Who's In Charge Here?

Some Say Airport Sponsors Are Taking Over Too Many FBOs

Over the past five years, trade groups have joined some members of congress expressing concern over what they see as a troubling trend. They claim that municipal airport land owners, known as sponsors, are jumping into the FBO business and competing unfairly with privately owned and operated businesses. Sponsors are usually local governments represented by an airport authority or board, so this is viewed by some as unwelcome government intrusion into private enterprise.

On the other side, airport managers have argued that the practice is necessary, either to provide airport services at a location where a private business could not survive, or to create competition that better serves consumers.

Municipalities providing airport service is hardly a new practice. There is a visible cycle where government-operated FBOs increase in number after every economic downturn as private FBOs go under. So even critics acknowledge there are situations where it’s best for all involved when taxpayer funds support the airport’s ability to provide for its customers, be they operators of private aircraft or airlines.

But the fear is that airport-sponsored FBOs may be competing with private businesses on an uneven playing field. And supported by taxpayer money, the airport sponsor can slant the rules so the private business is the one running uphill. In essence, critics say, the landlord is going toe-to-toe with its tenants, and the landlord writes the rules of engagement.

Airport Real Estate

Both sides accuse the opposition of oversimplifying. That’s not really surprising, given the immense complexity of any FBO’s business plan, be it a small private enterprise or a huge public-backed entity. It starts with the very ground they rest upon, and works upward from there.

From the real estate perspective, an FBO is unlike any other business. Imagine renting acreage to build buildings and conduct a private business (the FBO) on municipally owned land (the airport) that is almost totally controlled by a federal agency (the FAA). If the airport has airline service, you can add the TSA to the mix. So negotiating (and renegotiating) a long-term lease is a major part of the FBO’s business plan. Terms of the lease can either be business-friendly, or a nightmare of high rents, fees, and restrictive sub-clauses. Also, the degree of enforcement of those restrictions could vary, depending on who is in power on the airport board.

How the local government views the airport has everything to do with the terms of the lease, as it is initially designed in a request for proposal (RFP) — and that lines up the challenges the FBO will encounter on a day-to-day basis. The government that controls the airport property could be at the city or town level, a county, or even the state. It may be overseen and administrated by an airport board or a private management entity, which could be a quasi-government agency such as a port authority.

Case In Point

No two airports present exactly the same scenario, and in fact, the landscape can change over the course of the terms of the lease. But let’s look at a snapshot of two fictional airports, each owned by its respective county:

At airport Alpha, things are pretty good. The county owns the airport and the local tax base is comfortably lucrative. Local businesses that support that tax base are thriving, real estate values are on the upswing as people move in to go to work, and the county fathers have launched a two-prong plan to boost development in the area even further: by increasing tourism at its lakefront marina; and encouraging new manufacturing to move in to prime, vacant space. The local government is savvy and innovative, realizing that the county’s small airport has the potential to funnel vacationing boaters and potential business interests into the economic mix of their community.

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