Back in a Buying Mood

In February, Houston-based Landmark Aviation announced the acquisition of the Odyssey Aviation chain of five fixed base operations — at Cincinnati; Chicago; Asheville, NC; Charleston; Lafayette, LA; and New Orleans. The move followed the December buyout of DB Aviation at Waukegan, north of Chicago. Landmark, now with 47 locations in the U.S., Canada, and Europe, is back on the FBO buying circuit, explains president and CEO Dan Bucaro.

Recently, airport business interviewed Bucaro to discuss the state of the FBO business and Landmark Aviation’s role in the marketplace. Following are edited excerpts ...

airport business: How would you characterize the FBO business today, following what some would call the hell of the past two years?

Bucaro: Yeah, it was hell, wasn’t it? I would say it has definitely stabilized; we’re seeing improvements in every category. For us that means our FBO business; our charter management business; and our MRO [maintenance/repair/overhaul] business are all performing better than last year at this time. Those are encouraging things. Clearly, they’re not back to 2007 levels. But it’s certainly an improvement from where we were coming from.

ab: Is there any particular segment that appears stronger than the others?

Bucaro: The MRO side is probably the laggard, at least for us. But you have to remember it’s not our major business.

ab: Would you agree that it is a changed industry today?

Bucaro: I think we’re just cautious; the industry is cautious about getting ahead of itself. Clearly, we all went through hell and nobody is going to forget that anytime soon. We’re not going to let our cost structure get out of hand. We’re not going to do things that put us in a position where if there is another slowdown, we have major issues. I think we’re optimistic about 2011-12, but not overly optimistic. It’s a realistic view that things are going to continue to get better, and they’re going to slowly get better.

ab: I’ve heard many FBOs say that the downturn of 2008 forced them to rethink their businesses. Is that true of Landmark?

Bucaro: It forced you to really look internally at what you’re doing. We were pretty disciplined and, frankly, ahead of the game of cutting costs; I think we were ahead of the game of ‘stop buying’. But at the same time, I don’t think anybody could have really believed that it was going to be a 25-30 percent hit to volumes. It forced everbody to stop looking at the outside for opportunities, chasing everything in the world. You just looked internally to see what you had to do to survive. That’s what we had to do. We did it; it wasn’t pleasant.

ab: It appears that the acquisition of DB Aviation was a signal that Landmark is back in the ‘buy FBOs’ arena.

Bucaro: We really liked Waukegan and DB; it has all three components of our business. It’s a really good fit and gives us a presence in the Chicagoland market, which is really important. We felt like it was a great transaction at this time.

ab: Can you disclose the cost of the acquisition?

Bucaro: Even if I wanted to, I can’t; every one of our agreements has a clause that says we can’t discuss the financials. It’s one of the things about being a private company.

ab: But it would seem you can discuss the buying/selling environment around FBOs today, right?

Bucaro: The multiples [times earnings] are more realistic today; it depends on the properties and where they’re at. You’re seeing five to eight times [multiples] happening now; in the heyday, people were paying double-digit multiples. It’s much more realistic. I will say, though, that not everybody is realistic. There are still people out there thinking it’s 2007, but I don’t see them getting bought.

ab: Which leads to the question, What are operators asking in terms of purchase price?

Bucaro: You’re getting transactions done in that five to eight range, but it’s not easy. You pass on an awful lot of them. I think some people out there see an eight to ten multiple as realistic these days, and to us it’s not. To make a generalization, people are much more in line and realistic of the marketplace today than they were three years ago. And the multiples are reflected by that.

ab: With the acquisition of Odyssey, will current president Ken Allison remain with Landmark?

Bucaro: Yes, he’s going to work with us going forward, primarily with our acquisition team and looking at new opportunities for us.

ab: Is it safe to assume then that more acquisitions could be in the offing?

Bucaro: I think we’re very diligent and very prudent about what we’re going to acquire, but we’re definitely looking at other properties.

ab: Is the focus more on the types of properties, or on location?

Bucaro: It’s location-driven; if you look at our map you can see where we have voids. We need to build out our network to better service our customers. We’re excited about going into Miami where we won that RFP process. It really helps our network. We’re going to make strategic acquisitions. What drives our business is safety and customer service, and part of the customer service issue is having the right locations for our customers. Look at our map and you can see we didn’t have a very good presence in Florida or the Midwest; we don’t have a very good presence in the Northwest. Those are all areas that we’re working hard to try to improve.

ab: How would you characterize the mood of your investors [GTCR Golder Rauner and Platform Partners, LLC]?

Bucaro: Our investors are very supportive. We have to show that it makes sense. They still like the industry. What speaks volumes is how they stood by us and stood by industry during the downturn.

ab: Is there an ultimate goal for the Landmark network?

Bucaro: I don’t look at it as putting dots on a map; I think there’s an ultimate goal that we continue to improve our network, again with the goal of serving our customers. Which dots will help us fill out the network?

ab: How does the international market fit in your plans?

Bucaro: We’re in Paris and Nice today, and clearly we like Europe and South America, but right now our focus is on North America. It doesn’t mean we won’t do something outside North America, or that we’re not talking with people outside North America.

ab: As you know, many airport sponsors — cities, counties, authorities — are under fiscal pressure today. Do you find airports trying to work with tenants during these economically challenging times, or are they raising rates and charges?

Bucaro: As a group, I would say they’re pretty well educated about the FBO business these days and understand that FBOs have to make money to continue to invest in the facilities and the airports. Overall they are supportive of the FBO business. We have many more airfields working with us to do the right things. Very few are taking the aggressive posture of let’s just raise rates. We have not seen that much at all.