January 05, 2016

10 Essential Elements of a Favorable Fuel Supplier Agreement

January 05, 2016/ AC-U-KWIK

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

In our last blog post, we concluded our series on the 10 critical elements of an FBO airport lease that was first on our list outlining the six intangibles that can build equity in your FBO.

Next up is a discussion about another intangible that will help build equity in your FBO enterprise: A favorable fuel supplier agreement.

One of the most important agreements you can have with any vendor in the FBO business is the one you establish with your fuel supplier. When done properly, it can add real intrinsic value to your business and, quite frankly, make or break your bottom line.

Over the years, we've reviewed and helped write many fuel agreements and have coached FBOs on the intricacies of arriving at a favorable agreement.

As we teach in our NATA FBO Success Seminars, your initial approach and mindset to developing a favorable fuel supplier agreement is one of partnership. Working as partners with your fuel supplier will provide a win/win agreement where both parties want the other to succeed and are willing to work in concert to that important end.

With this in mind, here are the ten essential elements of a favorable fuel supplier agreement:

1. Term of Agreement.
2. Pricing Methodology.
3. Transportation & Delivery.
4. Terminal Locations.
5. Credit Terms.
6. Taxes: Federal, State, Local & Flowage Fees.
7. Quality Control & Training.
8. Marketing Support.
9. Credit Card Processing.
10. Contract Fuel Programs.

In coming blogs, we’ll discuss each of these and make recommendations on how to improve the equity in your FBO.

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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December 15, 2015

Breaking Down the 10 Critical Elements of an FBO Airport Lease, Part 4

December 15, 2015/ AC-U-KWIK

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

In previous blog posts we discussed nine of the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.

In this final post for this subject, we will discuss the last critical element, Airport Minimum Standards. The Airport Minimum Standards document is basically what creates a level competitive playing field. It further helps protect the intrinsic value of your enterprise by spelling out the minimum requirements for an FBO or SASO (Specialized Airport Service Organization) operating at your airport and sets the standard of compliance for existing or potential competition.

In essence, it states that if a new operator wants to start an FBO at your airport then they must make the same investment in facilities, pay the same rentals and fees, provide similar services, and operate on the same level as your business.

Although an FBO Minimum Standards document is generally separate from your lease and resides as part of the rules and regulations of the airport, it is important to make sure it is called out in your lease. Many airports do not have minimum standards and this may cause a problem for the existing businesses.

Two important elements of an airport minimum standards document are its purpose and the issuance of a permit, lease or operating agreement.

Purpose

The purpose of minimum standards is to establish and make requirements for general aviation aeronautical activities. They are established in the public interest for the safe and efficient operation of the airport in order to enhance orderly growth and comply with federal, state and local government legal requirements. It also provides information to parties operating or desiring to operate at the airport. These standards in general establish minimum levels of service that shall be offered in order to protect the public welfare and prohibit irresponsible, unsafe or inadequate services.

Permit, Lease or Operating Agreement

No person, including an aeronautical service operator, shall offer or perform a commercial aeronautical activity, operation or service at an airport without written authority for such service. Such authority will generally be contained in a Permit, Lease or Operating Agreement that has been negotiated between the FBO/SASO and the airport.

Keeping these elements in mind will assist you in maintaining your FBO business no matter what the competition may bring to the airport environment. Make sure the minimum standards are up to date. Many documents we review for our clients are up to 20 years old.

In our next blog, we’ll start a new series based on the second intangible that can build equity in your FBO: A Favorable Fuel Supplier Agreement.

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December 08, 2015

Breaking Down the 10 Critical Elements of an FBO Airport Lease, Part 3

December 08, 2015/ AC-U-KWIK

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

In previous blog posts we discussed six of the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three additional key airport lease elements and provide insight and tips to help you protect your business while adding intrinsic value to your enterprise.

Improvements, New Buildings and Renovations

FBOs should view this section as a way to spell out and secure future equity in their enterprise. Making lease hold improvements, building new facilities and making timely and needed renovations are critical in negotiating a longer lease term and potentially additional optional years.

In this section, it is critical that you consider the best investment in facilities that gains two things:

Longer lease term
Return on your investment (ROI)

Having a business plan that details what your goals are will greatly assist you in getting the project financed and approved by your board of directors.

During your evaluation of expansion projects, it is important to keep in mind the goals of the airport authority. Airports like to see investments into the infrastructure of the airport environment, expansion of the business base and job creation. Make sure your project meets these goals and adds to the success of the airport master plan.

Insurance, Indemnity and Hold Harmless Agreement

Protecting your enterprise from unforeseen perils that can expose you to risk and harm is what this section is all about.

Insurance must meet the requirements of the lease. In many cases the lease insurance amount requirement may be too low, such as $2 million or $5 million in aviation liability coverage, auto liability and workmen’s compensation insurance. You should review these requirements with your insurance broker to make sure you are adequately insured and there are no clauses in the agreement that cannot be met. The airport will want to be a named insured on your policy. This is a standard requirement.

Both the Indemnity and Hold Harmless clauses are very important to the FBO. When there are problems at the airport that involve your business and the airport authority, these clauses may come into play. Unfortunately, in many cases the legal language in both of these paragraphs can be onerous to the FBO. The airport may want to be completely indemnified for any actions on its part and held harmless for any acts, gross negligence or misconduct. Your legal counsel should review this language to make sure you can live with it. In many cases, since you are operating at a government owned facility, the FBO may have to accept less than ideal language.

Environmental Liability

In running the day-to-day FBO operations, owners and operators are constantly dealing with aviation fuels and other chemicals that can be environmentally hazardous. With this in mind, it is important to understand that if you are operating a tank farm system for fuel storage you are required to provide environmental insurance. If you are operating at an older airport and you are new to the facility or the ground, you may want to consider completing a Phase 1 environmental assessment prior to use. This inspection could be a requirement of your insurance underwriters. Your legal counsel and insurance brokers should review the inspection and subsequent lease language prior to signing an agreement.

In our next blog, we’ll examine the remaining critical element of your lease, the Airport Minimum Standards section. We consider this one of the main six intangibles and will treat this as a separate subject because it is a very important component with distinct elements.

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December 01, 2015

Breaking Down the 10 Critical Elements of an FBO Airport Lease, Part 2

December 01, 2015/ AC-U-KWIK

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

Previously we discussed three of the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three more of the airport lease elements and provide insight and tips to help you protect your business while adding intrinsic value to your enterprise.

Payments, Including Rental, Gross Revenue, Flowage Fees and out Years to Include Escalators

By paying attention to the exact wording of this very important element, you can protect yourself from any future disagreements or disputes. Payments may include investments in refurbishment of your terminal building and/or hangars to keep them up to date. Payments may include capital investments for a new hangar or building to exercise lease extensions. These rent payments and additional investments are all financial obligations that contribute to the success or potential failure of your FBO. Please note that each one of these elements is negotiable; therefore, do your homework by getting other comparable FBO leases in your area and region. If you have a competitor at your airport, ask to see its lease. Because it is considered a public record, you can obtain a copy under the Freedom of Information Act (FOIA). Remember, knowledge is the key to negotiating your best rates.

Building/Ramp Maintenance Responsibilities

Be sure to be very specific with the language for this element. Any ambiguity can lead to finger pointing, and the FBO can end up on the short end. If you are leasing buildings owned by the airport, most leases provide for the lessee (FBO) to pay for building upkeep, utilities and taxes. If you operate in the snow belt, it is incumbent on the FBO to understand whose responsibility it is for snow plowing ramps, approach taxiways or other areas.

Be very clear on taxes. In many cases you don’t have to pay property taxes on buildings owned by a city or municipality. In some states you may have to pay school taxes or other fees. Therefore, be clear on defining responsibilities.

Termination by the FBO or Lessor

In this section, it is wise to spell out unequivocally how the lease can be terminated by either party in cases of dispute, natural disaster, fires or other unforeseen events. What is most important is that the parties to the agreement have sufficient time to correct and negotiate any disputes or other occurrences. The “cure” clause should be at least 30 to 60 days to fix problems. This length of time is generally not used if the issues are late payment of rents or fees.

When there are issues, prompt resolution is the best way to solve problems. As Colin Powell once said “Bad news isn’t like wine. It never gets better with age.”

In our next blog, we’ll examine the final three critical elements of your lease with additional tips that can help you build equity in your FBO.

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November 24, 2015

NBAA from an FBO Perspective

November 24, 2015/ AC-U-KWIK

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

The 2015 NBAA Business Aviation Convention & Exhibition is now in the books, so let's break down the show from an FBO perspective.

With more than 27,000 attendees and over 1100 exhibitors, the show was very lively, and most FBOs exhibiting said they were pleased by the amount of traffic and activity at their booth. In general, the atmosphere was upbeat with several OEM airframe manufacturers introducing new aircraft and reporting healthy orders to help fill their delivery slots going forward.

The one lament that FBOs seemed to repeat was that business jet operators continue to tanker fuel from their home base resulting in only courtesy fuel buys.

As in the past, many look with anticipation to hearing the results of Honeywell Aerospace's Annual Global Business Aviation Outlook, which is traditionally released at the annual NBAA show. Here's a look at some relevant predictions.

First of all, Honeywell states that “as a slow-growth economic environment takes hold across many global markets, the business aviation industry is not immune to its impact."

In past blogs, we've talked about the slow-growing economy and our Annual FBO Fuel Sales Survey backs up this statement. We are seeing some bright spots in select markets while fuel sales continue to grow at a slow pace.

As for new business jet deliveries going forward, Honeywell forecasts up to 9200 new business jet deliveries worth $270 billion over the next 10 years. This is actually a downgrade of 3 to 5 percent over the value noted in its 2014 forecast.

The reason we look at new business jet deliveries is that it's a leading indicator of the need by business jet operators either to replace or upgrade their existing aircraft or to expand their current uplift capability.

Another indicator we watch closely is the used jet market to see if inventories have risen or diminished. This gives us another barometer with which to measure and monitor the current health of the business jet industry.

Honeywell's findings indicate a used business jet market that has stabilized at 10 percent of the existing fleet up for resale, which is significantly down from the 16 percent high-water mark recorded in 2009.

According to Honeywell, operators responding to their survey increased their used jet acquisition plans by about 4 points, equating to 32 percent of their fleets in the next five years. For FBOs/MROs who specialize in avionics and cabin upgrades, this is good news.

Other key global findings in the 2015 Honeywell outlook include:

Operators surveyed plan to make new jet purchases equivalent to about 22 percent of their fleets over the next five years as replacements or additions to their current fleet.
Of the total new business jet purchase plans, 19 percent are intended to occur by the end of 2016, while 17 and 20 percent are scheduled for 2017 and 2018, respectively.
Operators continue to focus on larger-cabin aircraft classes, ranging from super mid-size through ultra-long-range and business liner, which are expected to account for more than 80 percent of all expenditures on new business jets in the near term.
The longer-range forecast through 2025 projects a 3 percent average annual growth rate despite the relatively flat near-term outlook as new models and improved economic performance contribute to industry growth.

As we have written previously, the business jet market and the FBO industry is operating in what we are calling a new normal where the U.S. business economy is slowly growing. Increased tankering of jet A fuel by medium and large business jet operators is also part of the new normal. We have heard from Fortune 500 corporate aircraft operators that they tanker up to 70 percent of their fuel from their own corporate tank farm.

Therefore, it's important for FBO operators to provide excellent customer service in order to enhance and increase fuel sales at the point of transaction. FBOs should also look at ways to increase and diversify potential revenue streams in order to garner a greater share of the customer wallet. We will have more on this topic in future blog discussions.

If you attended NBAA, please give us your perspective in the comment section below.

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November 10, 2015

Breaking Down the 10 Critical Elements of an FBO Airport Lease

November 10, 2015/ AC-U-KWIK

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

In our previous blog, we listed the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three of the airport lease elements and provide insight and tips to help you protect your business and add intrinsic value to it.

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. Whether you're looking to sell your business or make additional capital improvements, the term and option years help form the primary equity foundation of your business. Therefore, rule of thumb is the longer, the better. If you are wanting to sell, investors want to see 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. This will give you more time to amortize the cost of capital improvements and put you in a better position to sell down the road.

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,ifyou 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 containreasonable language that says you can sell the business to a qualified party with approval in writing, and suchapproval 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’ll examine three more critical elements of your lease with additional tips that can help you build equity in your FBO.

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November 03, 2015

10 Critical Elements of an FBO Airport Lease

November 03, 2015/ AC-U-KWIK

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

As part of a new blog series, we'll take each of the six intangibles that can build equity in your FBO and give you valuable insight as well as insider tips to help you add intrinsic value to your business.

Starting at the top of our intangible list, developing a long-term lease with your airport authority is the lifeblood of your FBO operation and plays a large part in building equity in your enterprise.

The critical elements of a lease to understand, and that are a part of the negotiating process with the airport authority, include the following:

Term and option years
Operating rights
Payments, including rental, gross revenue, flowage fees and out years to include escalators
Building/ramp maintenance responsibilities
Assignment sale clause
Termination from FBO and lessor
Improvements, new buildings and renovations
Insurance, indemnity and hold harmless agreement
Environmental liability

The tenth critical element, an Airport Minimum Standards document, should be part of your lease. We consider this one of the main six intangibles and will treat this as a separate subject in a future blog because it is a very important component with distinct elements.

In our next blog, we will break down these components with some additional tips to help you negotiate the optimum lease.

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October 29, 2015

Poll: What Do You Expect Your Fuel Supplier to Provide to You?

October 29, 2015/ AC-U-KWIK

Question
Besides reliable, economical fuel supply, what do you expect your fuel supplier to provide in today’s environment?

Answer Choices
A) Training & quality control guidance
B) Direct sales efforts to attract local or transient customers to my FBO
C) Additional resources/solutions to help improve FBO operations
D) Rewards loyalty progam
E) Business development financing

Vote in the poll.

October 27, 2015

Six Intangibles That Can Build Equity in Your FBO

October 27, 2015/ AC-U-KWIK

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

Running a successful FBO operation requires attention to six intangibles. Reaching favorable terms and taking care of these intangibles the right way will help build equity in your business.

If you’ve ever gone to a bank to get a project financed, you know that it takes a savvy banker who understands the FBO business to get the project done. Most lending institutions can’t get over the first hurdle when they discover that an FBO doesn’t own the land where a proposed hangar is to be built.

To be sure, the FBO business is relatively unique. Often airports require FBOs to make major capital improvements as part of their lease, especially at time of renewal or in granting a request for a lease extension. Yet, at the end of the lease, none of the improvements are tangible assets that an FBO operator can liquidate. They are owned by the airport, which also owns the land.

Besides some ground service equipment, a typical FBO doesn’t have much tangible collateral. The real value bankers or investors are interested in is mostly the intangibles that help increase equity in an FBO enterprise. These include:

A long-term lease with extension options.
A favorable fuel supplier agreement.
Advantageous/profitable hangar contracts/agreements.
A sound balance sheet with consistent EBITDA performance.
A strong Airport Minimum Standards document.
A strategic business, operational and marketing plan.

In coming blogs, we’ll discuss each of these and make recommendations on how to improve the equity in your FBO.

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October 12, 2015

Four Tips to Retain Good FBO Employees

October 12, 2015/ AC-U-KWIK

Employee recognition and retention: What gets rewarded gets repeated

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

In our last blog, we mentioned that one of the top concerns for FBOs in our Mid-Year Fuel Sales Survey was finding and keeping qualified employees. Needless to say, it's a lot easier to retain a good employee than to go out and find a replacement.

Keeping your valued employees means you have less churn and provides the ability to deliver a more consistent customer service experience.

Retention of good, qualified employees should rank as a top goal for FBO managers and supervisors along with retention of customers. You should work just as hard to accomplish both.

Here are four tips on retaining good employees:

1. Develop a good internal culture. Make your FBO a rewarding and fun place to work. Internal culture starts at the top. Lead by example.

2. Listen to your employees. Make sure your employees have a voice in your organization. Be appreciative of their input. Invite them to help create your mission, vision and customer promise statements. Employees who feel their voice is being heard will “buy into” the process and help create and maintain a healthy company culture.

3. Treat your employees as stakeholders. A stakeholder is anyone who has a stake in the company in terms of determining success or failure. Besides employees, other stakeholders include customers, vendors and suppliers.

4. Reward the routine. Let’s face it. Many of the tasks performed by FBO employees are repeated numerous times day in and day out. That’s why it is important to let employees know they are doing a good job, even for the most mundane routine task.

On this last point, we’d like to expound a little. By reward we are not talking about money. Research indicates that what most employees seek is being appreciated for a job well done. So let them know. Pat them on the back. Shake their hand. Let them know you appreciate their contribution as a true stakeholder. For example:

”That’s a great job of cleaning the lavatory. Way to go.”

”Super job of marshalling that aircraft. You used crisp and precise hand gestures. Keep it up.”

”You handled that last customer complaint beautifully by taking ownership of that oversight and making it right. Nice job.”

In their book Managing Knock Your Socks Off Service, Chip R. Bell and Ron Zemke state that what gets rewarded gets repeated. If you want your employees to grow with you, yes, they need to be compensated fairly. But what’s more powerful is your recognition, not just for their time on the job, but for their accomplishments as well.

How true. Showing employees you appreciate their contribution completes the retention cycle and helps cement a more permanent stakeholder relationship with the FBO.

What do you do to retain employees? Let us hear from you by making a comment below.

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September 15, 2015

The Top 10 FBO Challenges for 2015

September 15, 2015/ AC-U-KWIK

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

In our last two blog posts, we reported the results and findings from our Mid-Year FBO Fuel Sales Survey. For this blog post, we look at the answers from a write-in question we asked in our survey:

What has been your biggest challenge so far in 2015?

With a nod to David Letterman’s Late Night Show Top 10 List, we’ve compiled our own list based on our survey results and named it the Top 10 Challenges FBOs are Facing in 2015, and offer a little sage advice.

No. 10: Contract Fueling. Not surprisingly, this topic made the top ten list. This subject has been discussed and debated many times in various forums including the NATA FBO Success Seminar. Our tip to FBOs struggling with this topic is to stay in your comfort zone with your margins, establish your own FBO contract sales price and offer this to your contract customers. Do your homework and track your contract sales. Did you sell more with a great discount?

No. 9: Managing your fuel inventory. Don’t get caught short. Develop daily dashboard reports to keep track of what’s in your tank. Check fuel prices on Thursdays to spot trends and to order fuel for Monday delivery if the prices are going up on Tuesday.

No. 8: Filling empty hangars. This is a constant challenge for many FBOs. Be proactive in identifying potential hangar prospects within a 50-mile radius. Use your flight tracking program to attain aircraft registration info. Put an attractive incentive package together, pick up the phone and call for an appointment. Also, visit neighboring airports and make cold calls. Know the costs of your hangar facilities.

No. 7: Fluctuating Fuel Prices. Welcome to the new normal. Our advice is make sure you keep track of the various price of loads that are in your tank. Be consistent with the margin you want to achieve relative to selling off your old inventory and adding new. Platts-based fuel pricing data changes on Tuesdays for most FBO fuel contracts.

No. 6: Runway closures. This is obviously a problem that’s out of your control. Use down time to maintain ground equipment, train staff and freshen up the lounge area.

No. 5: Weather. This is another problem that’s out of our control. However, interestingly, it’s the number five concern among those surveyed.

No. 4: High AvGas Pricing & Availability. We saw this comment many times, especially among smaller FBO operations in the Central time zone. Here is an anonymous comment submitted in the survey that sums up the situation:

“Uncertain supply issues that continue to plague delivery and pricing of AvGas. Rising prices which are counter to the price of oil and gasoline price at the pump are trends that are harming the industry as a whole, making it difficult, if not impossible to forecast sales and the future of the industry.”

No. 3: Growth and attracting more business to the airport. Although our survey showed very positive signs of growth among FBOs in larger markets, smaller FBOs pumping under 40,000 gallons of Jet A per month are mostly reporting no growth. Historically, the larger markets improve first, followed by the secondary markets. As reported in our most recent blog post, there are positive industry recovery signs in both flight hours being flown and in the United States manufacturing sectors.

No. 2: Finding and keeping qualified employees. This problem is not unique to the FBO industry. Working hand-in-hand with the local Chambers of Commerce and grass roots efforts at job fairs are critical. But perhaps more importantly is giving a potential employee a realistic look at the offered job. This may include on-the-job demonstrations, before hiring, from seasoned employees of the actual job being offered. While determining aptitude is important, assessing attitude is essential. Therefore, involve your team in the process.

No. 1: Marketing and inconsistent/low traffic counts. Attracting and waiting for new transient customers is one thing. Keeping the business you have is another. Make sure you are doing everything you can to keep your current customers. That’s worth more than spending marketing dollars to replace a disgruntled customer. It starts with a consistent customer service experience. Invest wisely by making sure your employees have good customer service skills and then lead them by example. Always ask your current customers if they would recommend you. If they hesitate, then fix the internal problem first.

What is the biggest challenge you face in the FBO business? We’d like to hear from you. Please write your comment below.

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September 08, 2015

More Positive Signs for FBO Industry Beyond Mid-Year Survey

September 08, 2015/ AC-U-KWIK

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

As a follow-up to our Mid-Year FBO Fuel Sales Survey results posted in our last blog, we are taking out our crystal ball and gazing ever so cautiously yet optimistically into the next six months with the following observations.

In reviewing the primary survey results, we found 45 percent of respondents experienced an increase in Jet A fuel sales for the first six months of 2015 compared to the same period in 2014. Add to that another 26 percent reporting flat fuel sales during this period, and you have a grand total of 71 percent of the FBOs experiencing at least the same or improved fuel sales.

At first blush, this may not seem like a big deal, especially to the uninitiated. However, for the FBOs that survived and lived through the years of decline since the big economic bubble burst of 2008, this news is music to their ears. Finally, we are starting to see a positive trend.

Gazing back into our crystal ball for a moment, we see some more positive news for the FBO industry.

First let’s look at the data released by ARGUS International, Inc., which tracks the monthly business aircraft flight activity in the United States. For five consecutive months, March through July, ARGUS found that flight activity was positive for most or all aircraft categories compared to the same periods in 2014. This activity, we feel, is a start of a healthy trend: more business aircraft hours flown, more turbine aircraft on FBO ramps, more Jet A sales.

Although the General Aviation Manufacturers Association (GAMA) is reporting an overall decline in aircraft shipments for the first six months of 2015, our experience is that flight hours have to consistently increase before manufacturers see an uptick in their order books. As flight hours increase, the demand for new or replacement aircraft also increases. Historically, the two go hand in hand. From where we sit, it is just a matter of time before this happens.

In other economic news, the Fed recently reported that although the economy is expanding slowly, there is positive news in the U.S. manufacturing sector, especially in the automobile industry. Historically, as U.S. manufacturing increases and expands, business flight hours also increase giving credence to the NBAA and GAMA initiative No Plane No Gain.

As we put our crystal ball away until our next Annual FBO Fuel Sales Survey in January, we can say that overall, we are very bullish on the FBO industry right now.

In our next blog, we take a look at some of the answers received from FBOs on our mid-year survey when asked, “What has been your biggest challenge so far in 2015?”

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August 25, 2015

Mid-Year FBO Fuel Sales Survey: 71 Percent of Respondents Report Increased or Flat Fuel Sales

August 25, 2015/ AC-U-KWIK

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

Following our Annual FBO Fuel Sales Survey, we initiated our first Mid-Year Fuel Sales Survey. Please note this is a top-line survey designed only to gauge trends. The survey database was provided by AC-U-KWIK.

As a quick review, the annual survey results we released in January indicated that 49 percent of FBOs surveyed reported an increase in Jet A fuel sales in 2014 compared to the results of 2013 while 18 percent reported fuel sales to be about the same. This gives a total of 67 percent reporting having at least the same fuel sales or improved fuel sales over 2013. (For complete results of our annual survey, please click here.)

As part of this mid-year survey, we asked:

For the first six months of 2015, compared to the same period in 2014, are your Jet A fuel sales:

Up from a year ago?
Down from a year ago?
About the same?

A total of 45 percent of the FBOs responding to the survey reported sales were up from a year ago with 26 percent indicating sales were about the same. That’s a total of 71 percent reporting having at least the same fuel sales or improved fuel sales from a year ago.

Conversely, 29 percent indicated Jet A fuel sales were down in 2015 compared to the same first six months of 2014.

For this mid-year survey, we also wanted to get a feel for the average posted Jet A retail price so we asked:

What has been your average posted retail price per gallon of Jet A over the past six months? Respondents were given a choice of price ranges with the following responses:

2 percent reported their posted Jet A price was under $3.00 per gallon.
28 percent between $3.00 and $4.00 per gallon.
52 percent between $4.00 and $5.00 per gallon.
12 percent between $5.00 and $6.00 per gallon.
6 percent indicated more than $6.00 per gallon.

As we all know, because of various industry discount programs, the majority of FBOs do not sell Jet A fuel at the posted retail price. However, the results of this survey question can provide insight into what FBOs are posting on average.

Further, it has been our experience in consulting with many FBOs as well as conducting the NATA FBO Success Seminar, that the average margin on Jet A fuel sales runs between $1.30 and $1.60 per gallon. FBOs that are consistently selling Jet A Fuel below a margin $1.10 are having a hard time of making ends meet.

For our next blog post, we’ll draw some conclusions and take a look at the responses we received from our write-in question:

What has been your biggest challenge so far in 2015? Some of the answers may surprise you.

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August 18, 2015

FBO Tip of the Week: Four Steps to Discover Your FBO’s Natural Rhythm!

August 18, 2015/ AC-U-KWIK

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

In our previous blog we discussed how every employee and department in an FBO needs to pull together like sections of a well-tuned orchestra in order to create a harmonious customer service environment.

Because every department touches a customer in some way, customers can sense when there is discord. Instead of one sound coming from one orchestra, they begin to hear many drums and many instruments playing haphazardly.

So how can FBOs pull the orchestra together, make many departments and teams move and sound as one and create an operating environment for delivering the ultimate customer service experience?

Here are four steps to creating departmental team harmony and discovering your own FBO’s natural rhythm.

Step 1: Develop and share the big picture. All employees should know the heritage of the company, where it is headed and the defining role they play.
Step 2: Lead by example, and empower management and supervisors to lead with enthusiasm, exhibiting encouraging behavior for employees to follow and do the jobs they've been hired to do with professionalism.
Step 3: Encourage and permit employees at all levels to have a voice in the process and be an instrument in the orchestra. Recongnize everyone contributes to the success of the FBO and is a valued stakeholder in the company.
Step 4: Follow through, and act with integrity. Everyone is watching, including the customers. Employee's actions reflect the company culture. Share company values, and include them in the performance reviews.

By preparing to meet the requirements of each of these steps, the FBO owner, operator or manager can create an operating environment for the team that is fun to work in and becomes a comfortable space for the customer.

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August 10, 2015

FBO Tip of the Week: Discover Your FBO’s Natural Rhythm!

August 10, 2015/ AC-U-KWIK

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

Listen to the rhythm of your FBO. How does it sound? Do you hear many instruments playing in harmony? Or rather a rag-tag hodgepodge of many different departments, working independently and making an awful racket?

From line service and customer service to accounting and maintenance, every department and every employee touches a customer in some way. One bad towing job, one dirty restroom, one inaccurate invoice or one late maintenance delivery can move customers out of their comfort zone and motivate them to take their business, and their multi-million dollar aircraft, to a competitor.

For the premise of this blog, let's think of and visualize each department as a section of a well-tuned orchestra.

In the typical FBO organization, we have several departments or musical sections that make up the orchestra. They include fueling/line service, customer service, maintenance, avionics, parts, refurb, charter, flight school, aircraft sales, accounting, etc.

In consulting with many FBOs with which we've come in contact, several managers have lamented that departments often don't communicate well with each other and have tended to work more and more in isolation. In other words, they're tapping out a rhythm to their own beat, not in concert with the rest of the orchestra. In a way, they've created their own ensemble and aren't playing the same music.

When the customer spends some time at an FBO, they begin to develop a sixth sense with regard to the working environment. Their antennas are up and they can sense when there is discord. They begin to hear many drums and many instruments playing haphazardly instead of in sync as one sound, one orchestra, one FBO.

So how can FBOs pull the orchestra together, make many departments move and sound as one, and create an operating environment for delivering the ultimate customer service experience?

In the next blog, we'll discuss the four steps to creating inter-departmental harmony and discovering your FBO’s natural rhythm.

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July 21, 2015

Situational Awareness: You Can't Manage What You Don't Measure

July 21, 2015/ AC-U-KWIK

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

Situational awareness. It’s not just a term for pilots. It should also be a daily mantra for FBO owners and operators who want to run a successful operation.

In the FBO business, situational awareness is all about being aware of what’s happening in your inner and outer circle. It’s a process of understanding how information, events and actions impact business plan goals, both immediately and in the near future.

During our NATA FBO Success Seminars we discuss developing and reviewing statistics or dashboard reports on what is going on with your business. It’s a daily ritual that is all about situational awareness as it pertains to fuel sales, labor productivity, and tracking your actual profit and loss (P&Ls) against your budget and last year’s performance.

However, one area that seems to get neglected is measuring the sales and marketing initiatives by keeping track of what we are doing to sell our FBO services, develop new customers, bid new contracts and other marketing efforts.

CRM (customer relationship management) software is a category of software that covers a broad set of applications and software designed to help businesses manage and measure customer data and customer interaction, access business information, automate sales, marketing and customer support. To assist in your sales efforts through CRM techniques, you may want to utilize software programs such as Salesforce.com, Pipeline or QuoteRoller.

Once you’ve selected your software, we recommend keeping things simple by tracking at least the following three metrics:

Number of cold calls to prospective customers. Yes, cold calling is not dead. Pick up the phone and make contact.
Number of appointments, whether you’re trying to sell MRO service or just informing a potential new customer about your facility.
Number of closed sales or the number of new transient customers.

Once you get into this tracking, there are additional metrics you can add:

Number of referrals received and referrals closed. Referrals means your FBO is delivering a good customer service experience. Referrals should always be followed up on in a timely manner.
Amount of email, direct mail, social media and blog posts. The use of all communications channels will increase sales success.
Upsell attempts and rate of success. Upselling is critical to help make an FBO successful.
Number of business cards handed out. Sounds simple, but promoting the brand is critical.
Number of times you contact a prospect before you close the sale. Keeping in contact with the customer base, no matter what the message, helps create and cement relationships.

You can develop your own metrics to fit your business. Whether it is the number of annuals, 100-hour inspections bid on and closed, or the number of contacts for new hangar rentals, any of these metrics are vitally important to the success of your FBO operation.

And always remember, you can’t manage what you don’t measure.

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July 14, 2015

FBO Tip of the Week: Take Time for a Midyear Checkup

July 14, 2015/ AC-U-KWIK

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

Now that we're halfway through 2015, it's time to take stock of how your FBO has performed this far and review your goals and objectives for the year.

This midyear review is an excellent opportunity to take a look at all aspects of your business and review the metrics that give you a relative benchmark of performance.

Fuel Sales: Utilizing your dashboard and YTD budget reports, compare fuel sales for each of the first six months against the results of the first six months for 2014 and your budget forecast. Are you trending up or down or maybe staying about the same? Are you going to hit your sales targets?

Fuel Pricing: Review your posted retail pricing for each month, and complete a market survey, both on the field and in the region.

Fuel Discounts: Figure the average of what you actually sold a gallon of fuel for, taking into account all discounts including contract fuel pricing, etc. You also may want to break out these costs by category to include base customers, transient customers, contract fuel, commercial into-plane and government/DOD.

Review all your expenses: Remember to include wages/salaries, utilities, building maintenance, insurance, supplies, rent/lease, loan payments, etc. Are they in line with your YTD budget?

Recalculate what each gallon of fuel costs to pump into an aircraft.

Figure Your Fuel Margin: Compare these margins YTD with the results of 2014.

MROs: Figure your hourly productivity rate for your shop and each technician for the first six months of this year. Compare these findings against the results of 2014. How are you trending?

Review Your Airport Lease: Now is a good time to think about negotiating a lease extension.

Review Capital Improvements: Are you on target to start or finish your capital improvement projects?

Review Safety Procedures: Now is a good time to conduct an internal audit of your safety procedures.

Insurance Review: Call your insurance agent, and get together to review your insurance story. A good insurance story can save you money.

Review Your Credit Card Transactions: Are your CSRs asking customers for the preferred card? The one that has the lowest interest/processing rates?

Review Your Base Tenant Leases: Have the leases renewed at the same rate or is there opportunity to negotiate better terms?

Review Your Customer Service Training: Take time to observe how your employees communicate and deal with your customers. Are your customers willing to recommend you without hesitation?

Now, tell us how you are doing. We'd like to hear from you to get a sense of how the industry is doing. Have you had more transient traffic these first six months compared to the same period in 2014? Do you have an opinion of whether there is an increase of in-flight hours compared to last year? Are fuels sales better, worse or about the same?

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July 07, 2015

FBO Tip of the Week: Example of Contagious Company Culture: You've Got to Love Southwest Airlines, Part 3 of 3

July 07, 2015/ AC-U-KWIK

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

In this final blog post about developing a contagious company culture, we'd like to share a short case study of a celebrated aviation services company that has put it all together and shines above the rest: Southwest Airlines.

True, they're not in the FBO business, but for the sake of this blog post, let's call them kissin' cousins.

Company: Southwest Airlines
Commenced Operations: 1971
Years in business: 44
Years of Profitability: 41 plus and counting
Market Positioning: Low-cost fares
Market Positioning Symbol: Peanuts
Founder/Figurehead: Herb Kelleher

Many have attributed the contagious company culture instilled at Southwest Airlines to Kelleher, a rather colorful business figure who once accepted the challenge of Kurt Herwald, then the president of the FBO/MRO Stevens Aviation, to an arm wrestling match for the right to use a marketing phrase: Just Plane Smart.

"A company is stronger if it's bound by love rather than fear,” Kelleher has said while describing the internal culture at Southwest Airlines.

Perhaps coincidentally, Southwest started its operations at Love Field (DAL), Dallas, Texas, and still marries the heart symbol/graphic with its brand name.

Not so coincidental is Southwest's consistent profitability and its reputation for extreme customer loyalty. The two harmoniously go together, like peas and carrots. And at the heart of its customer loyalty is an internal culture that thrives on purpose.

In past blog posts we've talked about developing a company vision statement that is forward looking and describes what a company wants to become. Southwest's vision statement is: "Our vision is to become the world's most loved, most flown and most profitable airline."

But Southwest also created a purpose statement that essentially states why a company exists: "We exist to connect people to what's important in their lives through friendly, reliable and low-cost air travel."

Both the vision and purpose statements are meant to inform and inspire the primary employee stakeholder group. And to drive home the basic tenets of the purpose statement, Southwest developed a series of short videos. Although you can find them on YouTube, they are primarily targeted for viewing by employees.

They're slices of life and highlight the efforts of employees who go the extra mile because the internal culture inspires and gives them permission to do so without hesitation. Click here to view the video about the company’s vision and purpose statements.

In summary, a contagious company culture is one that is contingent upon a management style that nurtures instead of controls. It acknowledges and celebrates its employees’ strengths and encourages good employee behavior while recognizing their contributions.

As we teach in our Don't Forget the Cheese! FBO customer service training program, what employees seek most from an employer is not a monetary reward, but simple recognition of a job well done.

What has your FBO done to create an outstanding company culture? Let us know in the comments.

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June 30, 2015

FBO Tip of the Week: Team Chemistry-A Key Component of Contagious Company Culture, Part 2 of 3

June 30, 2015/ AC-U-KWIK

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

In Part 1 of this series, we said a spirited and contagious company culture is essential in delivering a great customer service experience because it sets the tone and feeds the passion of the operation.

A key component of this type of culture is team chemistry. Good, athletic teams with winning cultures will often point to their internal chemistry as a factor for their success.

But where does good team chemistry come from? How does it take hold and why does it flourish in some companies and not in others?

Certainly, having the right combination of team members plays a big part. But perhaps more importantly is having the right management team in place that's been trained or knows intuitively how and when to nudge the ship in the right direction. It’s important to lead by example, set the tone, act and react consistently, and recognize and reinforce good behavior.

FBO management that has a team-oriented mindset will effectively infuse a healthy culture into the organization where it becomes infectious and adopted by the stakeholder employees.

Many companies try to impose repair for their internal culture problems by attempting to manipulate the behavior of their employees. Quick-fix gimmicks like providing monetary rewards or merchandise incentives may alter a behavior pattern in the short term, but the effects are often short lived and it doesn't take long for the same old habits to find their way back into the culture.

The remedy? Change the cultural mindset; cure the problem.

Changing the cultural mindset is a conscious decision and, yes, it can be done. In other words, the manager or management team first has to be able to recognize when there is an internal cultural problem. As mentioned in Part 1 of this series, an independently administered SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis will help determine what's working and what's not.

Then the management team has to be willing to adopt a cathartic or energizing process that involves all the employee stakeholders. When employees feel their opinions count, an adjustment in mindset takes place. They become more open to change.

Remember, it's not the chemistry of each individual team member that counts. What matters most is the team chemistry that thrives collectively and is managed wisely.

In our next blog post, we'll provide an example of an aviation company where team chemistry flows freely and is highly contagious.

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June 22, 2015

Tip of the Week: FBO Industry Consolidation to Continue

June 22, 2015/ AC-U-KWIK

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

Editor’s Note: This is a special blog post by John Enticknap, who attended the 2015 NATA Aviation Business Conference that was held June 15-18, in Washington, D.C.

At the recent 2015 NATA Aviation Business Conference held last week, I had the privilege of sitting on a panel with Tom Hendricks, NATA president, Jim Hopkins, Landmark Aviation, and Clive Lowe, Atlantic Aviation, to discuss the current state of the industry and, in particular, FBO consolidation by the major and smaller chains.

We all agreed that consolidation activity will continue for the foreseeable future and, in fact, has recently picked up a little steam.

One of the questions we are often asked in our consulting business is, "With the chains acquiring all of the good independent FBOs, are there any left to continue consolidation initiatives?"

To prepare for this session and to help answer questions like this, we did a little industry research and came up with the following statistics, thanks in part to help provided by the good folks at AC-U-KWIK.

There are currently 3,650 FBOs in the United States and Canada. But not all of these FBOs are what we define as viable FBOs or FBOs that may be targets for acquisition. So what is a viable FBO? It should include the following criteria:

1. A sustainable business model.

2. Be profitable.

3. Attractive lease terms with long tenure.

In addition to these criteria, we need to define the business model. There are many FBOs in the United States and Canada that are located on small airports with runways that are less than 4,000 ft., with unpaved runways, and are primarily selling avgas with less than 500,000 gallons of aviation fuel sold per year. These businesses are generally not targets for acquisition. If we apply these filters to our 3,650 FBOs, we have approximately 1,600 FBOs left that have business enterprises that sell enough fuel, have hangars, and sell other services that allow the business to be sustainable.

We hear that the chains have purchased all the FBOs. Based upon our statistics, let’s really look at that question. The chain FBOs include the big three, Atlantic, Landmark and Signature, but also other smaller chains such as SheltAir, TacAir, Cutter, Jet Aviation, etc. Altogether, they comprise approximately 285 locations. The number keeps changing from month to month!

Based upon our FBO business model, only 17 percent of the viable U.S. and Canadian FBOs are operated by the chains!

This begs the question, will consolidation continue? The answer is definitely YES! Why? The business model works. By purchasing good FBOs and grouping them together, immediate added value for the buyer is created. Plus, there is the potential to operate the business more efficiently, drive more business to the location, and create or sustain a unique brand.

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