FBO Best Practices Series #7: Find the Free Money
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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:
- Fuel Purchasing.
- Credit Card Interest Rates.
- Insurance Premiums.
- 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:
- Discussing your training programs.
- Your lack of accidents and incidents.
- 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.
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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