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Good judgment
comes 1963-1968, COO, Aircraft and Equipment Leasing Company Still in college, Buck’s first company was a start-up. The company financed and leased aircraft and he created, he thinks, the first residual-based financing and leasing plan for airplanes. He even tried to sell Fortune 500 companies on leasing their business aircraft on a residual-based lease. They thought the idea was interesting, maybe, but not something they needed. It’s interesting how things change with time. Buck added equipment leasing and set up a leasing program for a major manufacturer of business machines with a young upstart selling, of all things, hamburgers. That company became the largest hamburger franchisor in the world and the franchisees were interested in conserving their investment cash. Buck built up a $10 million + portfolio. Based on the experience gained in the aircraft leasing and financing business, an idea to lease aircraft out on a short-term basis was examined and appeared to offer an interesting opportunity. If you find yourself 1968-1972, COO and later CEO, Short Term Aircraft Rental Company, Franchisor and Financing Company The short-term aircraft rental concept started as a one man office at a Chicago area airport. A private airport was later purchased, a real estate play as well as a bigger base for the airplane rental business. The airplane rental business expanded again with a leasehold purchase in California. It was the sixties and franchising made sense. It also made sense to use the aircraft financing experience to finance the growing fleet for the franchisees. Equity capital was required and a private placement was done. The result was aircraft rental locations in 33 cities and a fleet of over 400 aircraft. The fleet was funded through a finance subsidiary of a Fortune 500 company with an initial credit facility of $5.5 million and an upside line of $400 million. The success story was trumpeted across the country in the financial press, trade journals and local papers. A major national weekly magazine did a feature business story. The PR success was mind blowing. There was a flaw, the one that is usually the culprit - management. Most of the franchisees had purchased a franchise because they were pilots. It wasn’t fun being a doctor, a lawyer, or a financier, not compared with being able to be in the aviation business. They hired young pilots to run the business and despite a very advanced training program most franchisees saw the program as just plain fun. When the young pilot managers didn’t sell the program well enough, rather than replace the managers and put in the balance of the required start-up capital, they just slowed down the payments to the captive finance company. Why not, it was part of the parent. The franchisor should have required an owner to be the manager. The problem happened with enough of the franchisees that it caused a horrendous cash flow problem for the financing subsidiary. It was life threatening. Buck was faced with a big need to do his first corporate fix and for good reason - it was survival. It didn’t take long to decide that there were two choices; fold up the tent or put in a lot of money and buy back all of the franchises. The first loss can often be the best. The franchisees were all released from their agreements, most of the planes were taken back and sold, a net operating loss was generated and investors in the parent company were rightfully concerned about their investment. What started as a financial success had turned rapidly to a boat anchor. It was an artistic success and a financial flop. Buck met with a friend, a well known financier from a well know family of financiers. He was also a pilot with a great interest in the aviation business. The pearl that came out of that meeting was “Do a John Paul Jones.” He meant pull your ship alongside one that’s not sinking and take it over, you’ll live to fight another day.
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