Objectivity Helps Secure Flexible FBO Leases

Most FBO owners and managers in the United States say modernizing FBO facilities is a goal that is beyond their reach.

Although glossy, even high-tech, FBOs are springing up worldwide — such as the new 35,000-square-foot facility and 64,500 square feet of GA hangar space being developed in Beijing — the risks posed by investing in improvements on property leased by municipalities in the United States seem to outweigh the rewards.

“The margins FBOs work under are pretty narrow,” said Gary Shafer, who manages Southern Illinois Airport and teaches airport management at Southern Illinois University. Although shorter leases enable FBOs to capture the value of their asset better, “there’s not a lot of extra capital built in them,” Shafer said.

That doesn’t mean a long-term investment is impossible. To secure one, FBOs first need to examine regional market conditions and the reasonable economic life of the property at stake. By staying objective and focused on community needs, “the mechanics sort themselves out,” Shafer said.

“People want a magic formula, but one doesn’t exist,” he said.

Even when FBOs favor and are able to secure a longer-term lease, the financing they need to make capital improvements might be scarce, said Dan Reimer, a partner with the law firm Kaplan Kirsch & Rockwell LLP.