Your fuel supply agreement is one of the most important contracts in operating a successful FBO. Your lease with the airport authority is what puts you in business, but your fuel supply agreement is what keeps you in business.
As many of you are aware, over the past couple of years there has been an effort by a number of municipal airport managements in the United States interested in entering the aviation services business where private enterprise providers already exist.
It’s a political hot potato to be sure. No one is suggesting that municipal airport-managed FBOs should not exist. There have always been airport-managed FBOs providing essential services at small and large airports, and for good reasons.
The controversy arises when a municipal airport authority decides to either compete with or edge out an existing private FBO enterprise. This begs the question: Is it fair, or is it foul? To answer this question, let’s examine both sides of the issue.
We know the pricing game all too well. Gas stations and auto dealerships have conditioned us to react to pricing of a product or service by offering a perception of a good deal.
In the FBO fuel pricing arena, we tend to play the same game.
In a previous blog post, FBO Fuel Pricing: Seeking a Silver Bullet, we discussed some pricing theory and came up with some ideas to find the silver bullet — which is the best price.
In the FBO business today, some customers call ahead for fuel prices, seek to use contract fuel suppliers and try to negotiate when they arrive on your ramp. We would like our customers to believe that our prices are well thought out and not just some arbitrary posted numbers.
Knowing how customers interpret numbers can help your FBO make stronger pricing decisions. What we would like to discuss here are some thoughts that go through people’s minds when they are looking to purchase.
Recently, I was reading an article posted to Eye on the Economy on msnbc.com. The article was titled “As oil prices drop, Fed should get credit.” After reading the article, I decided to write Part 2 to a previous blog post titled The Cost of Aviation Fuel.
In the first post, I talked about continued increases in the cost of aviation fuel and what FBOs can do to mitigate high retail prices. We looked at a number of the reasons for the increasing cost of fuel:
Since then, here is what is happening in the world markets:
In some of our previous blog posts, we have mentioned the need to develop a strategic business plan, not only as a way to define business goals, but also to help formulate your personal goals, such as detailing an exit plan from your FBO business.
As most of you know, if you want to borrow money from a bank, the SBA or other sources, one of the first things they will ask you for is a business plan. This alone is a good reason to develop one. However, beyond this basic need, a business plan can be much more and serve your business in many different ways.
One of our more popular courses at our FBO Success Seminar is Maximizing Your Credit Card Transactions. We discuss in detail the credit /debit card processing system and how it affects your FBO business. Needless to say, the cost of this vital service is substantial and increasing.
We think it’s fair to say we are all feeling the impact on fuel price increases over the last six months or so. As a pilot, I’m seeking the best fuel price and am modifying my flying patterns to get the best deal.
Historically, after an initial spike in oil prices, the market tends to settle down. So why haven’t we seen a stabilization in Jet A fuel prices? What’s causing the volatility in the open and spot fuel markets?
Besides the obvious affects of world events, including the disaster in Japan and political upheaval in the Middle East oil-producing regions, there are other underlying dynamics that contribute to rising aviation fuel prices.
It wasn’t that many years ago that the majority of FBOs were defined as “full-service companies” offering flight school training, new and used aircraft sales, charter, maintenance, hangars, and terminal facilities.
The business model was to market to potential pilots, both professional and recreational, train them, sell them an airplane, hope they would trade up, maintain the airplane, hangar it and, of course, sell them fuel and various services. As the pilot grew in experience and need, the FBO could make a good living by selling the next biggest aircraft.
It was a cradle-to-the-grave concept, and it seemed to work just fine.
In Part 1 of Optimizing Your FBO, we talked about analyzing your business and investing in your front line employees. It just makes good business sense, even in tough economic times, to invest your time and resources in your front line employees because they have the first and the most important contact with your customers.
In this post, Part 2 of Optimizing Your FBO, I want to share additional strategies that will help prepare you to weather any kind of economic environment and increase the efficiency of your operation.
For most FBOs, employees must learn to multitask — a term that management gurus have coined. It’s really a new term for an old axiom. The best employees, who do the best jobs, can do many different tasks. Gee, what a concept!
For FBOs that are consistently successful, employees do many different job functions that result in a more efficient operation and better employee morale. A happy employee, a happy customer. It can be a very contagious working environment that results in better customer service. Cross-training makes all employees more valuable and better motivated.
Let’s look at some ideas:
As we start to see a small ray of sunshine peeking out from behind the lingering recession cloud, we find some encouraging news in the industry. Flight hours are increasing, used aircraft are starting to sell, and we see a resurgence in the continued consolidation of the FBO industry.
In the last couple of months, we have witnessed chain operators sell a couple of locations and sell one location to a competitor. We also saw the sale of a small chain to a larger chain. Therefore, I pose the proverbial question in the manner Harvard Business School types might ask: Is it time to “harvest” your business?
Only you can determine this. But if you’re getting into the sell mode, here are few things to keep in mind as you move forward.
Often, when FBOs, and other businesses for that matter, are faced with an economic downturn, one of the first places they look to make cuts is their payroll. That might work if you are operating a clothing or grocery store, but take a moment and think about the time that has been invested in training your employees, especially the ones who are out there on what I call The Front Line, marshalling, fueling, and, most importantly, meeting and greeting customers.
These are the employees who have built a relationship with your customers. There is a certain amount of trust and comfort that a flight crew feels when someone familiar is handling the company’s most prized possession, the corporate jet. And if you are looking to increase your fuel sales at the point of transaction, who is in a better position to positively influence the sale: you or the line service technician or CSR?
Ever since the Lone Ranger first loaded his trusty six-shooter with silver bullets, I’ve been intrigued with the idea of formulating a single straightforward solution for pricing fuel at FBO operations I’ve managed over the years.
This search for the silver bullet is a subject we discuss at our FBO Success Seminars, and FBO managers in attendance often voice their concerns about how to effectively price fuel. On one hand, they’re concerned about the bottom line. On the other hand, they don’t want to price themselves out of the market and lose valuable customers in the process.
Indeed, it’s a two-edge sword. The trick is to maximize both cutting edges. Let me explain.
We would like to welcome you to AC-U-KWIK’s FBO Connection, a source for discussion, ideas and general conversation on the FBO business. Here you’ll find weekly contributions from seasoned FBO professionals, sprinkled with bits of wisdom and peppered occasionally with some hot topics. We like to call it “Sage Advice for the FBO Community.”COPYRIGHT © 2025. ALL RIGHTS RESERVED. INFORMA MARKETS, A TRADING DIVISION OF INFORMA PLC.
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