LAS VEGAS -- At this year's annual convention of the National Air Transportation Association, part of the Aviation Industry Expo supershow, key discussions focused on undercurrents that have the potential to change the fixed base operator industry for years to come: airports potentially getting into the services sector at their facilities; the changing face of lease terms; and, the growing influence of outside money. In addition, a special post-convention FBO/Airport Symposium highlighted issues facing airports and tenants in their ongoing daily business.
Over the past 20 years the, FBO industry has been undergoing a transition due to the attrition of many of the key players from the World War II era who initially built the nationwide foundation for the services sector. Through consolidation and buyouts by outside investors - exemplified by Signature Flight Support and Mercury Air Centers - the FBO industry today looks significantly different. And it appears more change is forthcoming.
Meanwhile, airports are under pressure to be self-sufficient at a time when the airline industry is in disarray, leaving that revenue source highly volatile. As airports look for more consistent sources of revenue, or any new revenue streams for that matter, some are considering getting into the aircraft services business, either on an exclusive basis as permitted by FAA or as competitors to the existing services providers (see sidebar).
The concept of new players entering an industry strictly from an investment standpoint - versus a love of it, per se, as is the history of FBOs - has been a dominant part of American business for some time. However, it's fairly new to the aviation services sector.
The eventual fallout of this trend is uncertain. Will it lead to a buying and selling of FBOs that leads to instability and inconsistent services? Will it lead to more economic stability and viability in an industry earmarked by low margins? Could it lead to airports taking over the FBO services because of inconsistency in quality, which some airports have experienced through the years? And, should airports be concerned that the signatories on the leasehold actually never set foot on the leasehold? These are among the questions being asked at this year's convention.
While this discussion was taking place, a proposal in Congress was calling for a requirement that leaseholds on airports should be 75 years in length. Asks David Bennett, director of safety and standards for FAA's Office of Airports, "If you're an airport operator, why would you want to lose control over your property for 75 years?"
Jim Haynes is president of The Aviation Group, a consulting firm which advised Macquarie Bank, an Australian firm, during its acquisition of Avports and its mini-chain of FBO Avcenters. He is also a former chair of NATA and FBO owner.
Comments Haynes, "It's only very recently that private equity firms have gotten interested in the FBO market." He sees international investment as a next step in the evolution of the U.S. FBO market.
Peter Clare of The Carlyle Group, an investment firm that has acquired Piedmont-Hawthorne and Garrett, among various aviation interests, says a key reason outside investors are interest in the FBO market is due to the growth in business aviation. "We certainly want to find more and expand," he says.
NATA president James Coyne projects that as many as 40 private equity firms are looking at the FBO sector today.
On the topic of what an ideal FBO/airport lease should look like, along with the associated rates and charges, the discussion focused on long-term leaseholds - albeit perhaps not 75 years - and what is fair when it comes to fees.
Comments Robert Olislagers, director at Denver's Centennial Airport, "Don't tell me how to lease land and I won't tell you how to sell fuel."
The aviation services sector will meet in Orlando in March at the annual NATA convention and Aviation Industry Expo. Here's a look at the key issues on the docket via an interview with NATA...