When this publication was launched in November 1986 as FBO magazine, we ran an article announcing the sale of the Pal-Waukee Airport north of O’Hare International by the Priester family to the surrounding cities of Wheeling and Prospect Heights, IL. Today called Chicago Executive Airport, it still has as a tenant Priester Aviation, which is now a global charter operator.
I recently visited with Charlie Priester, 73, who subsequently sold his fixed base operation to Signature Flight Support, with whom he is now a subtenant. Of the changes over the past 25 years Priester comments, “The equipment has changed, but the industry is the same — it’s still people doing business with people. One thing you can never replace is a minute in time.”
He adds that his family’s philosophy through the years — “It’s all about the customer” — has not changed, a fact he points out that many airports are learning firsthand in today’s airline environment. “If you keep your eye on the ball as it relates to the customer, it will drive your future plans.”
Not long after, I met Don Campion of Banyan Air Service at Fort Lauderdale Executive Airport (FXE). He was a maintenance guy operating out of a leased lean-to, and was driven, as was I as the new editor of a magazine, canvassing airports around the U.S. and trying to understand who the players were, and what the business of airports was about.
I had gotten my start in the business as the communications manager for the National Air Transportation Association, which is where the publishers of this magazine had found me.
Don Campion wasn’t a player yet; he was a wanna be. Like so many other impassioned people in aviation, it wasn’t about flying the airplane, it was about making airplanes happen. Like avionics guys; like repair station guys; like airport directors.
Today, Banyan Air Service is a first-class operation with the amenities that the fractional revolution wrought.
People like Charlie Priester and Don Campion are good starting points for a story about the industry for the past 25 years, if for no other reason than they represent the spirit of entrepreneurialism so rampant in the history of this industry, and both reflect how much has changed over that timespan.
We started this magazine, then FBO, in 1986 and the goal was to help aviation businesses (tenants) become better at what they do, particularly by learning from the successes of others as told in this magazine. The idea got traction. An early reader wrote us at the time that we may have come along at the right time and that it potentially could save his business. We grabbed onto that concept. Remember, the late ‘80s and early ‘90s were not pretty for the business of fixed base operators. The recession of 1991/92 was not a welcome visitor.
Then the world began to change — at least, for the world of tenant operations and the airports on which they resided.
In 1991 we acquired our competitor Airport Services (nee: Airport Services Management) magazine and began to learn about the commercial aviation/airport management side of the business. Along the way we came to recognize that the world of airports in the U.S. was changing, and that recognition ultimately led to the merging of the two magazines, FBO and Airport Services, into AIRPORT BUSINESS.
USTs; tenant leases
In the mid-1980s, the Sunday night TV show ‘60 Minutes’ aired a program on leaking underground storage tanks (USTs). The story focused on a gas station and its leaking tanks that were contaminating a community’s underground aquifer, and thus its water supply. Back in the day ‘60 Minutes’ had the ability to cause the nation to “talk” on Monday morning, and that was no more true than the story about leaking USTs. In a heartbeat, the Environmental Protection Agency was proposing radical regulations (at the time) for attacking the problem.
As EPA and industries around the nation began a soul search on the extent of the problem, one sector that quickly rose to the forefront was airports. Most of the nation’s airports were created in response to the World War II effort, using steel tanks (which corrode) for fuel storage. By the time the ‘60 Minutes’ segment aired, many of these tanks had corroded and were leaking. In many cases, they were totally unaccounted for at airports and when found were indeed leaking.
This in time led to a confrontation – when a leaking tank was found at an FBO, who was responsible? Airports claimed that since the FBO was the owner/operator of the tank, it had the liability. FBOs argued that since ownership of its facilities, including the fuel farm, reverted to the airport when the lease was up, the airport was accountable. The debate wound up in court. Airports eventually won the argument in court but it didn’t settle the issue. It still needed to be resolved on a local level. In a way, it became a moot point.
Meanwhile, around 1991 NATA conducted a survey of its FBO and other tenant members that sought to reveal how many airport/tenant leases were scheduled to be renegotiated by the year 2000. It turned out that almost half of all leases in the U.S. were up for renegotiation. Many of the long-term leases from the post-War era, or those subsequently negotiated in the 1960s, were up for renewal.
In time, as we considered the best way to approach this situation from an AIRPORT BUSINESS publication point of view, we came to ask the question, “Who will still be around in the year 2000?” Through our experience with FBO magazine, and through our research with Airport Services, we did an analysis. Turns out, there were airports and tenants around the country who were moving on and had resolved the fuel storage issue through various means, and had renegotiated leases.
The lesson to be learned was that these airports and their tenants had resolved these issues because they recognized a bigger trend — that the business of airports was changing. In time the light went off and we got the concept, which became AIRPORT BUSINESS.
And, as we came to understand the business of commercial aviation, we came to recognize that the business of airport/airline relationships was changing radically as well. As was the business of the terminal itself.
Northwest Airlines vs. Kent County, MI
The changes happening between airports and tenant airlines is perhaps no better exemplified than by a lawsuit, Northwest Airlines vs. Kent County, MI that ultimately went to the U.S. Supreme Court and which was decided for the airport. At the center of the case was the issue of residual versus compensatory lease agreements.
Historically, to build the infrastructure necessary to finance airline terminals, air carriers were given long-term leases, or monopolies, on portions of an airport or on entire terminals based on the fact that they were the ones backing the bonds that would pay for the infrastructure. The airport sponsor may have owned the terminal, but in essence the airline owned the actual operations and controlled, or kept out, the competition. Of course, this was before mechanisms such as the Airport Improvement Program or passenger facility charges (PFCs) came to play such a predominant role as they do today. Airlines shared in the cost of the development, and shared in the profits.
Kent County sought to change that, by charging an airline ad hoc for space occupied and services needed. This came at a time when the concessions revolution inside airport terminals, imported from Great Britain when BAA oversaw the making of a mall in the new Pittsburgh International terminal, began to get a foothold at U.S. airports.
Essentially, the airport in Grand Rapids, MI sought to take over control of its airport and gate operations, and keep the profits, which in turn could allow for it to finance its own future infrastructure improvements, while attracting new airline tenants (competition) and broader air service options for its community. If the airport had more revenue in its coffers it could reduce the rates and charges to new entrants, and thus encourage more air service. Today, this is a common concept at U.S. airports. Then, it was revolutionary.
Enter the fractionals
By the early 1990s the FBO sector was in rapid decline. Companies such as Butler and Van Dusen were the dominant chains, and the era of ‘mom and pop’ FBOs was coming to an end.
The concept of fractional ownership, which was launched in 1987 by Columbus, OH-based Executive Jet Aviation when it unveiled NetJets, was only beginning to take root. The technological revolution which fueled startling increases in worker productivity in the U.S. drove a new era of prosperity during the Clinton presidency. With the IT revolution and a booming economy came new players — in technology, real estate, and on Wall Street. In time these new players became users of charter companies and business aviation, and in turn they discovered the business of FBOs.
By the mid-90s the FBO sector was experiencing a turnaround, fueled by new money and new entrants, not only in North America but globally. The fractional and Part 135 charter segments became intertwined, and the FBOs benefitted with increased fuel sales. In time, many FBOs turned away from the historical full-service model and became property managers and line service providers. Where airports required the traditional full array of services — flight training, maintenance, avionics, aircraft sales — the FBOs turned to subtenants. In the business aviation sector today, it is a predominant model.
Meanwhile, the FBO business became an international one. NetJets and other business aviation providers have exported their models around the globe, while foreign owners are today big players in the U.S. market. U.K.-based BBA Aviation is owner of the Signature Flight Support chain and other aviation companies such as Dallas Airmotive and ASIG. Australia-based Macquarie is the owner of the Atlantic Aviation chain.
The IT revolution at airports
For airports, advances in technology in time would bring a change in how they operate. In the late ‘90s I visited two of the leaders in this trend — Brussels and Vancouver. Perhaps the greatest lesson to be learned was that IT brought with it a new ability for an airport to control its facilities, particularly gates. With two decades of airline upheaval brought by deregulation, airports such as Brussels and Vancouver pushed the common use concept in which airlines ‘plugged in’ to the airport’s system, rather than permitting individual airlines to control gates and terminals through long-term leases.
This evolution continues today, as airports in the U.S. move away from long-term commitments to carriers. An emphasis now is on developing more terminal concessions and non-aeronautical revenues, with a primary goal of expanding air service for the communities the airports serve.
At the same time, information technology is having a major impact on customer service, which after 9/11 airports came to recognize had become a primary role they inherited from a changing airline industry. The role of IT has accelerated in recent times with the advent of social media, as airports connect to customers, not only providing information but also promoting opportunities for new revenues just by the new-found ways of “touching” the customer.
Interactive digital signage is rapidly emerging on the horizon, and in short order a new revolution in communicating to customers is in the offing. Combined with social media, a new one-on-one relationship between the airport and the passenger is developing.
For business aviation, IT is having a similar impact. FBOs can track potential customers while in flight; connect to the cockpit through social media and other digital means; and increase sales while enhancing service. The time-worn marketing tool — the binoculars — has quickly become a relic of the past. For this segment of aviation, that fact may best symbolize the changing of the guard.