Our 2014 FBO Industry Annual Forecast
/
Expect a Flat Market with Spotty Increases in Fuel Sales
Key for Success in 2014 will be Higher Margins on Static Volume
By John L. Enticknap and Ron R. Jackson, Aviation Business Strategies Group
Recently we conducted our 2014 Annual FBO Industry Survey and the overall results indicate a mixed market that has yet to catch real traction.
We surveyed more than 500 FBOs and asked for responses to these statements:
- For this past year, 2013, please indicate how your FBO fuel sales performed compared to 2012.
- For this year, 2014, what are your predictions for your FBO fuel sales compared to 2013?
- In your opinion, is the economy headed in the right direction?
In general, there is a sense of status quo for 2014 with a majority of those surveyed predicting, at best, a breakeven marketplace. However, on the positive side, more than 40 percent predicted an increase in fuel sales volume with 20 percent of those surveyed projecting an increase of more than 5 percent.
Although there were reported pockets of increased fuel sales in 2013, nearly half the FBOs surveyed did not see an increase in business while feeling the economy is not headed in the right direction. We feel this trend will continue for 2014 with a relatively flat market and again some spotty increases in fuel sales.
While another year like 2013 is not necessarily good news, we feel the average FBO can improve profitability even in a flat market. Here’s what we believe are the keys to success for 2014 and beyond.
Keys to Success in 2014
- Watch your margins closely.
- Don’t give away your services.
- Compete on customer service, not price.
Let’s break this down further:
Key No. 1: Watch Your Margins Closely.
If you’ve been to our NATA FBO Success Seminar, you’ve heard us go through the drill:
- Understand the true cost of pumping a gallon of fuel including labor, fuel truck lease, flowage fees, insurance, credit card charges, utilities, rent, coffee, ice, cookies, popcorn, etc. We’ve seen midsized FBO operations with an insurance bill that averages $1,000 per day.
- Set your own discount fuel price and don’t go below it. We all know the posted price myth: no FBO sells fuel at posted price. However, there is a discount limit you need to establish and stick to it. Too often, third-party fuel providers dictate your fuel price and chances are you lose money or breakeven at best.
- You may end up with less volume, but the fuel you end up selling is at a higher value and your bottom line will look a lot better. Sometimes less is more!
Key No. 2: Don’t Give Away Your Services.
If someone can show us another industry where the business model gives away so many services, please let us know. In reality, we’ve probably done it to ourselves by offering free newspapers, crew cars, coffee, ice, cookies, Wi-Fi, ushering, baggage handling, aircraft towing, parking, tie downs, multiple lounges, flight planning, etc.
Problem is that our current business model has spun out of control. Margins are getting squeezed and yet customers still expect the free stuff. You can’t go to the bank when you’re busy pumping a pre-arranged load of fuel at a heavily discounted price. Or, in the case of the reluctant customer, no fuel at all.
- Consider a two-tier pricing structure where everyone who comes on your ramp must contribute something to your business. Whether it’s a courtesy load, a top off, or a ramp and facilities fee.
- Tier One: Full Service. Pay something close to retail price and you’ll throw in the kitchen sink.
- Tier Two: A La Carte Services. Want a heavily discounted fuel price? Great! But pay for each and every service you use, including a facilities fee, to cover all the incidentals. That clean bathroom just didn’t happen!
Key No. 3: Compete on Customer Service, Not Price.
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 is to offer an outstanding and memorable customer service experience.
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.
Here are suggestions for improving your customer service experience:
- Standardize your customer service training.
- Empower your employees to own their mistakes.
- Teach employees to deal with customer dissatisfaction.
- Motivate your employees to work together as a team.
- Measure your customer service delivery with a short survey.
- Ask the customer the really tough question: Would you recommend us?
- Monitor your loyal customer database. If you haven’t seen a regular customer in a while, find out why.
If you want to learn more about developing a customer service training program, check out our acclaimed Don’t Forget the Cheese!© The Ultimate Customer Service Training Program and visit our new website at www.absggroup.com.
During our upcoming NATA FBO Success Seminar to be held March 24 and 25 in Las Vegas, we will be discussing these major issues and much more. Please join us for this event. Past attendees say it’s like taking a short course on how to run a more successful FBO.
Tell us what you think—we appreciate your comments and thoughts. Send us an email to jenticknap@bellsouth.net or Ron@thejacksongroup.biz.
About the bloggers:
John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.
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 CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.