There's Change in the Wind

ORLANDO — This is not your father’s business aviation industry. The successful outreach by fractionals in the 1990s to the business community will soon be extended with the advent of the microjets, or very light jets (VLJs), to a wider market. The impact on airports and fixed base operations is today difficult to predict; but the VLJs will have an impact. Meanwhile, outside financing of FBOs continues to grow.

Such were the highlights of the experience known as the annual convention of the National Business Aviation Association, which reports a final total of 28,796 attendees. A record 1,142 exhibiting companies participated; the Static Display of aircraft at Orlando Executive Airport hosted 110 business aircraft. The show had to be relocated to Orlando after Hurricane Katrina struck New Orleans, the scheduled site. Despite the relocation, activity remained brisk, though perhaps with less of an edge.

In the Spotlight: Very Light Jets
Of the array of light and very light jets being proposed, Eclipse Aviation, Adam Aircraft, and Cessna Aircraft Company were most notable at this year’s NBAA event. Eclipse reports it took orders of some 80 Eclipse 500 VLJs, including a 50-unit order from Linear Air of Lexington, MA. Linear, which currently operates scheduled Part 135 service in the Northeast using Caravans, plans to use the 500s in a nationwide air taxi network.

Eclipse reports orders for the Eclipse 500 at some 1,592 firm orders and some 765 options.

Adam Aircraft reports that Pogo, the start-up air taxi network being proposed by former American Airlines CEO Robert Crandall, among others, has reaffirmed its order for 75 of Adam’s A700 twin-engine jet VLJs.

Embraer, which is coming offline with a new series of commercial airliners, announced its entry into the light and very light jet markets.

Regarding the potential impact of the VLJs on FBOs and airports, Roger Woolsey, president/CEO of the Million Air FBO franchise network, says, “We’re excited about it. Will there be change as when the fractional idea took off? Certainly. Were there a lot of scared people protecting their turf with fractionals? Absolutely. But those same people are the ones who may be benefitting the most.

“What fractionals have done is shaken the trees and new apples are falling out. My opinion is that the VLJs are probably going to have the same effect. If anyone should be afraid it’s the Part 121 carriers. If the DayJet and Pogo models pan out, there’s a new way to transport around the country. At the end of the day, America is strengthened by it.”

Comments Signature Flight Support’s president and CEO Bruce Van Allen, “I think overall they’ll do OK, whether or not the hype is realized.”

A New FBO Financial Structure
More and more, the influx of non-traditional sources of financing for the FBO business continues. Investment firms now own major portions of the FBO sector, while Signature parent BBA is a publicly traded company. Among other notables: AlliedCapital, which now owns the Mercury chain; Macquarie Infrasctructure Company, which owns the Atlantic Aviation/FBO Avcenter chain; and The Carlyle Group, which owns the Garrett/Piedmont Hawthone/Associated (now called Landmark Aviation) chain of FBOs and maintenance centers.

Dean Harton, vice chairman of Landmark and former president of Piedmont Hawthorne, says the new outside business investment in the FBO sector brings with it a level of financial professionalism that will serve as a positive. He sees new technologies being introduced more rapidly as a result.

It would seem that with outside money comes a greater focus on diversification. While all the major FBO players today say they have an interest in growing via acquisition, both Signature and Million Air report they are looking at other services as well.

At Signature, Van Allen says there may be an opportunity to market administrative or accounting services to other fixed base operations. The company is also looking at an array of airport services, such as janitorial. Says Van Allen, “We have to ask, what else can we do at that airport? It’s a subject that’s been getting air time with the board recently.”

At Million Air, Woolsey and company have contracted with the Albany International Airport to provide FBO and airline services, while the airport authority maintains the actual leasehold. Woolsey sees more opportunity for companies such as his to export their FBO operations expertise via contracts with airports or with other fixed base operators. (For more, see “Inside the Industry,” page 30.)

Signature: A Second Tier FBO Market?
At this NBAA, Signature announced the acquisition of three more FBOs, at Long Beach, Van Nuys, and La Quinta, CA. That brings its worldwide total of fixed base operations to 66, with 19 in Europe. According to Van Allen, the FBO chain expects to remain competitive in the U.S. acquisition market, but BBA Group is heightening its focus on the Asian and African markets.

A new opportunity the company is exploring in the U.S. market, says Van Allen, is a “strategy of a second tier. There are emerging markets in the U.S. and they don’t have to be big locations. Years ago, we might have looked at it as a [fuel] volume issue, but that’s not necessarily so anymore.”

Van Allen says there may be a second tier model, and it could involve merely buying out an existing FBO and leaving it in place as is. Perhaps it could evolve into a loose federation of FBOs, he says, that would benefit from shared administrative and financial services. “So, we could possibly acquire an FBO and leave it alone in the marketplace,” he says.

Landmark’s Coming Out Party
The newest player among major exhibiting companies on the NBAA trade show floor was Landmark Aviation — the new brand for the FBO/maintenance network of Garrett/Piedmont Hawthorne/Associated. The new name will be placed at all Landmark locations, with the exception of the Dallas-based Associated Air Center, a major modifications center whose brand is already well entrenched internationally, say officials.

Headquartered in Tempe, AZ, Landmark is expected to leverage its financial backing by The Carlyle Group to facilitate more acquisitions in the aviation services sector, according to officials.

Landmark president Shawn Vick says his company is bullish about corporate aviation, with some estimates putting the number of new bizjets at 8,300 over the next ten years. Vick expects Landmark to grow from an $800 million company today to a $1 billion firm within three years.

Landmark is already a well-diversified aviation company, with FBOs, maintenance and modification centers, charter, and aircraft sales among its businesses. According to Vick, no particular area will be emphasized as the company grows. He expects that the Landmark’s ability to move quickly on acquisitions should help facilitate its growth.

According to vice chairman Harton, while 70-80 percent of Landmark’s business today is east of the Mississippi River, the company is looking at growth in the Western U.S. to complement its large FBO in Vancouver.

Harton echoes what Van Allen, Woolsey, and others say about keeping a close watch on overall corporate earnings, which they see as a critical benchmark in projecting activity levels in the years to come.