Dame, my family lived in a very tiny home, and my father worked for the U.S. government. So, there wasn't really a lot of money. And I remember I was going up to a visit at Notre Dame, and I remember hearing my parents talking about the fact that they would have to tell me that they couldn't afford to send me there.
I was going up there, and I remember coming on campus and asking, is there any financial aid available? Or are there scholarships? Because I realized all of a sudden I wasn't going to be able to go. And they said, "Well, you're kind of late in the program, but there is this ROTC program." And I will tell you, this was while the Vietnam War was just ending, so the military was very unpopular, so they were not meeting their quotas for cadets. They said, "You could go down to the ROTC building, and see if there's any positions available." So, I don't know why I did this, but I went to the Naval, I guess it's because of the Blue Angel pilots. I decided I wanted to be a Blue Angel pilot, so I thought I was going to enroll in the Navy.
At that time, it was a Saturday, and the ROTC building is closed, but you can walk through the corridors, and I was peeking in, because there were no cell phones. And I was peeking into the Naval ROTC to try to get the phone number to call them about getting a scholarship. And as I'm standing there, a guy taps me on the shoulder and he says, "Can I help you?" And I said, "Well, yes. I'm an incoming freshman. I've been admitted, but I'm interested in going into ROTC, and I'd like to fly jets." And he said to me, "And you're at the Naval ROTC?" I said, "Yes, sir." He said, "Well, son, I'm the head of the Air Force ROTC. Are you sure you got admitted? Because the Air Force has jets, the Navy has ships." So, it was at that point he walked me down to the Air Force office, and I enrolled. And that's how I got my ROTC. That's how I started ROTC.
Molly McMillin: Wow, that's a great story. How did you transition from being a corporate pilot, you've got thousands of hours, to launching your first business?
Kenn Ricci: When I talk about starting businesses, there are really two types of businessmen. And there are business people that love business, and they're transactional. And if you handed them a donut shop, they'd want to make it good. And if you handed them an excavating company, they'd like that too. And if you handed them an insurance business, they'd like that, because they like business. They like the transaction. And then there's people that get passionate about the business they're in. So whether it's because they love bookstores, they start a bookstore business. So that was really my background. My background wasn't that I loved business. My background was that as I got to love aviation... It's interesting now because if you go back into the eighties, which was what most of my flying career was, and when I was thinking about the business, private aviation was not that stable.
We had less than 5,000 jets at the time, and the airlines were furloughing in and out. I had a brief airline career. Aviation jobs were not stable. So, I think I began to think about if I wanted to have some stability in aviation, I was going to have to start a company on my own, and I was going to have to have some control of its success or failure. So that really was the nexus for how I began, but I remembered distinctly the minute when I decided to start my first company. And back in the late eighties, we didn't have GPS. And I was flying international. At that time, I was actually flying for Richard Branson. And we would use INS systems, long range navigation systems. And these were very complex, and INS was a very complex unit.
There was a monopoly in the area at the time. Delco had the majority of the INS systems. Litton had some too. And I broke down in Paris, and I couldn't get the INS to come online. So therefore, you can't cross the Atlantic without long range navigation. And I had to delay the trip, and I immediately got a $60,000 bill. It was like $30,000 for an overhaul repair, $30,000 for a [inaudible 00:06:49] unit. I said, there has to be margin in this, there has to be somewhere. And actually, so one of the first companies I started had to do what was called Inertial Navigation Services. And we repaired long range navigation systems, primarily because I didn't want to pay Litton the excessive costs they were charging. And I actually sold that business to Heico in the late nineties.
Molly McMillin: Oh, wow. When you look back over your career, what do you consider some of your most instrumental moments?
Kenn Ricci: I would tell you that the foundation of when we began to move into the service side of the business, which was really, I came out of flying the rock stars and flying those very premium clients. And really, the epiphany to me was the importance of the pilots in private aviation. And the airlines have never prioritized the pilots. They have gate agents; they have a cockpit door. But also, again, going back to 25, 30 years ago, pilots were still seen as a commodity. They weren't seen as a necessity. So, we did not have really phenomenal careers and phenomenal career stable growth paths for pilots. And it began to me to say, whether at the time it was really more around aircraft management and then evolved into fractional, I began to think that I wanted to create a stable environment for pilots. And that if you had a great core group of pilots that interacted, that this could be the nexus, this could be where we could build the foundation of the company on. So, I would tell you epiphany one for me was really around that idea.
Molly McMillin: What about when you look backwards? What do you consider your biggest challenges?
Kenn Ricci: Today, or going back? Obviously, I think perception is reality. So early on, always the biggest challenges had to be the high capital cost of aviation. And my partner and I have been together a long time, over 40 years. And if I say there was one thing we did differently than a lot of our competitors that didn't survive, is that we paid a lot of attention to the balance sheet. Recognize, and it's very nice, and a lot of people will talk about their income stream, or their EBITDA, or growth in revenues, but the reality is aviation is so capital intensive that if you don't have a balance sheet plan, it's tough to have a long-term vision. So, it's tough to have long-term stability. So very early on, this is still true today, Flexjet still is a $4 billion company, but still, the balance sheet is tremendously important to buying new aircraft, to growing our leasing program, to going international.
So early on, that was much more challenging than it is today. Today it's interesting to me. I think the challenges are different, whereas in the nineties we couldn't get anybody to even talk about private aviation. By 2010, in the last 10 or 15 years, everybody wants to be in aviation. So here comes private equity. And private equity has entered the FBO space, they've entered catering, they've entered ground handling, they've entered – the maintenance business particularly lately has done a lot of investment by private equity, and not always for the good from our perspective. From a perspective of a fleet operator, in many cases, our challenges today are the real drive for profitability that lowers the experience that we have today as a fleet operator. So, I think the challenge today is really trying to keep service level highs when we have this phenomenal quest for profitability that maybe I didn't think existed 10 years ago.
Molly McMillin: At a conference in Miami, you made a statement that when you're an entrepreneur, only the paranoid survive.
Kenn Ricci: Yes.
Molly McMillin: What did you mean by that? Can you expand on that a little bit?
Kenn Ricci: Have you ever seen the statue of the entrepreneur where he's carving himself out of stone, and he has a hammer and chisel? And one air, and he could go through his body instead of just chiseling the stone away? And I think that's how you have to think about it. If you're really immersed in your business, foreseeability is tremendously important. So being tuned in to what are the challenges that come to harm you in the future, is what I was speaking to, being paranoid about what's next. If I go back three years ago, I mentioned briefly about private equity. If I go back three years ago, Directional owned a substantial maintenance company called Constant Aviation. And we were getting approached by significant investors, both manufacturers and private equity people to buy that company for a tremendous value. About 30% of the volume for that company was Flexjet, and about 70% was other people.
And we started to think, well, if we sell this company, where is Flexjet going to get its maintenance done? And we began to see the funnel really narrowing towards options that Flexjet would have for maintenance, as our fleet at that time was only 150, but today is over 300 aircraft. So, I was paranoid, if you will, about how these maintenance costs long-term could harm us. So, that force that made us go into bringing all of our maintenance in-house. We still run on, all of our division leaders have a goal orientation, and we do meet every time we have a goal review. We do ask them, "What are your biggest threats?" And that's an attempt to make sure people are being paranoid about what could come up and harm you.
Molly McMillin: Looking back, what's the best business advice that you ever received?
Kenn Ricci: It's not exactly directly business advice, but it was to be passionate about what you do, and compassionate about how you do it. Because the nature of business is such, you can tend to think, because bottom lines are so important, and we oftentimes will measure ourselves by the metric of what that bottom line is. So, we get focused. It's a career and it's a vocation that can end up being very selfish if you really let it be that. So, making sure that you think about how you can pay it forward, how you can be compassionate about how you do business might seem like, well, why would you pay attention to that? The reality is, over the very long time, the more you pay it forward, the more you think about how to be inclusive, actually the much better it is for your business.
The quick answer to business advice would be, don't get short-sighted. Taking a long-term approach is not always easy, and it doesn't always get you the immediate gratification. And it's obvious we are in a society where instant gratification is extremely important, so this maybe swims upstream. So, I would say the advice is to think long-term and think things you could do. The business thing I would do, the one I tell to college [groups] when I talk all the time is, find a partner. It's lonely at the top. And if you're forced to make every decision on your own, you can't oftentimes ask direct reports, because it might affect them, so that advice might not be truthful or honest. If you have to go home to your spouse every night, that's not a great place to end up.
I think having a partner over the years where you share equally in the pain and the glory, and someone that you can vet ideas with is really important. Like I said, Mike and I have been together for 40 years. And every conversation, whether we're looking at buying a company, whether we're looking at buying new airplanes, begins like this. "Mike, I think this is going to be great. I think it's a great opportunity." And Mike goes, "I don't like it." So, between the two of us, we work it out, and I accept as an equal. If a subordinate told me, "I don't like the idea," well, first of all, they wouldn't tell me that, right? Because they'd be afraid of offending the boss by telling them they didn't like his idea. So, I think having a partner is extremely important and helpful, also.
Molly McMillin: We've talked about the past, looking forward. In your crystal ball, where do you think business aviation will be, if we sat here 10 years from now or 20 years from now? What will it look like?
Kenn Ricci: You really have to ask a couple of questions that I don't really want to be attributed with asking the question. But they're probably obvious questions we all need to think about, like when will be the time when we stop having pilots? I don't think anybody doubts that it's coming. Well, we can see the advent of technology, and we could see where that is. Do we think it's 20 years, 30 years, 40 years? And then what does that mean? What does service level become? What's the experience of private aviation without that? And then you also have to ask the question, is there a time where there won't be private aviation? And I could give you, again, going back to paranoia, you could see threats to the industry could be technology. If the day comes when I can virtually be anywhere, and that virtual experience is so good that it's not worth the flight to get there, why would I fly to get there?
So, I think long-term you have to think about those things. I think in more intermediate term, I think there's going to be some phenomenal and just revolutionary things that we're going to see coming very soon. I've gotten several presentations lately on the concept of (eliminating) windows in the aircraft, because virtual reality is getting to the point where we don't really need the windows in the cabin. We can make that cabin whatever we want it to be. It could be a picture window, it could be floor to ceiling, it could be no window, it could be a video screen. And obviously windows are a weak point in the fuselage stability, and they're noisy. And I've had many manufacturers show me their plan for window elimination, so that's interesting and coming along. There's going to be something, I'm not sure, electrification in helicopters as we were invested in that also, but I'm anxious to see where that takes us. And clearly there's going to be some hybrid production that I see coming.
And I've seen a couple of plans where you have electric motors, but powered by a single turbine that charges batteries. So, I think it's going to be interesting. I think propulsion is going to be something that we'll see in the very near term, that'll be interesting to see where we evolve to.
Molly McMillin: And it sounds like you'll be right in the thick of that.
Kenn Ricci: I hope so. I would love to be a leader in it, right? If you've been in your craft and you love what you do, you want to embrace and find the next best thing.
Molly McMillin: I'm going to ask you to pick among your children, what is your favorite airplane, if you have one?
Kenn Ricci: Oh, gosh. That is picking your children. So, the answer is obvious. It's the next one I'm going to buy. That's going to be my favorite. But I spend most of my time in Gulfstreams. I found I'm comfortable in them. I flew a G-II and G-III throughout Africa where there was no support infrastructure, and the plane was always dispatchable, never let me down. So I just have an affinity for them. I'm on my third Gulfstream, so I've owned three of them over the years, and maybe soon to have a fourth.
Molly McMillin: Do you have a favorite business?
Kenn Ricci: You mean from just one I like? Or from a business model that I think is a great business model?
Molly McMillin: Well, I was thinking about all the different businesses that you have. Is there one that you like the most?
Kenn Ricci: Without a doubt, I would tell you Flexjet is the business, for one reason. Have you ever heard of the six degrees of separation? That you're only six people from meeting everyone in the world? And I always say, no, no, no. You're only one flight from meeting everybody in the world. The amount of people - the customers that I get to be involved with, the caliber of who uses Flexjet is just spectacular. We hold a chairman's event once a year. We invite our lead customers to come, and they love to come. And it's interesting. No matter what your business is, like I said, if you're in the insurance business and I call you up to talk about airplanes, you like to talk about airplanes. People love airplanes. So, I like the business because it makes it so accessible. It's easy to meet people.
And also, it's a great place. We have a great pilot workforce there, and I enjoy our pilots tremendously. So yes, by far I enjoy Flexjet the most. There are ancillary businesses to Flexjet that are important. Also, Molly, we haven't gotten too far off our skis. We always think about something, like when we bought SIMCOM, which was a training facility, we bought it with the idea of how it could enhance Flexjet. So, we've mostly been around companies that we thought we had some relation. I always say, we're an inch wide and a mile deep. We don't have a really broad perspective, but we have a very deep perspective on this very, very narrow part of aviation. In general, businesses that generate cash in advance of the expense are my favorites.
Warren Buffett would agree with me, because he created the ultimate business. You collect all this insurance money, all the cash comes in, and then you figure out what to do with it somewhere down the line. But there are those kinds of businesses. The jet card business is one like that. Even Flexjet a little bit, because we have these subscriptions that come in. So, if I was not speaking about aviation and I was just talking to a class of MBAs, I would say businesses where cash comes first and expenses come later are much better than businesses where the expense goes first and the cash comes later.
Molly McMillin: I can see that. You mentioned maybe one of your next businesses, you might be getting into the catering business. Is that right?
Kenn Ricci: I think it's a weak link and let me give you an example. If you have a five-star dining experience, you know what it is. I think we've yet to really master that in private aviation, and it should be. I think we've created a food academy in London where we train our 170 flight attendants. So, on our high-end aircraft, we're good. But sourcing a good chef, it's 60%, 70% about sourcing the food, and 30% about how you make it. And that's still our challenge today. So, when I talk about catering, I'm talking about how we can source quality product, which I think we've lost our way on in aviation. I'm not sure we'll start a whole separate business, but we certainly at Flexjet are focused on how to improve the quality of what we serve on those aircraft.
Molly McMillin: This is more of a Kenn Ricci question. What do you do for fun when you're not working?
Kenn Ricci: Well, first of all, you're going to laugh, but traveling is the number one thing I do for fun. I've always been an avid traveler. I tell the story when I was growing up, as I mentioned to you, my father worked for the government, so we didn't necessarily have a lot of money. And I remember we had in our little den, the aluminum outdoor furniture would come in the winter, and in the summer there'd be no furniture in our den, because we would put the aluminum furniture outdoors. And my dad thought that was a very efficient use of the furniture. My mom hated it, because she thought the worst thing in the world was the aluminum furniture in the den. So, my parents would have these arguments about, should we buy new den furniture, or should we travel? And my dad won most of those arguments.
As a kid, I spent a lot of time traveling, and I have carried that on with my children. I have three children, and they've all skipped eighth grade to travel for a year, and I've traveled with them. And we still every year, have a family trip. So, we still have maintained that. I would tell you that the idea of traveling, the social interaction, I feel that when you're in a foreign place, you can think about it two ways. One, I'm not welcome here, I'm a foreigner. Or you can think about it as an opportunity to meet so many different cultures. So that's what I think we like. I don't know if I've mentioned that I've been to North Korea three times. I'm pretty sure I hold the record for an American.
Molly McMillin: I think you do. I've only known one other person who's been to North Korea, and that was once.
Kenn Ricci: Well, yeah. Well, as my wife would say, she went once and she said, "I'm never going back." She said, "You're going the rest of the time without me."
Molly McMillin: Interesting. That sounds like a conversation I'd love to have. Anything we haven't talked about you'd like to add, Kenn?
Kenn Ricci: No, I think that the thing I would tell you is that aviation is a wonderful industry. What I like to say is, if I'm at a cocktail party and standing next to me is the yarn salesman, and I got the aviation stories and they have the yarn stories, aviation wins every time. And I think sometimes, it's a wonderful industry to be involved in. And I think anything we can do to promote our industry, to promote such a wonderful experience is really a good thing to do. And thank you and your magazine for what you do to help promote it.
Molly McMillin: Well, thank you so much. Thank you. That's all the time we have for today. Thanks for listening. Thank you, Kenn, for being here. This week's episode was produced by Jeremy Kariuki. If you enjoyed the show, don't forget to or follow us on your podcast app of choice. And if you'd like to support us, please leave a rating wherever you listen. Thanks again to you for listening, and thanks, Kenn, for being with us. See you next time.
Related Content
