FBO Success: A Multi-Part Series

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By John Enticknap and Ron Jackson, Aviation Business Strategies Group ABSGgroup.com

Element No. 1: Obtaining a Long-Term Airport Lease with Extension Options

In our last blog post, we introduced a new series called the 7 Immutable Elements of Building Equity in Your FBO Enterprise©.  We call these elements immutable in that they are essential building blocks that, when executed properly, form a strong unassailable foundation for building equity in your FBO enterprise. These elements are:

1.   Obtaining a long-term airport lease with extension options.
2.   Securing a favorable fuel supplier agreement.
3.   Creating advantageous/profitable hangar contracts/agreements.
4.   Establishing a sound balance sheet with consistent EBITDA performance.
5.   Advancing a durable Airport Minimum Standards document.
6.   Instilling a strong internal safety culture.
7.   Developing a Consistent Customer Service Experience.

Over the next several blog posts, we will do an in-depth dive into each of these elements, providing valuable insight to help you navigate your way towards operating a more successful FBO business. For this blog post, we start at the top: Obtaining a long-term airport lease with extension options. Your lease with the airport authority is the lifeblood of your business. Here are the critical components of your airport lease that we will look at:

  • Term and option years.

  • Operating rights.

  • Assignment sale clause.

  • Payments, including rental, gross revenue, flowage fees and out years to include escalators.

  • Building/ramp maintenance responsibilities.

  • Termination from FBO and Lessor

  • Improvements, new buildings and renovations.

  • Insurance, indemnity and hold harmless.

  • Environmental liability.

For this post, we will focus on the first three components.

Term and Option Years

When you approach bankers or investors to help grow your business, one of the first items they will examine is the primary term of your lease and the option years remaining. The rule of thumb is the longer, the better. You should have at least 15 years remaining on your primary lease with at least one five-year option. If you are planning to upgrade or expand your facility, now is the time to negotiate a longer primary lease and tack on one more five-year option.

Operating Rights

Under the Operating Rights section of your lease, you'll find a detail of the services you can provide, the facilities that you are required to have and the required hours of operation. Besides the standard fueling services, most FBOs must also provide ground handling services, hangar services and a terminal facility. In addition, many leases require an FBO operator to offer aircraft maintenance, flight training and other special services. If you don't want to provide these services, make sure you have the right to subcontract these out. Also, if you don't want to be open 24/7, make sure the hours of operation are detailed in the lease.

Assignment Sale Clause

Any business needs flexibility for its future. If your business outlook changes, a family legacy becomes altered or you encounter a major life event, you need the option to be able to sell or transfer your FBO business. The sale and assignment clause allows you to do exactly that.

The clause needs to contain reasonable language that says you can sell the business to a qualified party with approval in writing, and such approval will not be unreasonably withheld. This process can sometimes take months, but, with patience, it can be completed successfully. Note that some airports have elected to charge a substantial fee to both the buyer and seller to complete a lease assignment. 

In our next blog, we will break down the next three components with some additional tips that will help negotiate the optimum lease. Please leave any comments you have about this blog post below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.

ABOUT THE WRITERS: John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group (ABSG) and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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