Airports, FBOs and Users Role in Fostering Airport Health

March 29, 2018

Airports and their tenants provide essential services to keep general aviation healthy, sustainable and successful, as well as support the economic viability of local communities. In a recent Airport Business/ article, NATA Board Member Curt Castagna discussed pathways to maintain the sustainability of airports and to encourage stakeholders, including users, to collaborate on achieving a robust airport that supports both economic development and public access to aviation.

Is Your Airport Healthy?

BY CURT CASTAGNA, President and CEO of Aeroplex/Aerolease Group
Originally posted by Airport Business/ ON DEC 26, 2017

For managers of general aviation airports across the nation, the definition of sustainability is as diverse as the stakeholders whom they serve. However, most contend that maintaining both economic viability and social responsibility are vital to maintaining a healthy airport.

The Airport Cooperative Research Program (ACRP), which is funded by the Federal Aviation Administration (FAA) and undertakes research in a variety of aviation subject areas, defines airport sustainability as practices that ensure:

  • Protection of the environment, including conservation of natural resources
  • Social progress that recognizes the needs of all stakeholders
  • Maintenance of high and stable levels of economic growth and employment

There is no simple formula for achieving airport sustainability, as each facility has a unique operating environment, business structure, governance and market. In addition, airport management face diverse challenges in relation to meeting user needs in the areas of maintenance, modernization, budgeting, security, grant assurances, and local political and community initiatives.

This discussion is designed to encourage visionary thinking from airport, business and community leaders, as well as airport users, on how to collaboratively achieve a robust airport that supports both economic development and public access to aviation.

Navigating the Path to Self-Sufficiency

When it comes to maintaining the economic health of an airport, it is crucial to understand its unique operating environment. In broad terms, general aviation airports must comply with a host of federal regulations and requirements, while navigating local market forces and economic and environmental pressures.

General aviation airports traditionally generate revenue from lease rates, fees and charges collected from tenants and users who provide a broad range of aeronautical services to the aviation community including: aircraft sales and acquisitions, fuel, aircraft ground support, passenger and crew services, aircraft parking and storage, on-demand air charter, aircraft rental, flight training, aircraft maintenance and overhaul facilities, parts sales, and business aircraft and fractional ownership fleet management.

Development at general aviation airports often takes the shape of public-private partnerships, modeling the discussions currently underway at the nation’s commercial service airports. For example, an airport sponsor enters into a type of public-private partnership with a fixed based operator (FBO) that provides airport users with a wide range of aeronautical services. In return, the airport sponsor receives a fee for the land and the community receives the economic benefit, with minimal risk for the business enterprise that is created. An increased number of airports are also entering into agreements with private companies that provide renewable energy sources, such as solar panel installations, that can diversify revenue streams, significantly reduce energy costs and benefit the environment.

A third revenue stream at airports comes from specialty companies that serve aviation-related segments of the economy. Corporate and general aviation services are augmented by a diverse array of mixed-use facilities, including business parks and industrial centers, which make airports a powerful economic engine.

Finally, public-use airports benefit from grants provided by the FAA for vital infrastructure projects. Eligibility for these Airport Improvement (AIP) funds is specifically based on the airport’s ability to maintain a level and competitive playing field for leaseholders engaged in aeronautical activities. To maintain its grant assurances, airport sponsors are responsible for ensuring that its tenants provide services at prices that are fair, reasonable and non-discriminatory.

Competition, Not Regulation, Creates Healthy Airports

At some general aviation airports, as well as commercial airports with general aviation facilities, corporate aviation accounts for a disproportionate share of revenue generated compared to smaller general aviation aircraft. How then, do airports achieve economic sustainability while maintaining a healthy mix of jet, propeller and helicopter operations?

A proper mix of operations and aircraft cannot be achieved through increased federal regulation or market manipulation. Rather, airports must aggressively work to implement policies that maintain balance among the needs of diverse airport users, while extending the benefits of aviation to the local community.

This includes using a competitive selection process to attract tenants that make significant capital investment and offer quality services at reasonable prices. Airport sponsors must also establish fair and equitable lease rates and charges appropriate to the local market, as well as address mixed land use in their long-term master and business plans. When airport operators view their tenants as true business partners, they achieve mutual success and advance the airport’s mission to achieve both economic and social sustainability.

Case Study – The Airport Sponsor/Tenant Relationship

Currently, the Aircraft Owners and Pilots Association is calling for the FAA to regulate the price of aeronautical services provided by FBOs, such as fuel and ramp fees, to achieve unfettered airport access. While this suggests that private pilots would receive the lowest costs available, it actually constrains the airport’s ability to serve the aviation community and achieve its goals.

The investments made by aviation and FBO facilities not only serve local pilots, but are gateways to economic investment in the community. As leases come up for renewal, an increased number of airports are requiring FBOs to make significant capital investments which revert back to the sponsor at the end of the ground lease. Each airport and each market is different. Thus, based on local and regional knowledge, FBOs construct pricing that enables them to provide quality service at a reasonable rate of return.

The economics of airport business place great importance on master lease terms and available revenue streams to create viable airports. While FBOs frequently comply with guaranteed service levels and facilities dictated by airport minimum standards, their business model does not guarantee income. Sparing airports the risks of an open and volatile market, they provide a steady revenue stream in the form of rent. Ultimately, the rates and charges collected by the airport sponsor are reinvested to help create a healthier airport.

In circumstances where pilots feel they do not have access to the best prices for fuel and other FBO services, the situation is best mitigated locally through the airport sponsor, which is obligated by federal law to ensure access on fair and reasonable terms. This does not equate to the lowest prices, but does require FBOs to offer equal rates to similarly-situated pilots. If the situation is not resolved, a last resort is the formal FAA Part 13 or 16 complaint process.

Clearly, this does not remove responsibility for the fair and equal treatment of pilots and other airport users from the realm of the airport sponsor. Rather, airports are held accountable for supporting policies and programs that best serve the diverse needs of the entire aviation community.

At Van Nuys Airport, for instance, progress on a 30-acre development project dedicated to propeller aircraft is climbing full speed ahead. This site, still under construction, provides hangars, tie-downs and office facilities for up to 270 propeller aircraft and related businesses. It also features a self-serve fueling station for private pilots. By relocating approximately 85 portable hangars from other leaseholds, this facility enabled other development projects to move forward and generate substantial economic impact.

Practices to Achieve Economic Sustainability

Creating an environment where airport businesses can thrive provides benefits to airport sponsors, users and operators, while creating high-skilled, high-paying jobs in the community. A business-friendly environment also attracts public-private partnerships to the airport, including those that advance green technology and neighborhood compatibility.

The following are a few practices that can help propel an airport toward economic health and, in so doing, promote policies that are both responsive to business and responsible to the community:

  • Develop and enforce airport minimum standards that promote the highest levels of safety, security and service for all airport users.
  • Ensure the airport has a current business/redevelopment plan and schedule of rates and charges that reflect its overall vision and mission.
  • Consider a transparent RFP process to solicit business proposals for real estate that is designated for both aeronautical and FAA approved non-aeronautical uses.
  • Review and maintain compliance with all airport grant assurances and regulatory measures established by federal, state and local government agencies with jurisdiction over the airport and its users.
  • Think globally, but work locally with airport users and operators, public officials and prominent business, civic and community organizations to form an airport business support team.

Finally, aviation industry leaders and policymakers should take advantage of organizations throughout the world, such as ACRP, that contribute guidance and research on subjects of importance to airports. Many of their findings derive from the day-to-day challenges faced by airport managers and can lead to innovative solutions.

Curt Castagna, president and CEO of Aeroplex/Aerolease Group, is a member of the Los Angeles County Airport Commission, president of the Van Nuys and Long Beach Airport Associations, and a board member of the National Air Transportation Association. A certified private and instrument-rated pilot, he has instructed courses in aviation administration at Cal State Los Angeles for over two decades.

2016 Aviation Business Conference | Gathering in Washington During Interesting Times

June 20, 2016

NATA members attending the association’s second annual Aviation Business Conference are arriving in Washington, D.C. at an interesting time. Congress will still be in session but can already see on its horizon July 15th, the date it will adjourn for the two national political conventions and its annual summer recess. Returning shortly after Labor Day, Congress will meet for only a few short weeks before adjourning to campaign in advance of the November 8th general election.

Not by coincidence, July 15th is also the date of the expiration of the FAA’s current authorization. On the House side, Chairman Shuster’s (R-PA) proposal to create an air traffic corporation continues to languish due to objections from other congressional committees, conservative Republicans, and virtually the entire House Democratic Caucus. NATA continues to voice its strong objections to the corporation concept at any and all venues that provide us the opportunity to discuss the dangers it poses to general aviation. Like presidential candidates, NATA has been on the road, updating the aviation business community in Florida, Wisconsin, Illinois, South Carolina, Indiana and Texas on the status of the Shuster proposal. We also continue to work the issue at the national level, educating the press and appearing at public policy forums here in Washington, D.C., to rebut the outrageous claims of the airline interests campaigning for ATC corporatization.

I am also pleased to report that in April the United States Senate took a different, more hopeful path than the House, approving by a vote of 95-3 a bipartisan FAA bill that does not include provisions to create an ATC corporation. The legislation instead embraces NATA’s long-stated belief that Congress should build upon its previous work and continue to improve the consistency of FAA decisions across its offices and regions, streamline the FAA certification process to better reflect today’s pace of innovation, and assist the agency in operating as efficiently as possible.

The Senate’s action now puts the impetus for further action in the hands of House Transportation Committee Chairman Shuster to decide whether or not to continue to press forward on his proposal to create a user fee-funded, air traffic control corporation, accept the Senate proposal, or simply extend the FAA’s authorization beyond its current expiration on July 15th. Senator John Thune (R-SD), Chairman of the Senate Commerce Committee, who steered the legislation through the Senate, has publically expressed his hope there will be no more extensions and that the House will give serious consideration to the bipartisan approach taken by the Senate.

This puts NATA members in Washington, D.C. this June smack dab in the middle of it all. Our annual fly-in on June 9th will once again feature key aviation policymakers sharing their perspectives on the FAA reauthorization debate. We are also fortunate that once again Tom Hendricks and the leaders of the other general aviation associations will brief you in advance of your trip to the Capitol Building. And, of course, we will also gather informally that evening on Capitol Hill with aviation policymakers and their staffs for our annual industry reception.

However, the Aviation Business Conference is more than about politics. For that reason, we will be joined by TSA Administrator Peter Neffenger, who will discuss the security challenges facing our nation. FAA Associate Administrator for Aviation Safety Peggy Gilligan will be on hand to answer your questions about the FAA’s regulatory agenda. Finally, the conference will be packed with sessions providing insights on the state of the industry and the latest in effective business and safety practices.

So bring some good walking shoes (we can never guarantee the operating state of our subway), your questions and your insights. We look forward to seeing you in our nation’s capital!

By Bill Deere, Senior Vice President for Government and External Affairs (republished from Q2 2016 Aviation Business Journal)


April 1, 2016

I had the opportunity last week to attend the U.S. Chamber’s annual Aviation Summit. “Aviation” in the title is really a misnomer. Despite the fact the Chamber has member companies with corporate flight departments, and even a wide array of other aviation businesses, make no mistake about it — this was an airline conference. The summit’s lack of balance was startling; this was a vehicle for airlines to get their message out and other viewpoints need not apply. Comfortable in what was clearly an enabling setting, airline executives felt empowered to say what they really think.

The leaders of the so-called low cost carriers were in lockstep about the dangers posed by four airlines with 80-percent domestic market share. Through their dialogue, they invited us to peak behind the curtain for a look at the impact of global joint ventures, noting for example three mega-alliances controlling 87 percent of the transatlantic market. They called upon the Department of Transportation to revisit these anti-trust waivers and immunized joint ventures…..and in the next breath they called upon Congress to adopt the Shuster proposal to create an airline dominated air traffic control corporation.

This is a demonstration of the old political adage, “where you are is where you sit.” Market concentration, it appears, is dangerous….unless of course you are part of it. This inability to either see or understand other perspectives is disappointing from people who are seemingly aware of the dangers created by market concentration. Even if we all saw creating an air traffic control corporation as a good idea, which we don’t, why would aviation businesses willingly sign up for a proposal that leaves their future costs to be determined by airlines?

However, the low cost carriers were just the warmup act, next came the airline association and a representative CEO from the big carriers. These speeches were carefully orchestrated and honed to two messages. First, congressional policymakers who offer pro-consumer proposals related to airline seats or pricing of various airline fees are intent on nothing less than re-regulating the airline industry. The airlines’ view of consumer legislation was best summarized by the head of their trade association who told the crowd, “Members of Congress, with all due respect, if you want to run an airline, buy some planes, hire some employees and sell some tickets.” Well, to paraphrase Ricky Bobby, he did say, “with all due respect.”

The wrath of these airline leaders was especially reserved for those who dare oppose their plan to create an air traffic control corporation. Those in opposition to the corporation are nothing more than “entrenched interests fighting to maintain their advantage.” Their response to the bipartisan work of Senate Commerce Committee Chairman John Thune and Ranking Member Bill Nelson that did not include a proposal to corporatize air traffic control, “The Senate took the easy way out.”

Worse are the half-statements that come along with addresses of these sort. For example, we were told airlines believe in a user fee-funded corporation so much they are willing to write their own checks to the corporation for the air traffic services they use. How altruistic. Except of course the real cost will be borne by the customer and the corporation proposal neatly removes accountability for those costs from a consumer’s direct scrutiny — let alone the costs the airlines will attempt to shift to general aviation. Other whoppers rehashed in front of a largely adoring crowd included the suggestion that air traffic controllers are using 1950’s technology, or that 60 countries currently operating corporatized systems are in some way more efficient or safer than ours.

Airlines also tried to dispel the notion they don’t want to run the corporation by noting the composition of the air traffic control board was changed late in the House committee process with the addition of two more seats for general aviation, bringing GA to the same number of seats as the airlines. While no doubt equal in number, it’s arguable those seats are not equal in weight. The corporation CEO, who also holds a board vote, will undoubtedly feel the pressure of the four votes that represent the overwhelming amount of corporation funding. In addition, this is not a proposal that is yet set in stone.   Neatly forgotten by these airline leaders during the conference, their complaint to Congress that the original proposal already lacked a sufficient number of airline stakeholders, particularly given the representation from general aviation — stakeholders that in their view pay next to nothing. We should not expect the airlines to give up on their attempts to “perfect” the board’s composition.

I report all this to remind you that despite some press reports, the airline industry is not giving up. Between now and July 15th (when the current FAA reauthorization again expires) we must be vigilant and engaged with our elected lawmakers if we are to withstand the imposition of the airline worldview on consumers and general aviation.

By Bill Deere, Senior Vice President for Government and External Affairs

A Confession about Community

April 17, 2013

I moved to the Denver, Colorado area about a year and a half ago, and I have a confession to make. I joined the Colorado Aviation Business Association (CABA) pretty early on in my stint in Colorado and even sit on the legislative committee, but I only just recently attended my first big CABA meeting. Why did I pass on the last two holiday parties and several other events? It snowed – a lot. The roads were bad. I traveled for work that week and my flight was late the night before. I was sick. I broke my foot and spent six months on crutches. Basically, I had one excuse after another (although that crutch thing seemed kind of legit), because the truth was rather embarrassing for a full-grown adult to admit. Joining a new group like that – even a group of like-minded aviation professionals – felt a bit like going to a new junior high school. What if I don’t know anyone in this new community? It might be awkward. I might be bored. It might be a waste of my time.

When I worked for NATA and lived in the Washington, DC area, my sense of “community” was never in question. From the outside looking in, one might think the aviation community in DC is forced. We were “required” to spend quite a bit of time together at seemingly endless receptions, dinners, meetings, and other functions, but the people who make up that community – my trade association friends and colleagues, our wonderful association members, and even to a varying degree the regulators with whom I worked – are such incredible people that I felt blessed to be part of such a great community. Since I left DC, life has taken me to Kentucky, Kansas, and now Colorado and my incredible Beltway community seemed irreplaceable. I never even tried to be part of the aviation communities of those other states. They were just bases from which I parked my car at the airport and flew to visit a client somewhere else.

I attend most of the “big” national aviation trade conferences with a soft spot in my heart for NATA events. For me, NATA functions are like class reunions, and I am always excited to visit with other attendees and hear what’s new in our industry. In fact, I’m currently getting revved up to attend NATA’s Aviation Business and Legislative Conference next week in DC. But I always assumed the local events were unnecessary – a drain on my already limited time at home with my family.

Let me share with you what I learned at that CABA meeting last week: Our local aviation community is essential to our professional development and even sense of well-being. I cheated a bit at this event and found a client of mine to visit with at the beginning of the evening, but soon found my way to colleagues who overlap with my DC community and yes – met new people. I came away from the event energized for the future of my own business, excited about the opportunities to participate more fully with CABA, and amazed at the power of shared passion.

Are you active with your state or regional aviation business organization? The national trade associations increasingly rely on these state and regional groups as essential pipelines of state and regional issues and concerns. Aside from the obvious networking opportunities these local groups provide, I learned they can bridge the gap between the national events most of us attend and give us that injection of energy only found in large groups of people that have a zealous devotion to the same industry.

NATA’s new Aviation Business and Legislative Conference is being held next week in conjunction with the association’s committee meetings. I am looking forward to seeing my DC community, catching up on important issues, and experiencing the enthusiasm of my colleagues. Are you in need of a little community? It’s not too late to register for the Aviation Business and Legislative Conference and committee meetings!

Submitted by Guest Blogger Lindsey C. McFarren

President of McFarren Aviation Consulting

First NATA Safety 1st FBO Audit Completed

March 27, 2013

Originally appeared in the 2013 1st quarter edition of Aviation Business Journal
By Lindsey C. McFarren

In November 2012, the first audit was conducted in accordance with the NATA Safety 1st Ground Audit Standard. I was lucky enough to observe the audit and will share my experiences with you below. The Aviation Business Journal published an article introducing the audit in the first quarter of 2012, but here’s a quick refresher on the program.

NATA Safety 1st established the NATA Safety 1st Ground Audit Standard to promote industry best practices and Safety Management Systems (SMS) development among ground handling providers. This audit standard is the first published audit for FBOs and other ground handling service providers. The NATA Safety and Security Committee, which includes representatives from large and small FBOs, on-demand charter operators, fractional program managers, insurance brokers, fuel companies, and more, assisted in drafting this important new audit standard.

The NATA Safety 1st Ground Audit Standard’s two primary objectives are: to create a consistent operational safety standard for FBOs, airports, and other facilities, while increasing the overall safety level of these operations, and to provide FBO or other ground handling facilities customers with an alternative to costly proprietary audits of these operations.

How It Works

NATA Safety 1st manages the audit standard but does not actually conduct audits. This audit allows for two levels of certification: self-certification, whereby the FBO has a qualified employee, trained by NATA Safety 1st, to conduct internal audits, and third-party certification, in which the FBO contracts with an NATA Safety 1st-trained auditor to conduct the audit. A self-certification audit must be completed within a specified time period. NATA Safety 1st must be advised of the start and end dates of the self-certification audit. The audit I observed was a third-party audit.

After either type of audit has been completed, the facility has 120 days to review the findings and implement any corrective actions. If the facility successfully closes all findings, it will be listed on the NATA Safety 1st registry of audited facilities. This registry will be available online at no charge to aircraft operators and other consumers to verify the successful completion of the audit.  

NATA Safety 1st maintains oversight of the audit by reviewing each audit report, including corrective actions, upon completion.

What Does the Audit Cover?

The audit covers seven separate operating areas within an FBO, ranging from the company’s management system to environmental policies and procedures.

  1. Management SystemSection 1 evaluates the management policies and procedures of the organization.
  2. Safety Management System and Quality AssuranceSection 2 evaluates the facility’s safety program, emergency response procedures, and quality assurance procedures.
  3. TrainingSection 3 evaluates the training programs (i.e. general training, hazardous materials training, vehicle and equipment training, security training, and more) of the facility.
  4. Standard Operating ProceduresSection 4 reviews the standard operating procedures of the facility to ensure they are properly document and executed. This includes aircraft marshaling, taxiing, fueling/defueling, deicing, and more.
  5. SecuritySection 5 reviews the security policies and procedures of the facility.
  6. Occupational Safety and HealthSection 6 reviews the facility’s occupational safety and health policies and procedures to ensure the facility is in compliance with state requirements. (Note: This is not a full OSHA audit.)
  7. EnvironmentalSection 7 reviews the facility’s environmental policies and procedures, including storm water pollution prevention, hazardous materials handling, and underground storage tank requirements.

First Audit:  Lessons Learned

The on-site portion of the audit was conducted at one base of an FBO with a few locations. The FBO is not notably different in size, shape, or make up from any other FBO in the country. It is not a part of one of the large chains nor is it a “mom-and-pop” organization. It is a happy medium in terms of fuel sales, daily operations, and so on. Because this audit was the first “real” one of its type, the auditor was conservative in timing and allotted two and a half days to conduct the on-site portion of the audit. The company is currently in their 120-day window to review and correct findings so I will not disclose the company’s name or location at this time.

However, a number of lessons can be gleaned from the initial audit.

Lesson 1: Document everything! The NATA Safety 1st Ground Audit Standard requires an FBO to say what they do and do what they say; in other words, every standard must be met with written, implemented policies, processes and procedures. In this particular facility, high turnover is an unfortunate, but not uncommon, concern. Written policies and procedures can help ensure that new personnel perform to your standards and existing personnel continue to perform in a consistent manner. Be sure your company’s policies and procedures are well-documented.

Lesson 2: The goal is to exceed requirements. For this audit, line operations and safety training are particularly important. Many of the ground handling training programs – including the NATA Safety 1st program – available to FBOs only require training every 24 months. This facility has fully implemented the NATA Safety 1st program and meets the 24 month requirement. However, the Ground Audit Standard requires training every 12 months in most cases. There is no need to make this requirement too difficult though. Continue to use the training program you currently use. Just write a policy in your manuals that every applicable employee will complete recurrent training every year and set a schedule to be sure that training is in fact completed. This could be the entire PLST program or an overview of selected modules. (Note: The NATA Safety 1st PLST is not the only formal training acceptable for this audit – it is just one method of meeting the training standards and happened to be the program used at this location.)

Lesson 3: Be prepared. Electing to complete this audit is a commitment. Certain resources are necessary to perform the audit. If you intend to commit employees to the process only for the few days an auditor is onsite, frankly, do not waste your time. You will need to spend some time getting prepared for the audit. It might be in your best interest to review the checklist several weeks or months prior to the audit to gauge how you think your facility will perform and to close some gaps in your operation prior to securing an auditor and setting a date for the audit. Once you have chosen an audit date, complete the pre-audit checklist thoroughly. List the manual in which each standard is addressed along with the appropriate page number or other identifying details. Not only might this lessen the auditor’s time at your facility, but also it provides the auditor with more opportunity to observe your operations instead of being buried in manuals for days.

Lesson 4: Be realistic. This goes back to lesson 3. If you have prepared appropriately, you will not be especially surprised by most of the findings the auditor discovers. Similarly, do not set unrealistic expectations for yourself (or your staff!) in closing audit findings. This audit is a totally new ballgame for many FBOs, and you might be surprised by the overall number of findings. This is not an assessment of you or your team’s abilities or dedication to your work. It is a process intended to make your operations safer and more efficient.

Lesson 5: Address safety issues quickly. If an auditor points out an unmarked cabinet containing flammables or a lineman smoking within 50 feet of an airplane being refueled, do not wait until you receive the audit findings before you address those issues. There is no time like the present to address a safety concern.

Bragging Rights: A.K.A. Why Perform an Audit?

I could say the benefit of doing an audit like this one is to evaluate your facility objectively to become a safer operation ultimately. Certainly that is one great reason to consider doing any audit. But there is also a business case for conducting an audit such as this. An audit that focuses on safety and quality can help identify a safety risk before an accident or incident occurs. It can also help reveal inefficiencies in your operations, allowing you to tighten your procedures and become more efficient and effective. 

Another reason to undergo an audit such as this is to lower insurance premiums or at least slow the rate of increase in premiums. Contact your insurance broker. Would the broker help subsidize the audit or provide resources to help you prepare? Could a third-party safety and operations audit lower your insurance premiums?

Pursuing this type of audit could keep your customers (and airport) happy. Part 135 air carriers eventually will be required by the FAA to implement a Safety Management System (SMS) within their operation. Some airports will be required to implement an SMS soon. There will be a trickle-down effect when SMS is required of air charter operators and these airports. Part of a complete SMS is the oversight of service providers, and FBOs should expect oversight from air charter operators to increase as SMS implementation progresses. FBOs, based at designated airports, will be required to comply with SMS regulations because they operate on the airport’s ramp.

However, FBOs are not in business for the express reasons of being safe, efficient, or making customers happy. Cleary if you accomplish none of these goals, you probably will not be in a business long. But one other, more important thing keeps your doors open and your staff employed: revenue. With any luck, PROFIT! You could be the safest, most efficient, most customer-centric company on the planet but if you do it without making money you will not be around long. Completing an audit like the NATA Safety 1st Ground Audit Standard, especially while it is in its infancy, can set you apart from your competitors. If you have only one other competitor on the field and you have completed this audit but they are known for both cheap fuel and hangar rash, where do you think most customers will go? There will always be aircraft operators who would sell their first born to save two cents a gallon, but as SMS and risk management concepts become more prolific with corporate and charter operators, expect more customers to choose the lower risk – if slightly higher cost – FBO.

Stay tuned for more information on the NATA Safety 1st Ground Audit Standard. Several auditors have been trained and are available to conduct the audit. Visit for more information.

Walk a Mile in His Shoes – Aviation Business Journal Article Series

February 13, 2013

We have all heard the saying: Walk a mile in his shoes. Many of us have used it to help our children understand that different people view things differently. How does that apply to aviation businesses though? A new three-part article series appearing in the first quarter’s Aviation Business Journal (ABJ) explores this issue.

Paul Meyers, the Principle in Charge at Aviation Management Consulting Group, Inc. an NATA member company, wrote Walk a Mile in my Shoes – the Art and Science of Doing Business with Airport Sponsors. In this three-part series, Paul explores the airport management/airport tenant relationship from the perspective of each of the parties with the aim of creating a better understanding of the concerns and values faced by all involved.

The first article in the series, now available in NATA’s Aviation Business Journal, takes a look at the airport sponsor perspective, exploring the many rules and regulations that an airport sponsor must adhere to when negotiating lease agreement.

In the second and third quarter edition of Aviation Business Journal, the series will continue with a look at the airport tenant business perspective and a review of best practices for negotiations between airport sponsors and airport businesses.

A special thanks to Paul and the entire team at Aviation Management Consulting Group for their work on this project.

The first quarter ABJ is available online right now and print copies should arrive at your location in the next few days. Be sure to take a few minutes and read Walk a Mile in my Shoes.

Click here for the digital version of NATA’s Aviation Business Journal.

A Changing FBO Business Model: You Can’t Give It Away

August 25, 2011

Submitted by: John L. Enticknap & Ron R. Jackson, Aviation Business Strategies Group

For many years, the FBO Business Model in the United States has been fairly simple and straight forward: markup fuel to cover all the operational business expenses; the greater the margin, the better the profit.

When fuel prices were fairly stable and the old inefficient heavy iron aircraft were commonly seen on ramps, this worked out pretty well.

But as singer-songwriter Bob Dylan so poignantly penned, “The Times They Are a-Changin’.”

From the last quarter of 2008 we’ve seen some real changes in our industry including political bashing and a prolonged recession. As we struggled through 2009, we saw the ‘average’ FBO experiencing a 20 to 25 percent drop in business sales with some losing more than 50 percent of their fuel sales. In 2010 there was some recovery with an encouraging increase in charter activity and the resulting increased fuel sales.

Now in 2011, we are struggling with ever higher fuel costs and a general business malaise. Just as we are writing this article, we experienced more unfortunate politics conveying a negative image for business aviation. And we are seeing the restart of the continued consolidation of the FBO industry; some failures; and most of all, much continued pressure on fuel margins.

The cost of fuel peeked in the first week of May and has dropped .40 cents to early July; now it’s on the way back up. Just about the time we sell the high priced inventory in our fuel farms and look for some stability, the higher prices are again reality.

Changes in operator fuel purchasing habits

Over the last few years we have seen a strong push from corporate customers towards a utilized alternate fuel purchasing strategy, rather than the traditional retail fuel purchase. Of course, the full retail fuel purchase has always been a myth – purchasers of Jet A fuel expect and get discounts off the posted price.

The trend over the last 15 years, especially within the last few, is to pre-negotiate fuel purchasing with many of the contract fuel sellers prior to arriving at your FBO. Calling ahead for the best discount available or changing plans to get the best overall operating costs are all tactics for reduced fuel costs and gallons purchased. This is savvy cost control for corporate operators.

Add to this the fact that corporate aircraft operators are getting more sophisticated in their flight planning:

  • Using fuel tankering models
  • Pre-established fueling points
  • Better ATC routing for weather and flight planning to minimize fuel costs
  • The purchase of more fuel-efficient aircraft

FBO profit misconceptions

Today’s FBO business model has not changed much over the last 30 years. It is still highly dependent on the retail fuel sale. The successful FBOs look for the fuel sales – retail, contract, or other – to essentially support the entire FBO operation.

But do all the aircraft that taxi onto an FBO ramp purchase fuel? NO THEY DON’T! Yet the cost of doing business goes on, including exposing your FBO to potential insurance claims should the customer’s aircraft get mishandled. This has given rise to the Ramp Fee which is still a controversial subject in some aircraft operator’s minds.

Again, there is this misconception by many in the aviation business that FBOs are super-high profitable organizations and are “ripping off” the flying public. This, of course, is highly exaggerated.

There has even been a string of emails lately that draws attention to the continuing misunderstanding of the FBO business. These emails contend FBOs are making more than $4.30 per gallon gross margins and, after fuel cost and lease expenses, are earning $334,000 per week before labor and other expenses.

In reality, margins are running more in the $1 to $1.50 range while insurance costs alone can run $1,000 per day. So the operator who comes onto the FBO’s ramp and doesn’t contribute to the income stream is not cost free to the FBO> To be sure, the FBO business is still a good business to be in. If an FBO chain or individual location can make 10 to 15 percent EBIDTA, then it is a very good business. In perspective, look at the oil companies who may be earning in the nine percent range; on the other hand, a general consumer company like Coke is running 25 percent plus.

Changes in the wind

However, today’s FBO model in the U.S. is destined for change. As mentioned, fuel margins are being squeezed from both ends. At one end is the higher cost of fuel which drives up the base price. At the other end is the more savvy aircraft operator trying to drive down the posted price. In the middle is your margin, being squeezed like a lemon in a juice press.

So how do we make lemonade out of the tart extracted juice? Here are a few observations to ponder.

Having operated FBOs in both the U.S. and in the Middle East, we are very familiar with the European FBO Business model where fuel is not part of the income equation. Rather, fixed base operators in this part of the world depend on revenue generated solely by fees associated with providing various services common to an FBO operation:

  • Marshalling
  • Handling
  • Parking
  • Ramp
  • Ramp transportation
  • Over the road transportation
  • Baggage handling
  • GPU
  • Lavatory service
  • Customs/visa
  • A handling fee for collecting navigation fees
  • A handling fee for collecting landing and over-flight fees
  • Lounge fees
  • Catering

We are not suggesting that you should follow this model, at least in its entirety.  However, as margins get squeezed, you need to get creative in shoring up your bottom line by creating other streams of income.

Don’t give it away!

Our advice is:     DON’T GIVE IT AWAY!

In operating Mercury Air Centers, we looked at every aspect of our business to see where we could recoup some of our expenses.

If a customer doesn’t buy fuel, or at least doesn’t buy a minimum quantity for the type of aircraft being flown, why not charge a facility fee for use of the ramp, including labor for safely parking and towing the aircraft and repositioning for passenger loading?

If aircraft operators want a significant discount off the posted price, why not charge for taking out the trash, cleaning the lavatory, servicing the galley with ice and coffee or hooking up the APU?

If a fuel broker drives a hard bargain, why not charge for the courtesy vehicle or the newspapers? (This often entails a requested set for the pilots and a set for the passengers.)

If, during the course of a transaction, your fuel margin is significantly compromised in any way, why not consider a facility fee for that clean restroom which is kept tidy by paid staff? Or how about the nicely furnished and well equipped conference room; or pilot and customer lounges that often include the coffee and cookie bar that is kept well stocked throughout the day?

Perhaps you don’t need or want to charge for everything you do, but you need to analyze your various income streams and make sure you are not giving your services away. Your business deserves to make a profit – and that is not a bad word! Your business should not subsidize corporate aircraft operating companies, or subsidize your airport sponsor. If you do that, your business will not survive and you’ll lose your investment. Profit allows for growth, sustainability and the continuation of your business.

Here is a short checklist to consider moving forward:

  • Stabilize your selling prices and your margins. Don’t be all over the place. Customers will notice and your employees with be confused.
  • Use a consistent discount program that is easy to understand for the FBO and your customer – and stick to it!
  • Don’t discount your hangars. Make sure you know the true cost of your real estate.
  • Don’t give away all your other services unless you get the ‘right’ fuel sale that protects your margins. More fuel sold equals more ‘free’ services. No fuel sale; customer must contribute to your revenue.

No one can predict the future of the FBO business, but it is possible high fuel prices are here to stay which, out of necessity, will cause change to the way we do business. It’s how we prepare ourselves for this change that’s important. By developing our own consistent approach to our FBO business model, we can make ends meet before someone else decides to move the ends for us.

Let us know your thoughts – email us at or Ron and John developed NATA’s acclaimed FBO Success Seminar Series curriculum. Click here to learn more about the upcoming FBO Success Seminar on November 8-10, 2011 in Atlanta

This blog post originally appeared on, The FBO Connection.

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