EDITOR’S NOTE: Eddie Allison is founder of Ocean Sky fixed base operations in Prestwick and Manchester, U.K., and is looking to acquire at least eight more FBOs by 2009. He recently commissioned a study of the European business aviation marketplace for an assessment of the challenges and opportunities. Following is his synopsis of what’s happening across the Atlantic.
Content herein was based on several months of research which included more than 30 interviews with European and U.S. FBO operators, pilots, scedulers and dispatchers, and service providers.
This European market has seen phenomenal growth — business aviation passenger trips have more than doubled to 16 million in the last eight years. With that in mind, one might expect business aviation to have settled into a stable form that reflects its function: the efficient movement of people and goods by air.
Instead of stability, however, our industry is in a state of flux. The rising cost of fuel may now negate the cost-savings business aviation has been able to offer many commercial airline users. And the ongoing consolidation of previously independent FBOs continues to change the face of the business.
The European fixed base operation faces its own changes. Our number of full-service FBOs has continued to grow, up almost 50 percent in the past ten years. And, the European FBO landscape has also continued to change as we follow the lead set by U.S. operators. To compete in the global marketplace, we have had to focus on offering the full-service facilities expected by international travelers .
At one time, the standard in Europe was a two- or three-person operation with a mobile-trailer, pumping only jet fuel, who subcontracted equipment and facilities from either the airlines or the airport. For example, even into the mid-90s, in the U.K. flight clubs normally were the source of all services for both piston and jet aircraft. If one didn’t call ahead, chances were there would be no one to meet the aircraft. In certain parts of Europe even today, the concept of executive terminals and VIP services is relatively new. Our biggest challenge has been to match the service-oriented FBOs in the U.S.
Today there are some 1,200 FBOs operating in Europe with at least one paved runway of 3,000 feet or longer, located on more than 980 airports — excluding Russia and the other former Soviet Union countries.
On further analysis, of these 1,200 FBOs, about 500 have staffs of eight to 12 people which provide administration, customer service, and line service. Of those 500, only about 60 can be equated to offering services equal to elite FBOs such as Showalter, Wilson Air, or Business Jet Center. Conversely, in the mid-90s fewer than 600 FBOs operated at just under 800 airports with the same 3,000-foot runways. Of those, no more than 15 FBOs offered elite services.
Outside forces
Interestingly, it was outside investment groups and European charter and aircraft management companies that helped spur the growth of European full-service FBOs, and these same groups today dominate the consolidation of the existing FBO community. More importantly, the size and scope of today’s FBOs in Europe have for the most part been modeled after U.S. operations.
Today nearly three times as many FBOs are operated by umbrella companies versus a decade ago. What’s in store for the coming years? More of the same.
Based on the forecasts from the E.U. and business aviation groups, the expansion will continue with the launching of new FBOs and other independent aviation service providers, such as MROs (maintenance/repair/overhaul).
Private equity and investment firms and charter/aircraft management companies continue to look for opportunities to grow their FBO holdings, via individual acquisitions and mergers of stand-alone FBOs.
Back to The Future
Ten years ago when I was the general manager of a Glasgow-based FBO, I was quoted in a leading aviation publication as saying: “At the Scottish stations we have seen a reduction in traffic; and Glasgow, in particular, has rationalized this slowdown by cutting costs, but not staff. But times are markedly changing. U.S. business aircraft are now gaining strength as a primary means of travel for corporate executives. Certainly the industry is healthier in the U.S., and this means the FBO industry in Europe will match pace.
“My take is that our economy is on the upswing and the FBO industry here in Europe will look much different ten years from now.
“I see our growth coming from opening up new FBOs, like our American counterparts, that offer an array of services, not just fuel.”
I would say the prediction ten years ago was spot on.
Upon joining Ocean Sky Aviation, a European charter operator and aircraft management company, several years ago, they opened the Prestwick/ Glasgow airport FBO, I recognized immediately the need for self-sufficiency.
Knowledge of the European FBO system taught me that after experiencing delays in getting snow and ice cleared by the airport, we should invest in our own equipment so as to be completely self-sufficient and avoid being the cause of delays for our customers. We have our own tow tugs and refuelers, and take direct responsibility for moving aircraft to and from remote parking areas when necessary.
It has been difficult to change the culture of the European FBO business, and particularly difficult to make airport authorities understand that private aviation needs to be treated differently and that the rules need to reflect this. We had to encourage airport authorities and Civil Aviation officials to focus greater attention on general aviation and make it easier on the operators.
We have made dramatic headway in Europe over the last several years in this regard. Today’s corporate pilots operating in Europe have access to better weather products, faster landing and overflight permits, global credit, and fuel and hotel discount programs. They also are given the latest intelligence on security and have handling agents that are knowledgeable about the individual requirements for a variety of aircraft makes and models.
Fuel Costs
With the cost of jet-A continuing to rise and topping $9/gallon in Germany and parts of France, and with no end in sight, corporate flight departments and Part 135 operators are stepping up efforts to find the lowest price.
Handling and landing fees add more costs. Unlike the U.S., European fees often top 500 euros for handling charges; landing fees often run more than 20 euros per ton. Yet, as long as the economic gain of moving people and goods supports the bottom line, benefits to the corporate aircraft operator will continue to gain traction, even at the present $9.
Trans-atlantic customers
So how can corporate operators save when flying to Europe? Several European fuel company executives have noted publicly that with the rising cost of crude oil, additional contract fuel and credit card programs may be the only means of keeping operating costs in-line. With the expansion of contract fuel programs into corporate aviation, it has become easier to get good prices.
In the past, contract fuel programs were mostly targeted at charter aircraft, freight companies, or other high-use operators that could get discounts on bulk fuel but typically didn’t use other FBO services. With contract fuel opening up to Part 91 and corporate operations, most companies now have access to multiple pricing structures.
While cost varies among service providers, there is a trend towards simplified pricing. Operators can obtain accurate cost estimates before undertaking a European trip and flat-fee sector pricing is becoming more common. While standard fees vary between regions, operators can expect to pay about $400 on a North America to Europe sector for weather, flight planning, communications, and destination handler set-up.
Another service provider option is on a per-leg billing based on a point system related to how many services are used on a particular flight. For example, a simple trip to London with weather, flight plan, ground handling, and hotel/transport set-up may run from $225-$300.
Another cost-savings approach being tested by U.S. corporate operators transiting to Europe is to set up local handling on their own.
And, aircraft operating costs must be addressed. Normally, pilots factor in some type of slowdown when considering a destination in Europe. These can amount to adding on 20 to 30 minutes of flight time. On average the normal hourly operating cost for a large business jet is about $2,000.
The message then is to look for destinations that allow for ease of entry with no congestion. Typically, schedulers should inquire from a destination European FBO if its airport offers high-speed approaches. We know that is the case at Prestwick. Scotland.
Service versus Fuel Costs
Another phenomenon we’ve encountered is that price alone often isn’t a determining factor in scheduling a trip. We’ve found that corporate operators often focus more on service, fuel quality, and convenience, and usually are willing to pay a few more cents more for top-quality services. Charter companies and some fractionals are often more price conscious and selective in their range of services.
In recent times, we along with other select FBOs in the U.K. and Europe have gained repeat corporate business by providing 30-minute turns, VIP sterile lounges, catering, and a friendly atmosphere. European FBOs have also focused on timely and accurate billing. Most handlers in Europe pride themselves on quoting and invoicing fuel costs as accurately as possible, including factors such as exchange rate fluctuations for international uplifts. Unfortunately into-plane rates, taxes, and fee changes often make this process challenging.
The only significant criticism of the present European aviation marketplace is that, if the established airport fuel supplier does not face enough competition from surrounding FBOs or does not see the true bottom-line potential of a new FBO at the airport, then these factors will not help to exert downward pressure on the price. Generally speaking, the fuel supplier and the airport still seem to prefer airliners with plenty of fee-paying passengers.
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Eddie Allison is a founder and managing director of Ocean Sky Corporate, Ltd. and has been in commercial and business aviation for more than 25 years. He was the founder of Execair, which was one of the largest FBO chains in the UK prior to its sale in 1997. Allison also served as the senior manager with the Glasgow Prestwick airport until 2006. He currently has management control over Ocean Sky’s FBO operations at Prestwick and Manchester.
