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Airports and FBO’s ? Can both of these survive?

Airplane Business No Comments

As most airport activity has slowed down in recent years due to lack of economic growth, many FBO’s and airport service operators have gone out of business. Obviously these are small community type airports, and as the airport owners, whether it is city government, county government, or state owned, the fact that there is no one is available to manage and provide airport services for these airports. The city/county/state owners have some tough decisions financially as to what to do about developing the airport and providing services. On the one hand, the airport hasn’t produced anything profitable to the taxpayer in years, and yet the airport property and runways have been built using federal and state money, now they need to be maintained!

Truly, I believe that most city/county/state government airport ?owners? are going to have to step up the game, as far as funding the FBO and management of these airports. Too often the city/county/state views the airport as an expense and they don’t want to spend any more taxpayer money on the airport, just to let a few of the ?rich? enjoy the airport at the expense of everyone else. Therefore, they figure if they get someone to open a business on the airport, they will produce a profit and the city will receive payment in rental of the facilities, fuel sales, and a percentage of the gross billing from the maintenance provided. However, what they don’t understand is that this is an impossible easy fix, because too much capital and ?staying power? is involved, therefore a good quality FBO management team will never take the opportunity, it just doesn’t pencil out and leaves too much risk for a return on the investment.

Some airport owners have already figured this out, yet don’t have any answers to solve the problem. The owner of the airport, trying to entice a service provider, often sets out the requirements for the provider to adhere to, with a lease and agreement on the percentages from fuel sales, etc. The problem is, without much business as a start-up on the location, the cash flow may take years to develop, providing the income to stay in business very long. In addition, many of these airport ?owners? were left to rely on the ?airport board? to plan the airport, and the planning didn’t take into account the rality of operating an airport business on the field. See Rod Beck’s write up on ?The Importance of Airport Infrastructure and Capability? as follows: 

The Importance of Airport Infrastructure and Capability

Airport infrastructure such as runway length, instrument landing capability, ramp or parking space, hangar storage, and terminal facilities, and its geographical location will dictate the present and future potential quantity and quality of the aviation consumer/customer. This plays an important role in both the Airports AND FBO?s future  business and success.

An airport with an 8,000 ft runway, ILS (Instrument Landing System) 15 single engine bases tenants, the areas city and county population totaling less than 47,000 residents in the middle Kansas, may meet the infrastructure requirement, but fails to meet the fundamental consumer demographic ? simply one of oversupply and  under demand.

This would be a typical example of a former WW II airbase that was sold to the community for a ?dollar?; what appeared at the time a bargain, but later proved to be a ?white elephant? ? a financial drain on the community.

Let?s examine three ?typical? General Aviation Airports and HOW their infrastructure plays a part in the airports success.

  1. ?Pleasantville, Ohio?, population 4,571 as of last census, has had a small airport since 1946; the runway is grass (unpaved) and 2,400 ft in length, unlighted, a dated office, pilots lounge and hangar in fair to average condition.  At present there are 17 based single engine aircraft, 2 Ultralites , and 1 glider on the field.  The only service on the airport is a 100 LL octane self-serve fuel pump.   A small maintenance shop was in operation between 1959- 1983, but closed due to lack of business.  For the past 24 years, the airport has been operating at a deficient of $11,000 a year in spite of the lease of 45 acres of farm land which has gone into the airports receivables.

The short unimproved runway, few based tenants, lack of adequate services, and the mere fact the airport has shown a consistent loss for nearly 25 years, an aviation consumer base that is all ?recreational? pilots and aircraft owners and no business/corporate use, would clearly indicates the airport ISN?T justified.

  1. ?Nice Town, Iowa?, population 11,258 at last census, has a modern updated terminal, a paved runway of 4,200 ft, and Instrument landing System, and is only 28 miles west of the state?s largest city having a over 425,000 residents. The airports FBO offers flight instruction and rental, aircraft sales and a maintenance shop. An Interstate Highway passes within 2 miles of the airport making the drive from the city do able in less than 30 minutes. Presently, 48 aircraft are based there; 38 single engine, 4 multi-engine,1 medium cabin class turbo- prop, and a small business jet. The airport provides 100 LL octane fuel (self-served), however, plans call for a Jet-A fuel 10,000 gallon storage tank to be installed within the next 6 months.  The airport has had a ?balanced budget? for over 7 years.

This airport has EXCELLENT infrastructure, financially stable, capable of accommodating small turbo-prop and jets (they already have two based there) an FBO, and a potential market from which to draw (nearby city) for future business as well as good and convenient highway access. This airport IS justified!           

 

  1. Home Brew, Tennessee, has a population of 3,273 residents, a current unemployment rate of over 13%, and a well below average state income. The airport, however, has a recently re-paved and lighted runway, 4,500 ft in length, a 14 year old terminal and maintenance hangar in good condition and a 100 LL octane self-serve fuel pump. A total of 19 aircraft are based on the field; 16 single engine and 2 Ultralites and a WW II era C-47 which has been stored (doesn?t fly) for the past 50+ years and has become a bit of an ?eye sore.? The airport was operating at a small deficient of $9,000 a year until 8 years ago, when a wealthy and noble local businessman, contributed to the financial shortfall to balance the budget. A small ?one man? maintenance shop operates out of the main hangar, however, the owner due to the recession and reliability of private owned ?weekend? pilots as his customer base, has expressed that he may be forced to close soon. There are 2 medium size cities of 75,000 and 40,000, however, they are 90 and 160 miles distance away respectively, making drawing from this market unlikely or not feasible.

Although the airport has good and acceptable infrastructure, it lacks BOTH an airport and general population demographic for success.  It does NOT meet the fundamental criteria to justify its existence at present and is unlikely will it in the immediate future.

Interesting “FACTS” about airports, that unfortunately many city/county/state governement “owners” never considered or were receiving bad advice.  The truth is, airport board members often have their own interests in developing the airport, and some poor decisions regarding the planning and practicality of how an airport can work for you, or never really develop into a positive outcome for the users and the taxpayers. 

To really be developed correctly and with any chance for success, the airport owner(s) need to put some capital investment into the property, so that an aviation provider can develop a client base and make the airport work.  All too often, a short term solution is invented, such as bring in a maintenance shop, and let them sink or swim, but the good news is that it won’t cost us that much!  Repeat solution 1 over and over until somene decides the airport is no longer needed, and there we go.

Realistically, the airport owner(s) need to make the decision, based on expected growth and demand, to build a large enough hanger for tenants that NEED an airplane, and also build hangers to entice aircraft owners in the area to base their airplane at this airport.  In addition, the owner(s) must provide a suitable facitily for doing business, and a reasonable lease that enables the operator to build the client base.  This includes payment TO the operator the for a determined period of time, so that the airport is attended for transient traffic, selling fuel and a shared percentage of income from fuel sales.  These percentages can be adjusted in time, so that as the revenue from the airport operator grows, a larger percentage for the lease can be built in, giving inecentives to the operator to expand the business, yet give the business a chance of growing.

The facts are that an airport needs to be viewed as a benefit and gateway to the city/county/state, therefore needs to have the budget to operate long after the runway is built.  It is complete non-sense to try the half-baked approach, since you are beyond the point of no return at this point anyway, time to recognize building an airport with services available isn’t something that is going to happen overnight.  For more information, and the “FACTS” on your airport, please visit http://www.aviationbiz.us

How I spent my Saturday…thinking about fun airplanes that I dreamed of flying!

Aviation Thoughts No Comments

I recently spent the Saturday at home, giving some time to catching up on personal responsibilities, and being that the weather was not that good outside, I didn’t feel guilty about it. As I finished one task after another, I spent most of the afternoon looking on-line at airplanes, watching some Youtube video about Bellanca Vikings, older Beeechcraft model 35’s, and Piper Comanche’s. These were airplanes that I always looked forward to flying someday, as a Jr.High student spending my afternoon’s at the local airport. And then there it was, the Mooney Mite and it was for sale, could I resist it? Read More

Aviation Flight Schools ? For profit or just fun?

Flight Training 3 Comments

Everyone knows that aviation is a fun and enjoyable business to be in, which is the big attraction to owning and operating an aviation business. However, there seems to be a culture in aviation whereby we sacrifice the main reason to be in business, which is to delivery a quality product for a price that represents value for the money. That statement is based on most flight school operators concerned that if they are in this to make money, they won’t have the support of the glider club, ultra-light crowd, etc., so they essentially aren’t making any money in the business. How wrong and out of date that thought is, we are hurting the aviation business and pilot numbers with this approach! Read More

The Problems with General Aviation ? Its not what you think

Airplane Business No Comments

With AOPA, National Business Aircraft Association, and General Aviation Manufacturers trying to get the aviation business turned around, one important aspect is always left out. Who’s running the business? When I say who is running the business, I am referring to the thousands of small business flight schools, FBO’s, and maintenance shops that haven’t necessarily employed good business skills in operating the business. Read More

Piper needs a score more than ever!

Aviation Thoughts 5 Comments

A few weeks ago it was announced that Piper Aircraft Corporation had a new CEO, and that the single engine jet they were developing was under consideration for halting development. It came as no surprise that a few days later, Piper announced the Altaire project was going to be stopped indefinately.http://www.flyingmag.com/aircraft/jets/piper-indefinitely-suspends-piperjet-altaire Here is another Piper product that quite simply cost the company a lot of money with no results. After the termination of the Piper Sport Cruiser, I wonder about the overall health of this company, and if they are going to stay in business, they need to score something and do it soon. Read More