If you are like many frequent travelers, you may step directly from an automobile on the ramp to your aircraft, never setting foot inside — or being aware of all the many services offered by — the airport’s Fixed Base Operator (FBO).
In fact, the FBO’s job is to ensure that all services are performed seamlessly and unobtrusively. Much of what the FBO offers may be taken for granted by the traveler, especially those who do not encounter challenges on a particular trip. However, with evolving industry practices shining a spotlight on rising fuel prices and new fees, it is helpful for owners and charter users to understand the business model of the FBO.
You’ve heard the axiom:
“if it’s associated with aviation, it’s expensive.”
For example, an FBO located on a mid-sized airport 50 miles from a large city, previously had two competitors. But in the past 10 to 12 years, increasing operating expenses and reduced fuel volumes forced consolidation. In response, the surviving FBO had to make significant capital investments to continue its commitment to providing excellent services. They include :
You’ve heard the axiom: “if it’s associated with aviation, it’s expensive.” This holds true for fuel and de-icing trucks, ground power units (GPUs), tugs, tow bars, and other equipment. On a recent visit to this FBO, a light jet bought 300 gallons of fuel, which was pumped from an aviation-specific 5,000 gallon fuel truck. The flight crew needed to perform avionics database updates and cool the cabin prior to departure, so they requested a GPU for a few hours. Not including infrastructure, payroll, insurance, or training expenses, the cost of just the equipment required to provide these services approached $400,000. It’s nearly impossible for the margin on fuel alone to generate the revenue to pay for this kind of capital investment.
Often, an FBO’s maintenance shop operates at a loss, as there is not always a need for its services. However, just like the fire department in your hometown, you want it to be there — just in case. And it must be, as the airport’s minimum standards require every FBO on the field to provide maintenance services.
Amenities and Other Services
Whether or not you or your crew use them, many FBOs offer a concierge service, in-flight catering, hangar space, and sales of aircraft parts and supplies. The FBO also may have a well-appointed executive terminal with a pilot lounge, conference room, showers, free refreshments, WiFi, and other luxury hotel-like amenities. Even the smallest FBOs offer well-maintained restrooms, vending machines, ground transportation and local accommodation referrals, flight planning, and weather information.
In today’s fuel efficient environment, the FBO industry is at a crossroads. The recent trend of charging additional fees for everything from overnight parking to GPUs is not “gouging” for additional profit; it’s replacing the operating revenue lost from lower fuel volumes and eroding fuel margins. Without adopting different pricing structures, many FBOs may fail. Their options are:
- Raise fuel prices and risk losing volume and the operating revenue associated with it;
- Lower fuel prices and associated revenue, but compensate by reducing costs by eliminating services and amenities;
- Introduce a two-tier pricing system : a full-service/retail fuel price covering all traditional services and amenities, or a discount fuel-only price without services or facilities use; or
- Keep fuel prices competitive and still provide services — but charge when those services are consumed, a structure commonly known as “unbundling.”
The FBO/flight department/airport/business aircraft traveler relationship is symbiotic. Each faces its own challenges, and each needs the others. It appears that aircraft owners and passengers may have to accept this trend toward the unbundling of services. And FBOs must continue to provide flight departments and passengers with excellent customer service. BAA
David Edwards, Director of Marketing for Truman Arnold Companies, oversees advertising and marketing for the TAC Air, TAC Energy, and Keystone Aviation divisions. Formerly an ad agency account executive, he holds degrees in Advertising/Public Relations and Marketing.