FBO Connection at 2016 NATA Aviation Business Conference

FBO Connection blogger and Aviation Business Strategies Group principal John Enticknap presented at the NATA Aviation Business Conference held in Washington, D.C., in early June.

He contributed to the "Industry Consolidation: What's Next?" panel (shown above; John is on the far right). The next day, he led a session called "Separating Your FBO from the Crowd: Maximizing Customer Service." Read more about customer service and FBO industry consolidation.

Pazos FBO Services: Putting the Customer First in San Juan, Puerto Rico

Part Two: Customer Service, the Universal Language Spoken Everywhere

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

Employees of Pazos FBO Services refuel an aircraft on their ramp at Luis Munoz Marin International Airport, San Juan, Puerto Rico.In a previous blog post, we talked about delivering our customer service training program to the good folks at Euro Jet in Prague and how great customer service in the FBO business is truly a universal language spoken everywhere.

Last week we had the privilege of conducting another international training seminar of our Don't Forget the Cheese!™ customer service training program for Pazos FBO Services located at the Luis Munoz Marin International Airport, San Juan, Puerto Rico. And once again we were blown away by the friendly reception we received and the way this FBO goes about its business of delivering a great customer service experience.

Although Pazos is currently operating out of a very limited space, this does not stop the hardworking and dedicated employees from greeting every aircraft and its passengers and crew with the same zeal and enthusiasm that is embodied in their call-to-action statement: Powered by a Passion for Excellence!

Without exception, they were already practicing one of the basic customer service tenets of putting the customer first.

Under the leadership of FBO president José Maldonado and manager Zuleika Caballero, Pazos is making great strides to go to the next level. As a World Fuel Air Elite fuel provider, the FBO has a new expansive fuel farm in place and a fleet of refuelers including two 10,000 gallon trucks.

At the heart of the expansion program is a new 12,000 sq. ft. FBO terminal facility, which is currently under construction and scheduled to open in August. A strategic and integral part of the new terminal will be a ramp side U.S. Customs and Border Protection services facility. This feature will help make Pazos an important turnkey port-of-entry facility for international flights with a U.S. destination.

Customer Service Tip

As part of our customer service training, we introduced Pazos to the art of turning a disgruntled transaction into a tranquil transformation. It all starts by being tactful and choosing your response carefully.

Adding some cheese to the equation means you think tactfully about your response and look and act in a responsible way. In a sense, you become re-sponse-able. That is, your facial expressions display openness and show you are ready to listen.

If you are being confronted by a customer who is disgruntled, show your concern by listening with empathy. Nod your head up and down to show you understand the complaint or the grievance or the criticism. By doing so, you are not showing you agree with the complaint but rather that you are genuinely concerned.

By listening, apologizing, problem solving and acting quickly on a solution, you can transform a dissatisfied customer transaction into a profitable long-term client relationship.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group 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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FBO Tip of the Week: Develop a Contagious Company Culture, Part 1 of 3

By John L. Enticknap and Ron R. Jackson
Aviation Business Strategies Group

A spirited and contagious company culture is one of the most important elements in running a successful FBO operation. It's an essential ingredient in delivering a great customer service experience because it sets the tone and feeds the passion of the operation.

Customers can sense and feel a company culture. It can make them feel warm and fuzzy or be a complete turnoff.

By definition, company culture is the "way of life" within an organization. It's exhibited by the behavior and demeanor of the employee stakeholders and expressed in the way the customer service experience is delivered.

As part of our Don't Forget the Cheese! customer service training, we are often asked by our FBO clients to help them analyze their company culture and then offer leadership training to their managers and supervisors to facilitate change.

One of the tools we use to analyze company culture is to conduct internal and external SWOT (Strength, Weakness, Opportunities and Threats) analysis. Through this process, we can gain valuable insight into what's working and what's not.

If an FBO has an excellent track record of establishing long-term, profitable customer relationships, they are probably doing a lot of things right.

On the other hand, if an FBO is experiencing one or more of the following, then it's in need of a cultural makeover: 

• Unusual or abnormal customer churn/defection.
• Lack of consistent repeat customers.  
• Few or no customer recommendations.
• Employees feeling disenfranchised/not part of the process.

The character or tone of a good company culture needs to be contagious. It starts at the top and, through the process of observation and osmosis, resonates down through the organization where it is absorbed due to continual and consistent exposure.

The reality is that great company culture does not magically appear on its own. It's up to FBO management to set the stage and create the proper environment for a desired culture to take root and flourish.

In part 2 of this series, we'll review the key elements in developing a contagious company culture.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group 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.

Tip of the Week: Keep Your Fuel Margins Closer

By John L. Enticknap and Ron R. Jackson
Aviation Business Strategies Group

Last week, our blog post discussed how keeping your customers close by diffusing disputes at the point of transaction made for good business. For this post, we’ll discuss how keeping your fuel margins closer makes good business sense. It’s really kind of a parody of the famous line from the film, “The Godfather: Part II,” “Keep your friends close and your enemies closer.”

At first blush, keeping your customers close and your margins closer are two axioms that don’t seem to go together. What does one have to do with the other? The answer is simply that each day FBO operators must keep their fingers on the pulse of their operations. Keeping customers happy is just as important to the bottom line as keeping track of fuel margins and managing closely what’s in the tank.

As we all know, a healthy fuel margin is hard to come by these days. On one hand you have savvy aircraft operators who fly more fuel-efficient aircraft, tanker fuel from their own fuel farms and ask for aggressive fuel discounts when purchasing fuel.

On the other, you have the fuel brokers with their own sets of customers, negotiating significant  fuel discounts off the posted price and taking a piece of the action while cutting deep into your margin.

And then there’s the airport authority wanting to increase into-plane fees while planning to add another competing FBO at the airport, even though fuel sales have been relatively flat for the past seven years.

Sound familiar? It’s enough to make most FBO operators say, “Enough is enough!”

FBO operators should know and manage the cost of each fuel load that is in the tank farm and be able to adjust their posted price accordingly while remembering to keep their target margin consistent.

Therefore, this should be your daily mantra, “Today, I will keep my customers close while remembering to keep my fuel margins closer.” It’s just good business sense.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group 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.

FBO Operations Tip of the Week: Differentiate Your FBO on Customer Service, Not on Price

By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group

- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable

Note: Join John and Ron at NBAA Schedulers & Dispatchers Conference. Full details.

Many FBOs have gone out of business by lowering their prices during prolonged periods of time. Yes, FBOs need to be price-competitive, but they must maintain healthy margins and find other ways to compete through differentiation.

One of the best ways we find to differentiate one FBO from another is to offer an outstanding and memorable customer service experience. This is a fundamental shift in the FBO industry away from a price-sensitive business model to one based on providing exceptional customer service.

More and more FBOs are taking customer service training very seriously. Just as FBOs don’t tolerate mishaps on the ramp, they are becoming more conscious of eliminating miscues with the way they deliver customer service.

Research indicates that loyal customers don’t stop doing business with a company solely because of price, but rather because of a poor customer service experience. However, most will return if you recognize and fix the problem.

One of the ways to improve the customer service experience is to standardize training and look for ways to motivate employees in a way where they take ownership of problems when they arise. An example of a standardized training system is the Don't Forget the Cheese! customer service training program written specifically for the FBO industry.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s B&CA Digest. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518, www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s B&CA Digest titled: The FBO Connection.  Ron@thejacksongroup.biz,  Ph: 972-979-6566, www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Operations Tip of the Week: Cross Train and Involve all Employees in the Customer Experience

By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group

- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable

For most FBOs, employees must learn to multitask. In evaluating FBOs that are consistently successful, we find employees do many different job functions that result in not only a more efficient operation but it actually helps employee morale and adds to the customer service experience. As we like to say, a happy employee, a happy customer.

The result can be a very contagious working environment that gets noticed by the customer. Plus, cross training makes all employees more valuable and better motivated.

Here are some ideas:

• Train your CSRs to meet and greet arriving aircraft. You’re probably already paying the workers’ compensation rate for ‘ramp’ on the CSRs. 

• Train your CSRs and building maintenance staff to be wing walkers. Tip: Having two wing walkers, especially in hangar movements, can decrease your accident incident rate and could help lower your insurance premium. 

• Get your accounting staff outside to learn about fueling and tank farm quality control. They might even learn about fuel quality control and inventory procedures. 

• When was the last time the executive staff worked the ramp or talked to arriving pilots and passengers? 

• Encourage ramp staff and the executive staff to walk the ramp for FOD and look at the FBO facility from the arriving pilot’s point of view. 

• Consider having your A&P technicians meet, greet and take part in the customer’s maintenance project experience. Once the inspection is completed, the A&P should be part of the discussion with the owner on what is to be fixed. This seems obvious but is rarely done. 

• In your flight school, when was that last time your chief instructor called and talked to the students before a check ride? Find out how the student likes flying and the overall learning experience.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s B&CA Digest. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518, www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s B&CA Digest titled: The FBO Connection.  Ron@thejacksongroup.biz,  Ph: 972-979-6566, www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Operations Tip of the Week: Maximize Your Profit Position

By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group

- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable

As FBO operators and managers, one of the most important tasks to keep in mind is maximizing your profit position.

In order to accomplish this, we rely on a standardized fuel pricing method. We think it is fair to say most FBOs use either cost-plus pricing or mark-up pricing. Cost-plus means you want to make a certain “plus” above your cost. For example, your cost today is approximately $2.25 per gallon and you want to make $1.50 per gallon. Therefore, simple math puts the selling price at $3.75 resulting in a profit of 40 percent  on sales. 

For a mark-up pricing example where you want to make $1.35 per gallon, your selling price would be $3.60 per gallon, or just short of a 60 percent mark-up on cost.

Both of these methods are common in the manufacturing business arena. The variance in these two methods lies in the difference between margin and mark-up. This can be a lengthy discussion, but suffice it to say, a thorough understanding of your costs of operation to include labor, facilities, other income, overhead, etc., affects what margin you use to show a profit. This, in turn, allows you to calculate what mark-up percentage you must use to get to the intended profit level.

We discuss these fuel pricing methods in greater detail at our NATA FBO Success Seminar, which is scheduled for March 9-10 at the Sands Expo and Convention Center in Las Vegas. 

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s B&CA Digest. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518, www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s B&CA Digest titled: The FBO Connection.  Ron@thejacksongroup.biz,  Ph: 972-979-6566, www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Operations Tip of the Week: With Fuel Prices Falling, Guard Your Optimism

By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group

- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable

 
As the price of auto gas falls almost daily, we wonder how the corresponding drop in Jet A fuel might affect the FBO business.

Just four weeks ago, OPEC indicated they would stabilize a barrel of oil at $60. Currently, a barrel of oil is hovering around $54. Comparatively, at the beginning of 2014, index pricing for Jet A was around $3 per gallon. In December we saw roughly $1.60 per gallon resulting in a $1.40 swing. 

This begs the question: Will aircraft operators take advantage of lower fuel prices and start flying more resulting in more gallons being pumped at FBO locations?  

Based on our research and other industry discovery work, the answer is no, at least not in the short term. 

For the most part, flight departments, with FBOs following suit, have adapted over the past few years to what we call the new normal. While operators have right-sized their aircraft fleet and supporting flight crew personnel, FBOs have resized and streamlined their operations to meet the corresponding demand.

That’s not to say the industry will not benefit in the long term by lower fuel prices. Certainly, if lower fuel prices persist and the result is a more robust economy, aircraft operators will make the necessary adjustments by adding capacity and flight scheduling flexibility.  

But let’s not get ahead of ourselves. Just as it took months, even years, to get where we are now, the effects of an economic recovery on businesses operating aircraft will be slow to take place.

In the next few weeks, we will conduct our Annual FBO Industry Survey, which examines both past years’ performance as well as a look at current trends and predictions for 2015. In addition, we will probe FBO owners and operators to get a feel for their confidence in the economy going forward. 

In the meantime, lower fuel prices will give us at least a temporary reason to be optimistic. However, we can expect a continued sluggish market into the first quarter of 2015 with perpetual swings in fuel pricing and no appreciable increase in flight hours.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s B&CA Digest. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518, www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s B&CA Digest titled: The FBO Connection.  Ron@thejacksongroup.biz,  Ph: 972-979-6566, www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Connection Featured in B&CA Digest

By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group

- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable

 
We would like to welcome B&CA Digest readers to our blog, FBO Connection. Since our first blog post in 2011, the FBO Connection has been a source for discussion, ideas and general conversation on the FBO industry where you’ll find regular 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.”

The content of the FBO Connection varies with each post and is written as a source of information for not only owners, operators, managers and supervisors but also for practically any FBO employee. In fact, we’ve received feedback from FBO operators who say they print our blogs and post them in the FBO for all employees to read. “It’s like taking a course in how to run a more successful FBO operation,” one regular reader commented.

With each blog post, we’ll peel back the onion to reveal what we consider to be seasoned FBO insider knowledge. Many topics fall out of our proprietary 10 Steps to Building a Profitable FBO, which forms the basis for our NATA FBO Success Seminar.

Included will be winning strategies and tactics you can put to use immediately and, over time, in the operation of your FBO. Subjects range from leases, minimum standards, reducing your cost of business and operating more efficiently to managing your fuel pricing/margins, finding “free money” hidden in your operation and competing on customer service, not price.

As we prepare for 2015, we’ll be busy blogging about upcoming events that affect the FBO industry. Here is a rundown on some of our forthcoming activities and educational opportunities:

• Jan. 15: Our Annual FBO Industry Survey and Forecast. Each January we conduct a survey of more than 500 U.S.-based FBOs to determine the overall health and direction of the FBO industry. With this information, we write a report and issue a news release stating our findings while providing a forecast for the coming year.
• Feb. 3: NBAA Schedulers & Dispatchers Conference, San Jose, Calif. Join us at 5:15 p.m. in the Conference Hall as we conduct the Pre-Conference Exhibitor Meeting. Here we’ll discuss how to get the most out of your booth presence at the S&D conference and why “adding a little cheese” can enhance your exhibit investment.
• March 9-10: NATA FBO Success Seminar, Las Vegas. Each year this seminar gets bigger and better as we cover in detail the essential elements in building a more successful FBO operation. For a complete overview of the topics we discuss, click here.

We look forward to reaching out to you through this blog and connecting on everyday issues that affect the bottom line of your FBO operation. If we happen to hit on a subject you’d like to comment on, or if you want us to address a certain issue, please let us know by sending an email to John Enticknap at jenticknap@bellsouth.net or Ron Jackson at rjacksongroup@earthlink.net.

One thing is for certain, we’ll add a little spice to your FBO life and maybe some sage advice along the way.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s B&CA Digest. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518, www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s B&CA Digest titled: The FBO Connection.  Ron@thejacksongroup.biz,  Ph: 972-979-6566, www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Best Practices Series #9: Charge for the Free Stuff

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

- Authors of the forthcoming book: FBO Survival. 10 Tips to Keep Your Operations Lean, Mean & Profitable.

Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.

Best Practice #9: Charge for the free stuff. This is a simple reminder that every customer must contribute to your revenue stream, even the reluctant customer who doesn’t buy fuel.

The FBO business model that we’ve enjoyed for the past 50 plus years is dying a slow but inevitable death. If your FBO is still trying to exist on the margin charged on fuel sales, this is your wake up call.

In the “salad days” of our business, a healthy fuel gross margin of $2 per gallon or more would cover an FBO’s monthly expenses including the airport lease, insurance, facility upkeep and renovations, expansion, utilities, employee wages/compensation, fees and taxes, not to mention all the free stuff flight crews have come to expect.

But a $2 margin, normally factored into a posted price, is no longer realistic. No customer buys fuel at the posted price. It has been eroded over time by:

• Change in fuel buying habits by aircraft operators.
  - Pre-negotiated fuel purchasing.
  - Calling ahead for best discounts available.
  - Changing plans to get the best overall fuel purchase cost.
• No fuel required by operators.
• - Purchase of more fuel efficient aircraft.
  - Utilizing fuel tankering models.
  - Pre-established fuel points.
  - Better ATC routing for weather & flight planning to minimize costs.

• Fuel brokers negotiating lower fuel prices.
• Rising regulatory costs.
• Higher flowage fees charged by the airport.
• Increases in operating and insurance costs including liability, workman’s comp, health insurance, war risk, etc.

Note: An average sized FBO can have insurance costs as high as a $1,000 a day.

A Morphing Business Model

At the recent NBAA Conference held in Orlando, Florida on October 21-23, our company, Aviation Business Strategies Group (ABSG), was asked to facilitate one of our NATA FBO Success Seminar educational sessions titled: Get Ready for a New FBO Business Model.

A standing-room only crowd of aircraft operators and FBOs packed the session and took part in a lively follow-on discussion on how FBOs need to change the way they charge for services in order to continue providing first class facilities and great customer service.

The premise we presented is simple. As in the European FBO business model where services are unbundled, every aircraft operator that taxis onto your ramp must contribute to your revenue stream whether or not they purchase fuel.

Many FBOs have taken initial steps in this direction by imposing a ramp fee and/or a facilities fee. In general, these fees are normally waived if operators purchase a qualifying load of fuel.

However, many ancillary services are still being given away regardless of the selling price of a gallon of fuel. Aircraft operators expect baggage to be loaded and unloaded by the FBO. They expect trash service and galley service with ice and coffee. They may even expect free GPU and lavatory services as well as free towing, parking, tie downs and aircraft placement for departure. They also expect concierge services including taxi, limo and rental car logistics.

Then there are the clean restrooms, free coffee, popcorn and snack bar. Many FBO facilities offer a variety of crew lounges, rest areas, quiet rooms, computers, printers, Wi-Fi, copy, fax, flight planning, crew cars, and the list goes on.

As mentioned, gone are the $2 gross fuel margin days and selling fuel at the posted price. With all the customer and fuel broker pressures to discount fuel, gross fuel margins can get as low as $1.25 to $1.40 per gallon with some FBOs dropping to less than a $1 per gallon discount on contract fueling.

What aircraft operators don’t realize is when margins get this low, something has to give. Facilities fall into disrepair, customer service declines, dissatisfaction and disputes follow. No one wins in this scenario.

The New FBO Business Model

Since no FBO wants to be the first to start charging for unbundled services, what we at ABSG propose is a three-tier system.

Tier One: Full Service Pricing
Pay the full service posted price and get all the services thrown in.

Tier Two: Basic Fuel Service with À La Carte Pricing
Pay a discount off posted or a contract fuel price. Then pay for all the ancillary services requested. If no ancillary services, then also pay a facilities fee.

Tier Three: No Fuel Purchase
Pay a ramp fee, facilities fee and à la carte pricing for ancillary services requested.

At our NATA FBO Success Seminar, we discuss these issues in depth as well as a comprehensive examination of FBO operations, marketing, training and best practices. The next NATA FBO Success Seminar is schedule for March 9-10, at the Sands Expo Center in Las Vegas.

Tell us what you think—we appreciate your comments and thoughts. Also Like us by clicking the link below.

Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection.  Ron@thejacksongroup.biz  Ph: 972-979-6566 www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Best Practices Series #8: Take Time to Develop Your Business Plan

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

- Authors of the forthcoming book: FBO Survival. 10 Tips to Keep Your Operations Lean, Mean & Profitable.

Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.

Best Practice #8: Planning, budgeting and sales forecasting. It’s not exciting; it’s not fun; but it’s essential to running a successful FBO operation.

Peter Drucker wrote, “The manager’s job is to keep his nose to the grindstone while lifting his eyes to the hills.”

We’re all guilty of focusing on the day-to-day grind and forget to look ahead and think, “what if?” Especially when the current business climate seems to be sucking us dry. Sometimes we need a little reality check.

Too often we seem to be obsessed with short-term results in our pursuit of business profit and management goals. If you have bankers, they want to see your monthly and quarterly results to make sure you can support your loan document covenants. 

If you’re a public company, you have one eye on the stock market and the other on short-term forecasts. Then you have to listen to critical analysts. “Got to have positive monthly results,” they say.

Now is the time of the year most FBO operators are thinking about what’s going to happen next year. They dream of a 50 percent increase in retail fuel sales, a full maintenance shop, and the end to contract fueling. Now that’s a good dream! Right?

Reality Check

Not so fast. The order of the day is to do a realistic sales forecast that forms the basis for a rational budget. Too many businesses start the planning process based on how much money they are going to spend on budgeted line items. They basically warm over last year’s costs, adjusting here and there.

However, a solid sales forecast drives a solid budget. Base the sales forecast on company history, at least the past two years. Factor in the national and local economy, projected business aircraft flight hours, projected fuel costs, aviation and health insurance. 

The fiscal budget is the short-term plan. Now, look to the hills and update the long-term plan. You might start with an examination of your airport lease agreement: Years left, rent increases, lease extension options, terms of extensions, requirement for major capital improvements. It just might be time to negotiate a lease extension.

Other items to review:  Business expansion plans, new hangar funding, add to charter fleet, new tug and fuel truck, renovating the terminate building.

Problem is, all of these items compete for cash and capital resources. The trick is to provide a balance between producing current positive results and investing in the future.

This can lead to a confusing management exercise where FBOs find themselves switching between visionary goals, intense investment, “performance-oriented” goal setting and/or retrenchment. The larger firms can even find themselves changing management teams.  Instead of keeping their nose to the grindstone, there is too much looking up.

Also, FBO owners must keep in mind that short-term strategies involving cost cuts may be short sighted and will not achieve short-term results or even meet long-term goals. Such as a 10 percent reduction in experienced labor, which can be self-defeating. We’ve even seen FBOs cut hangar rents below costs to attract new customers on the premise and promise of more fuel sales, which never come. 

Our Recommendation

Here is a list of action items we recommend:

• Complete a realistic budget for the coming 12-month period.
• Do reviews of the actual financial results and compare against your budget.
• Develop and use metrics that can be used to measure your business.
• Use dashboard reports to look at your business on a daily basis.

For longer-term planning, ask yourself these questions:

• How do we add value to our services and existing customers?
• Who are our target customers and what is our value proposition to them?
• What additional capabilities can we add to our business that adds value for our target customers?

These are fundamental initiatives for current performance and future investment that should serve as a guide for the near future planning. The results should be more sustainable and the company should not have to sacrifice the future for short-term gain.

At our NATA FBO Success Seminar, we discuss these issues in depth as well as a comprehensive examination of FBO operations, marketing, training and best practices.

Tell us what you think—we appreciate your comments and thoughts. Also Like us by clicking the link below.

Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection.  Ron@thejacksongroup.biz  Ph: 972-979-6566 www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Best Practices Series #7: Find the Free Money

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

Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.

Best Practice #7: Find the free money! From fuel hedging to lowering your credit card interest rates, there’s free money in any FBO operation just waiting to be found.

Wouldn’t it be nice if you could turn over the couch in the customer lounge and find thousands of dollars dropping to the floor instead of nickels?

With more than 35 years of experience in managing and operating FBOs, we’ve learned where to look to find literally thousands of dollars of hidden money that can add significantly to your bottom line.

In fact, we’ve found so much money for our FBO clients that this has become a very popular session we teach at the acclaimed NATA FBO Success Seminar.

Here are the top four places we tell our clients to look:

1. Fuel Purchasing.
2. Credit Card Interest Rates.
3. Insurance Premiums.
4. Fuel Agreements.

Let’s break each of these down.

Fuel Purchasing

Stockbrokers will tell you to never try to time the market. However, when purchasing Jet A fuel, timing and pricing information is critical.

One of the techniques we teach at our NATA seminars is fuel hedging. Without going into a lot of detail, this is basically a process of knowing how aviation fuel is priced in your region and when to make the fuel purchase.

You should start with your last fuel contract negotiation in which you established your index pricing formula. Moving forward, it is important to keep track of the weekly changes in the Platts pricing indexes. This information should be available from your fuel provider upon request. However, obtaining the Platts data on your own requires a subscription, which can be rather expensive.

In lieu of a Platts subscription, you may also keep track of the price of a barrel of oil through USA Today’s Money/Business section or go to IATA-Jet Fuel Price Monitor, which is a free website.

With this type of information, you can purchase your fuel when the pricing changes to your advantage.

Credit Card Interest Rates

We’re sure you’re aware that transactional interest rates for branded credit cards can range all over the place. However, if you are a savvy FBO operator, you’ve done your homework and have trained your CSR staff to ask the customer to pay for their fuel with the card that favors your FBO by offering the lowest rate for your particular fuel transaction.

In some cases, it could be the card issued by your branded fuel provider. The processing interest rate for these cards can be as low as zero percent. With numerous purchases of 100 gallons or more during a 12 month period, this practice alone could save the FBO a significant amount.

However, if the customer does not have the card issued by your banded fuel provider, have the CSR ask for the next most favorable card in terms of the processing rate charged to your FBO.

For cards that have high processing rates, call the card issuing company and ask that the rate be lowered when processing a transaction at your FBO. As a backup, be sure to have some metrics in hand regarding the amount of fuel volume/transactional volume that flows through your credit card system. This information can be used as leverage.

Insurance Premiums

We find that many FBO operators don’t realize they can take steps to help decrease monthly insurance premiums. With numerous FBOs paying as much as $1,000 a day in premiums, any savings on this line item can be significant.

For starters, we coach our clients to write a good insurance story, especially if the FBO is using an insurance company that doesn’t quite understand the FBO industry. A good insurance story should include some of these items:

1. Discussing your training programs.
2. Your lack of accidents and incidents.
3. Establishing and discussing your Safety Policy and Objectives.

It’s also a good idea to establish and maintain a strong working relationship with your aviation insurance broker.

Fuel Agreements

One of our most popular services we offer is helping FBOs negotiate a favorable fuel agreement. Whether it’s with their current fuel supplier or going out for bids, there are many provisions in every fuel agreement that are negotiable and can save the operator both in the short term as well as over the life of the agreement.

Here is just one example. Review and discuss with your potential supplier where your primary and secondary fuel supply terminals will be located geographically in relation to your FBO. The location will affect your transportation cost, which is a negotiable cost. Also, don’t just accept one transportation firm’s fee. There is competition with various carriers for fees, surcharges and timing of deliveries.

Free money may not be easy to find, but it’s there if you are willing to look. Be the savvy FBO operator and know your options.

Tell us what you think—we appreciate your comments and thoughts. Also Like us by clicking the link below.

Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection.  Ron@thejacksongroup.biz  Ph: 972-979-6566 www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Best Practices Series #6: Make the Customer Your Fan

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

Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.

Best Practice #6: Make the customer your fan by building a team environment designed to differentiate your service from the competition.

We all know what it’s like to be a fan. We have certain things we like and we support our choices by voting with our enthusiasm and our dollars. Maybe it’s the brand of car we drive, a favorite restaurant we frequent or a new movie we went to see.  It also could be a favorite sports team we back.

But the true test of being a fan is if we recommend something to someone else. It’s like putting our reputation on the line.

And so it is with providing excellent FBO services. Loyal customers are very much like a fan. If they like your service, they’ll  keep flying back and vote with their wallet.

So what’s the secret sauce? How can FBOs make customers their fans?

We can sum up the answer this way: Provide a noticeably high-level of service that beats the pants off the competition.

Although consistency is important, the key is to differentiate your brand of service from the FBO next door, across the field or at the nearest competing airport.

The Wow Factor

In past blog posts, we’ve talked about competing on customer service and not on price. That’s just common business sense. We also know FBOs can’t compete or differentiate based on a brand of fuel because fuel is fuel, Jet A is Jet A and Avgas is Avgas. It’s all the same!

The differentiating factor is your secret sauce, the way you deliver the fuel, the maintenance, the parts, the catering, the charter, the flight instruction and even the bill.

And the secret to the sauce are the ingredients: the individual employees coming together, working as a team and providing a noticeably higher level of service. It’s what we call the wow factor.

Customers notice how the entire FBO operation works collectively. They’re either impressed or they’re not. They’re either put into a comfort zone or they’re watching you like a hawk.

Your FBO can have the best, most personable CSR in the country, but if the line service technician and wing walker don’t tow the customer’s $50 million baby just right, all is for naught.

Building a cohesive FBO team can take the human relations skills of being a good coach. The really successful athletic teams all point to a common denominator of having a good environment in which to excel. A good coach will create this environment. A good FBO manager will do the same.

Vince Lombardi, arguably the most respected and revered NFL coach of all time, created a successful environment where his players thrived as a team.

Here is one of his quotes: "Teamwork is what the Green Bay Packers were all about. They didn't do it for individual glory. They did it because they loved one another.”

Good Customer Service Principles

In developing our acclaimed aviation-specific customer service training program, Don’t Forget the Cheese!, we recognized that it’s impossible to separate the requirement for customer service training from the need to build a good employee teamwork environment. One can’t exist without the other.

That’s why we based our integrated teamwork training on discovering the power of ”we.” It’s an interdependent approach to a realization that working together is a lot easier, and a lot more fun, than working individually.

When you combine these two important elements together, memorable customer service training in a dynamic teamwork environment, you truly can create the wow factor.

Here are some basic customer service/team building principles we teach. We hope they inspire you to create your own secret sauce:

1. Add something extra … make someone’s day.
2. Choose your own attitude; be an empathetic listener.
3. Adopt a ‘we’ attitude; play team ball.
4. Be consistent; set high standards.
5. Be flexible; own your mistakes. Be the person who delivers great customer service.

Tell us what you think—we appreciate your comments and thoughts. Also Like us by clicking the link below.

Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection.  Ron@thejacksongroup.biz  Ph: 972-979-6566 www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBO Best Practices Series #5: Leverage Your Lease

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

Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.

Best Practice #5: Your lease is your leverage and the cornerstone of your enterprise. Don’t wait until your lease is ready to expire to develop favorable terms.

We’re often asked at our NATA FBO Success Seminars, “When is a good time to negotiate a new lease with the airport?” Having worked with many FBOs in restructuring their leases, we can say unequivocally the answer is simple: anytime.

This might sound contrary to what you’ve been told or believe, but here are the facts:

• A long-term lease is one of the best ways to add value to your FBO business.
• When you make any substantial investment in your business, negotiate a lease extension.
• Your lease determines how, what, when and where you can provide services at the airport. It needs maximum flexibility for your FBO to succeed.
• A lease with 10 years or fewer remaining is a major detriment to the value of your business.

Let’s look at an example where an FBO suffers from decreased value due to a short lease term.

In the current mergers and acquisition (M&A) market, a good FBO property will sell for approximately 10 times earnings before interest, taxes, depreciation and amortization (EBITDA). The industry uses EBITDA to evaluate FBO worth because it’s a measurement of a company's operating profitability. Because EBITDA excludes depreciation and amortization, EBITDA margin can provide an investor with a cleaner view of a company's core profitability.

Related: Breaking Down the 10 Critical Elements of an FBO Airport Lease

>> Part 1
>> Part 2 
>> Part 3
>> Part 4

Let’s assume an FBO is valued at $1 million EBIDTA. Applying the 10 times earnings multiple formula, the business might be worth $10 million on a sale. However, if the FBO has only 10 years remaining on a lease, the buyer will make nothing on his investment while assuming all the risk. Therefore, this deal will not get done!

So what does the buyer offer? Perhaps half of EBITDA or $5 million!

In a scenario where the lease has only five years left, the buyer may offer $2.5 million. However, the buyer may insist, as part of the lease assignment, the airport approve a lease extension. In this case, if the FBO owner obtains the lease extension prior to the sale and he enjoys the financial benefit!

FBO owners know too well that, as part of a lease negotiation for a new lease or a lease extension, capital investments are required. Because airport authorities/sponsors are seeking to build or expand their municipal airports, they understand a reasonably    long-term lease is required in order to amortize the FBO’s investment.

These lease issues were discussed a few years ago on a national level. Airport mangers know that without realistic lease terms, money is not available to the FBO at reasonable lending terms to build quality hangars and terminals.

Flexible Terms

Another important point we mentioned earlier involves flexible terms in the lease. When FBOs need to build facilities, they’re going to need capital. In most cases, FBOs will likely go to their local bank.

However, most bankers don’t understand the FBO business model. Imagine the banker’s surprise when he finds out the FBO doesn’t own any land!

Therefore, your lease is your collateral. You need a lease with at least 20 years remaining if you want to have a payback period of 20 years. However, the bank will need security as you get to the end of the payment period so a 25 to 30 year lease term is necessary.

Let’s say you get a lease for 20 years plus two five-year options to extend. The option language must be flexible so the banker understands you can extend the lease as long as you are paying your rent and in compliance with terms of the document.

An FBO also needs language in the lease to provide for the mortgage on the building to be built. The bank needs to approve this language as well as the airport. However, this can be difficult.

There are airport managements that don’t want to allow any mortgages. There may be banks that do not want to lend funds on leased land. All these issues can make for complicated lease negotiations. Therefore, an FBO must start early and allow plenty of time to complete a negotiation. This can take years.

Minimum Standards

In negotiating an FBO lease extension, minimum standards rules and regulations must be included. Minimum standards protect an FBO’s investment in their enterprise from unfair and discriminatory competition. Minimum standards lay out what services must be provided, what services are to be provided, and the size of the facility that must be built. Thus, minimum standards provide a level playing field for any competitor seeking to operate at the airport as they must also abide by the same rules and investment.

Tell us what you think—we appreciate your comments and thoughts. Also Like us by clicking the link below.

Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.

About the bloggers:

John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com

Ron Jackson
Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection.  Ron@thejacksongroup.biz  Ph: 972-979-6566 www.absggroup.com

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things