More Fixing of Things That Aren’t Broken

By Bill Deere, Executive Vice President of Government and External Affairs

The campaign to economically regulate FBO pricing took its latest step recently, when a national pilot organization filed informal complaints against aviation businesses at three airports. It is certainly reasonable for an association that represents pilots to act as a consumer ombudsman, just as NATA does on behalf of aviation businesses.

However, I very much agree with NATA’s President Marty Hiller who, pointing to the big picture noted, “This action is disappointing, coming at a time when the general aviation community is confronting a serious effort to privatize our nation’s air traffic control system. General aviation (GA) as we know it in this nation is under a real threat. We need to stand united right now and not be concerned with distractions like this.” Think Marty is exaggerating? I was on a recent call where the same national pilot organization was telling pilot groups from around the country the debate on ATC privatization has reached a point where the next seven days are critical to the future of GA in this nation.

To be clear, neither NATA nor its membership is afraid of a debate on FBO pricing. In fact, I am proud that NATA insists that viewpoints on controversial issues be aired directly with our members. On November 8th, NATA members will hear directly from AOPA General Counsel Ken Mead, who has agreed to join us at the 2017 Aviation Business Roundtable, to discuss pricing on a panel that will also include FBOs, airports and fuelers. I have assured Ken that no flak jacket is required.

The issue of FBO pricing is not new, and the pressure aviation businesses often face for more improvements and additional private investment can ignore the reality that these costs are ultimately paid for by the users. However, what is new, is the increasing lack of collaboration to address these issues. Historically, industry groups work in partnership on issues on behalf of their memberships, and in this case aircraft owners, aviation businesses and airports should be sitting down to address concerns and develop solutions, not looking for government regulation. This campaign to economically regulate FBOs began in secrecy, and ignores the fact the Department of Justice reviews FBO consolidations and requires adjustments if necessary to assure adequate competition continues. It seems reasonable that if a pilot organization felt its members were threatened at these locations, that their historic mission would have brought aircraft owners, aviation businesses and airports together, not pitted them against each other.

The commitment of the industry to work together on an unleaded avgas replacement exemplifies the potential of collaborative relationships. This effort provides users, businesses and airports opportunities to review incentives for alternative fuels as they hopefully become more readily available in the next several years.

While NATA does not take a position on pricing at individual FBOs, the association is providing important industry perspective, supplying both the FAA and local decisionmakers context as to the factors that go into FBO pricing. As you may recall, earlier this year NATA presented a state of the aviation business sector overview to the FAA. The overview, developed with the assistance of FBO and air charter members, discusses the costs of operating airport businesses and the many variables
that go into determining its pricing structure—including capital invested, lease duration, fuel volume, personnel expenses, hours of operation, and traffic types.

Press coverage of the informal complaints has been balanced and, most important, not accepting as axiomatic the assertion that FBO pricing is “egregious.” Especially gratifying to NATA are the comments that follow the related news stories. This would be a natural place for pilots to “pile on.” And while some do, there are also thoughtful comments from
writers who understand that FBO pricing is more complex than its glib portrayal in what is essentially an association’s membership renewal campaign. Some of the best discussion centers around the role of airports and the impact on FBO economics of a local airport or community’s desire for highend facilities, ways to most easily address security concerns or their own investment challenges. Federal requirements and local conditions can be managed together, and the industry has traditionally united to seek the necessary balance.

The FBO services market is and remains a very competitive industry. As the filings demonstrate, pilots, flight departments, charter companies, and fractional operators make a choice every day of what airports to fly into and which provider meets their requirements. Pilots have more technology than ever to create options to assist them in deciding where to land, purchase fuel, and remain overnight based on cost, convenience, reputation and services a fixed base operation provides. Currently, in the case of Jet A fuel there are no less than 26 providers of contract fuel (a method of payment offered by fuel suppliers and other transaction entities), most if not all posting weekly prices at most FBOs across the country. There are numerous websites that offer the piston and turbine pilots prices, with flight planning and other services, including FltPlan.com, AirNav, and RocketRoute.

Those within the aviation industry fully understand that FBOs compete vigorously with each other on price, service, and quality of facilities. Often, an FBO’s primary competitor is not a competing operation on the same airport but rather another airport in close proximity, or the airport where the plane came from or its final destination.

Pilots, take some of the self-congratulatory back patting of organizations with a grain of salt. The reporting has a tendency to peter out when the news turns inconvenient. For example, taking credit for a second FBO at Jackson Hole has stopped. Why? Because the airport authority may buy out the existing operation in favor of a city-run FBO. How about prices at John Wayne Airport now that an incumbent FBO was turned out? Looks like the total user price for fuel, handling fees and rents are still about the same. Economic regulation of FBOs is no different than trying to privatize air traffic control, another example of trying to fix something that isn’t broken. (Visit www.nata.aero to read NATA’s state of the aviation business sector overview.)

Republished from the 2017 Q3 Aviation Business Journal.

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