The Impact of the Economy

Microcosm of a market — FBO network puts acquisitions on hold; looks internally

BROOMFIELD, CO — Regarding the current state of the economy, Jeff Ross, president and CEO of Ross Aviation based here at Rocky Mountain Regional Airport, says, “There will be a recovery. My question is, how many years out? The related question to that is, when will we achieve a noticeable bottoming out? When will the fuel sales stabilize?” Many in industry await the answers; meanwhile, Ross and his company’s network of fixed base operations have pulled in the reins on acquisitions, by which it built its network. The emphasis is on building on synergies within the existing operations, and creating a branding program which doesn’t overshadow the independence of individual locations — a cornerstone to Ross Aviation’s approach to the market.

Comments Ross, “We have two great variables in our business, and for a long time we all thought the cost of fuel was the greatest single variable. Now we’ve discovered that it was actually the economy that was a much greater determinant of our success or lack of success.

“What I’ve come away with from the experience of the last 12 months is, the economy is much more important than fuel cost. Fuel cost is helpful when prices are lower, but the economy is a much greater factor.”

Laura Turner, general manager of the Denver Air Center, where Ross Aviation is headquartered, relates that while the Denver region hasn’t been hit as hard economically as some, the local FBO is feeling the impact.

“It’s definitely affecting us just because we are a lot of corporate,” says Turner. “When the fuel prices started skyrocketing, a lot of people were tankering. People were getting rid of their smaller aircraft and getting larger aircraft so they could do that. We’ve spoken with several people who have done that. People are starting to get their own fuel farms.

“We’re seeing a lot less on the upload side of it; people aren’t uploading as much fuel as they used to. Even if our operations stay pretty steady, the upload hasn’t been as good.”

Across the company network, activity on average is off by 20 percent, according to Ross. “We have some FBOs that are actually up a little bit; some are down more than 20 percent,” he says. “Our speculation is, we think that the individuals who own jets and travel for their own business or for pleasure, that business has held up pretty well. It may have declined by 10 percent or something like that. The problem that we have is the business travel, partly because of political pressure and partly because of the absence of significant business activity. It’s the pure business travel that’s down the greatest amount.

“Scottsdale had a tough time. It’s a fantastic market and we only have one competitor there. It began showing significant declines in fuel volumes last fall. Our theory, and it’s just that – a theory, was that it was the hottest markets that had the most to give back. If you had a superheated market and things slow down, the percentage change is going to be most acute in those hot markets.”

A unique chain
Ross Aviation has built through acquisition a network of 13 FBOs which it jointly markets; it also is an investor in Premier Jet at the McClellan-Palomar Airport in Carlsbad, CA. It also was in the process of investing in a new FBO at Palwaukee Airport in north Chicago, until the investment climate changed.

Explains Ross, “We backed out of a number of acquisitions and new investments in the later stages of 2008. It’s hard to commit new capital when the market is in a volume freefall.”

Ross explains that the network is marketed under the Ross Aviation umbrella, while each acquired FBO has kept its original identity.

“We think that the FBOs are best run locally. We believe that there is a whole series of local relationships and individual customers that need to be honored. So, we run these things from the ground up; not from headquarters down. We believe in having very strong general managers and making them in effect the leader of the entire FBO.

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