{"id":3613,"date":"2015-12-07T00:00:00","date_gmt":"2015-12-07T05:00:00","guid":{"rendered":"http:\/\/skiesmag.com\/features\/fbo-checkup\/"},"modified":"2016-09-14T09:12:57","modified_gmt":"2016-09-14T13:12:57","slug":"fbo-checkup","status":"publish","type":"features","link":"https:\/\/skiesmag.com\/features\/fbo-checkup\/","title":{"rendered":"FBO checkup"},"content":{"rendered":"

Ramp technician Jim Philpot services an aircraft at Irving Oil\u2019s FBO in Gander, N.L. Irving Oil Photo<\/b><\/i><\/font><\/p>\n

John Wraga keeps his finger on the pulse of fixed-base operators (FBOs) in the United States\u2014especially the 800-plus that are independent.  As founder and executive director of the Boston-based Independent Fixed Base Operators Association (IFBOA), he has seen firsthand the industry\u2019s ups and downs of the past decade.<\/p>\n

\u201cEverything was going well and then 2008 struck.\u201d He recalls the slump lasted a few years. \u201cTo 2011, it really hurt our FBOs. Fuel sales dropped, aircraft sales went down the tubes; maintenance on airplanes was delayed.\u201d <\/p>\n

Many smaller operations were snapped up by the bigger FBOs. \u201cI don\u2019t know how many we lost, but most of our members came through, and since late 2012\/early 2013 business has really picked up for us.\u201d He said an unofficial survey of IFBOA members showed 2014\u2019s average profits were up 12 per cent.<\/p>\n

It\u2019s a picture common to FBOs across the continent. Reporting in from the U.S. West Coast, Brad Wollen, vice president of aircraft sales with Clay Lacy Aviation, said, \u201cAs a whole, the FBO industry is pretty healthy right now.\u201d  Clay Lacy has two FBOs: one in Van Nuys, Calif., with about 300 employees and 70 managed jets, making it the largest charter operator in the Western U.S., and a smaller one in Seattle, Wash., which is \u201cmore of a gas station.\u201d  Wollen said he has noted a lot of consolidation in the FBO business, where larger companies like Landmark Aviation are buying up some of the independent FBOs.<\/p>\n

The health of Canadian FBOs is more directly linked to their regional location. Ian Wilson, vice president of sales and marketing at Skyservice, said: \u201cThe FBO industry here in Toronto as a major centre will look vastly different than it might do in Calgary for instance, because of economic influences.\u201d  Skyservice has three FBOs in Montreal, Toronto and Calgary. \u201cI would say Toronto is the healthiest, with Montreal being the second. But we are seeing a bit of an upside on the Calgary market,\u201d continued Wilson. <\/p>\n

In Quebec, Denis Jacob, president and CEO of Avjet, thinks the FBO business there is generally robust, too.  \u201cThe general aviation business is not that bad,\u201d he said.  \u201cWe have seen a change in the last few years. People are flying their own aircraft and now we can see the business picking up\u2014at least at our locations.\u201d<\/p>\n


Avjet president and CEO Denis Jacob says business is picking up for the Quebec-based FBO chain. \u201cWe have seen a change in the last few years,\u201d he told Skies. Avjet Photo<\/b><\/i><\/font><\/p>\n

Further east, Irving Oil maintains FBOs at Gander, Goose Bay and St. John\u2019s, Nfld. \u201cNewfoundland and specifically Gander used to be one of the most common stops in North America\u2014business was strong and traffic was heavy,\u201d said Susan Duffley, Irving Oil\u2019s jet fuel sales and operations manager for Canada and the United States.  <\/p>\n

\u201cIn 2008, the industry began to see a steady decline in corporate traffic as a result of the recession,\u201d she continued. \u201cAlso, the longer range of newer, more efficient corporate jets has reduced the need to fuel at Gander on the great circle routes. Today, however, commercial activity is very healthy and steadily growing.\u201d

Avjet operates five FBOs in Quebec City, Montreal (Trudeau), Montreal (St-Hubert), Gatineau, and Sept-\u00celes. The company\u2019s flagship FBO is its brand new, state-of-the-art facility in Quebec City, shown here. Avjet Photo<\/b><\/i><\/font><\/p>\n

Bricks and mortar<\/p>\n

<\/b>Despite the steady business, FBOs have their individual concerns. Clay Lacy\u2019s Wollen has encountered a challenge with lease fees, for example. <\/p>\n

\u201cThe municipalities own the land and we own the buildings,\u201d he said. \u201cWe pay a monthly stipend to the county under a 30- or 35-year contract, but every three years or so, they raise the rates. You can\u2019t just pick up and leave. We just spent $11 million on a new hangar here about five years ago, and now they want to raise our rates a good 40 per cent.\u201dAvjet\u2019s Jacob faces a similar concern in the company\u2019s Quebec City FBO, where two years ago they constructed a new building. \u201cSome rules in place are quite costly,\u201d he said. \u201cPeople do not realize that it costs two million to build and because of all the rules it costs four and a half instead of two.\u201dHe said that\u2019s partly because the ramp has to handle everything from Cessna 150s to Airbus 310s. \u201cThat is a challenge we have\u2014it is always difficult to pass on those costs.\u201d <\/p>\n

But, he added, Avjet maintains great relations with airport authorities. \u201cThey need money for development and a way to pay for it. If we work together with them for the development of the airport, there will be more in it for us.\u201d <\/p>\n

At Skyservice\u2019s Toronto FBO, it is the Greater Toronto Airports Authority (GTAA) that owns the land, said Wilson. \u201cYou pay a base rent to them but it\u2019s like any other thing in real estate: The price of renting land or buildings typically goes up per annum. But with us, it has been consistently within market levels.\u201d  <\/p>\n

Personnel shortage?<\/p>\n

<\/b>IFBOA\u2019s Wraga sees a looming problem for business aviation that may erode FBO business in the future: a lack of pilots and mechanics. \u201cThey are all taking commercial jobs,\u201d he said. \u201cAnd there is not a lot of people going into flight training anymore. Maybe the younger kids have lost interest in flying, but everybody is trying to promote new pilots. It is also true for mechanics who work at the FBOs. Very few of the younger generation want to be an aircraft mechanic any more\u2014it\u2019s hands-on, dirty fingers type of work.\u201d<\/p>\n

Wollen noted a similar situation in the United States.\u201cWe are running out of pilots,\u201d he said. \u201cA lot of kids aren\u2019t learning how to fly any more. Because first of all, it is expensive to get a private pilot\u2019s licence and then once they get the licence, what are they going to do with it? You could go to a commuter airline or become a flight instructor, but you have to fill up all this time to get a job and unfortunately the pay is so low. You are paying hundreds of thousands of dollars to get all your ratings, etc., and then you get a job flying commuter airlines for $25,000 a year. It takes a while to work your way up to where you can really make some money.\u201d<\/p>\n

Skyservice\u2019s Wilson doesn\u2019t see such a problem happening in Canada. \u201cIn the U.S. and maybe in Europe that might be an issue, but in Canada they have been talking about it for years,\u201d he said. \u201cI used to be a pilot and have been hearing that rhetoric for the better part of 20 years.\u201d<\/p>\n


The Skyservice FBO in Toronto is the largest in the chain, which also has facilities in Calgary, Alta., and Montreal, Que. Skyservice Photo<\/b><\/i><\/font><\/p>\n

Michael Denham, Skyservice\u2019s director of FBO operations in Toronto, highlights the need for properly trained line personnel. \u201cWe see a lot of people coming in from business school who are under the impression that their theory has given them the ability to know exactly how an FBO runs,\u201d he said. \u201cWhen we put them out there, it\u2019s a totally different world than what they were expecting. Skills-wise it is challenging; we have to start from scratch to train them. Even those who have past experience still need basic training.\u201d<\/p>\n

Jacob echoes that sentiment. \u201cWe do a lot of training and take all the steps we can to avoid an incident,\u201d he said. \u201cHuman resources is a large part of our success. It\u2019s a challenge.\u201d<\/p>\n

Stronger regulations help. \u201cOur fuel suppliers are always increasing their QC [quality control], which means more time making sure that their standards are met from our end, and this ensures customer service levels are at our standards,\u201d said Denham. Most regulations are justified and make sense, in his opinion. One regulation he\u2019d like to see\u2014to reduce risk of the wrong fuel getting into an airplane\u2014is enforcing proper fuel ID on aircraft wings by the tanks. \u201cI would like to see more ID\u2014some aircraft don\u2019t specify if it is jet fuel or avgas.\u201d

Commodity price downturn<\/p>\n

<\/b>The precipitous drop in crude oil and other commodities, while severely impacting resource-related aviation activity, has an offset of sorts: A reduction in fuel prices. \u201cYou are in fact seeing more and more airplanes flying because fuel is cheaper,\u201d said Wollen. \u201cSo it is working for us.\u201d<\/p>\n

But in oil and gas-centred Calgary, reduced fuel prices don\u2019t offset the reduced activity. \u201cWhat we see now in Calgary is drops in fuel volumes, drops in traffic and so on,\u201d said Wilson. \u201cSo we as a company have to take a different approach to get more traffic on the ramp, be it charter or contract type work. It is a matter of looking for new business and becoming more competitive within the businesses there.\u201d  He said Skyservice wants to carve out a bigger piece of the Calgary pie within the existing market. And then when the pie gets bigger from an economic turnaround, that piece will also grow. <\/p>\n


FBOs have felt the pinch as commodities prices have declined. On the flip side, fuel is cheaper, which encourages people to fly. Avjet Photo<\/b><\/i><\/font><\/p>\n

Commodity pricing effects are also felt in Quebec. \u201cIn Northern Quebec there is a lot of mining and that is down, particularly for the smaller commercial operators who are losing market,\u201d said Jacob. \u201cThere are a lot of aircraft on the ground or they have to reduce their activities, as a big part of their problems are related to the mining industry.\u201d Helicopter business is down too, he noted.

Looking ahead<\/p>\n

<\/b>To deal with the personnel challenges, Wollen said Clay Lacy is sponsoring a program in Seattle, with Boeing\u2019s help, called the Aviation High School. \u201cIt opened last year and the young kids are just great,\u201d he said. \u201cAnd they are not all vying to be pilots either; a lot of them want to be aeronautical engineers or join the FAA.\u201d Going forward, he wanted to be prepared for increased government regulation, which he sees coming. Skyservice\u2019s Denham believes technology will help \u201cmake sure all our systems are digitally backed up as well as having support in the event of any power-related issues. And all our client info is digitized for the front desk, so that we can generate reports effectively.\u201d<\/p>\n

In her eastern FBO region, Duffley recognizes the challenges in the industry but noted Irving Oil is continuously on the lookout for new ways to create value for its customers. \u201cIrving Oil is always monitoring changes in the industry and exploring new solutions,\u201d she said.  \u201cThere are several models in the FBO business; but for us, our guiding principle is to always provide our customers with high quality service.\u201d
 
Despite the challenges, IFBOA\u2019s Wraga sees a rosy future.  \u201cThe biggest opportunities for FBOs are coming in the next five years,\u201d he said. \u201cAircraft sales are going to be huge. The biggest problem will be finding good people. It used to be the cost of fuel, but that has come down dramatically and we expect it to stay low for at least the next year to 18 months. It looks like the future is bright.\u201d<\/p>\n


The biggest opportunities for FBOs are coming in the next five years as aircraft sales increase, according to the executive director of the Independent Fixed Base Operators Association. Skyservice Photo<\/b><\/i><\/font><\/p>\n

British aircraft services company BBA Aviation may be thinking along similar lines. Its recent proposal to buy U.S. competitor Landmark Aviation for US$2.065 billion will, if successful, create the largest fixed-base operator in the world when merged with BBA\u2019s Signature Flight Support business. Reuters gathered bits of insight into BBA chief executive Simon Pryce\u2019s mindset in a Sept. 23 media call. \u201cThis is the right time to buy this asset,\u201d Pryce said about the acquisition.                     

Graham Chandler is a Calgary-based freelance writer with specialties in energy and aviation. His work appears regularly in several oil and gas publications as well as international magazines such as Saudi Aramco World and Air & Space\/Smithsonian. Along with degrees in physics, business and archaeology, he is an engineering graduate of the US Naval Test Pilot School.<\/i><\/div>\n","protected":false},"excerpt":{"rendered":"

Anemic following the 2008 recession, North American FBOs have bounced back. Skies examines recent trends, market opportunities and challenges facing the sector.<\/p>\n","protected":false},"author":50,"featured_media":3614,"comment_status":"open","ping_status":"open","template":"","categories":[],"tags":[],"class_list":["post-3613","features","type-features","status-publish","has-post-thumbnail","hentry","entry"],"acf":[],"jetpack_sharing_enabled":true,"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/features\/3613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/features"}],"about":[{"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/types\/features"}],"author":[{"embeddable":true,"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/users\/50"}],"replies":[{"embeddable":true,"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/comments?post=3613"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/media\/3614"}],"wp:attachment":[{"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/media?parent=3613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/categories?post=3613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/skiesmag.com\/wp-json\/wp\/v2\/tags?post=3613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}