FBO Industry Update: Steady as She Goes

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

With the first six months of 2017 under our belts, let's take a look at how the industry has performed as we provide an update on our industry projections.

We’ll look at:

  • Business aviation flight activity year to date.      
  • Reported fuel sales from a sample survey across the United States.
  • Trending oil/fuel prices.

Business Aviation Flight Activity

Business aviation flight activity is a good barometer for the health of the FBO industry. Tracking this data over time allows a comparison of trends that often parallels the state of the economy. Generally, more hours flown by the business aviation fleet translates into more FBO fuel sales.

For this data, we access information provided by ARGUS TRAQPak, which tracks flight activity for turboprop aircraft as well as small, midsize and large-cabin jets for IFR flights in Canada and the United States, excluding Alaska and Hawaii.

The three industry segments that are tracked include:

  1. FAA Part 91 non-commercial operators
  2. FAA Part 135 commercial operators
  3. Fractional operators

Overall, flight activity for the first six months of 2017 was up 3.9 percent compared to the same period in 2016. Flight hours were up 6 percent during the same period.

Breaking down total activity by segment, Part 135 flight activity rose 10.1 percent, fractional activity was up 5.7 percent, and Part 91 activity recorded a decrease of 0.5 percent for the first six months of 2017 versus the same period for 2016.

Reported FBO Fuel Sales from Sample Survey

We conducted a small sample survey of a few U.S. FBOs to get a feel for flight activity and fuel sales volume. Note: Since this is a small sampling the results are not intended to be conclusive, but rather to spot trends.  Here are the results:

  • Northeast: Reported a 6 percent-increase in fuel volume for the first six months of 2017 versus the same period for 2016. However, business aircraft traffic declined by 4 percent over the first six months compared to a three-year average.   
  • Southeast: Overall, fuel sales were up for the first six months of 2017, compared to the same period n 2016, with a slight decline in June. There is reported increase in aircraft traffic on ramps for 2017 compared to the same period in 2016.
  • Midwest: Reported fuel sales have increased steadily for the first six months of 2017 compared to the same period in 2016. Transient aircraft traffic has also increased for the same time frame.
  • South Central: Reports for this section of the country are mixed. Some markets have had increases in both fuel sales and ramp activities for the first six months of 2017 compared to the same period in 2016. Others show retail fuel sales are off by as much as 15 percent, and traffic is down.
  • Mountain: Reports that both fuel sales and the number of customers are up for the first six months of 2017 compared to the same time frame of 2016.
  • West Coast: Reports aircraft traffic down and Jet A fuel sales are relatively flat for the first six months of 2017 compared to the same period in 2016. Piston aircraft GA traffic is drying up, resulting in a double-digit drop in 100LL fuel sales.  

Trending Oil/Jet A Fuel Prices

Since completing our Annual FBO Fuel Sales Survey in January 2017, the price for a barrel of oil has fluctuated by as much as $10 from a high in January of $53 to a low in June of $43. Currently, the price for a barrel of oil is running about $47 and has not been adversely affected, at the time of this writing, by the effects of Hurricane Harvey on the Texas oil refining industry.

As for the price of Jet A, beginning in January, Jet A Gulf Coast Pipeline Mean was approximately $1.56 per gallon and is currently running about $1.51 per gallon. We expect higher prices are coming as a result of effects of the hurricane.

After oil prices recovered at the end of 2016 to more than $50 per barrel, economists and oil cost experts forecast that prices would continue to rise through 2017 to $60 dollars per barrel or higher. So far, this has not occurred.

Why the consistently lower prices? As usual, there are many factors that affect the marketplace, including politics, inventory, world events, and the instability of oil-producing countries such as Iran and Venezuela.

Despite all the mentioned influences on oil prices, the basic reason for continued reasonable oil and fuel prices is that there is a lot of inventory, and demand is not outstripping supply. Will this trend persist? The experts can’t get it right, but it appears that reasonable pricing will continue.

One thing to keep in mind is that lower Jet-A fuel prices do not necessarily mean that there will be more business aircraft flight activity, particularly in the Part 91 operations. As the economy continues to improve and expand, we see more flight hours being logged in all categories but mostly by the Part 135 and fractional operators.

Also keep in mind that the business aviation marketplace is growing at a small pace, and new and used business aircraft sales have increased only incrementally.

As evidenced by our sample fuel survey, there are FBOs in a few spot markets that are doing well while others have experienced a very flat marketplace with some reporting a decrease in year-over-year fuel sales for the first six months of 2017. Look for this trend to continue through the rest of 2017.

Our advice is steady as she goes. Keep the course, and manage your FBO business prudently. If you invest in new infrastructure, do so when you can forecast a reasonable return on your new investment.

Please leave a comment on this subject 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 BLOGGERS:

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 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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