Leading FBOs Form a Coalition ...

...aimed at coming up with a “best practices” benchmark for length of leases at U.S. airports. And they hire a top-notch lobbyist to spearhead the effort. Sam Whitehorn, a long-time D.C. transportation lobbyist now with the firm McBee Strategic Consulting, is leading the charge for the coalition, which is made up of the major chains and some independent fixed base operators. Explains Whitehorn, “What we’re actually trying to do is create a best practices guide on what makes sense -- here is what you need to do to encourage investment. FBOs would invest except they can’t get long-term leases. We don’t have a specific number [regarding lease length]” Whitehorn says he has had “preliminary” discussions with the two major airport groups, AAAE and ACI-NA, about the initiative. Comments NATA president Jim Coyne, “I think it’s a very valid issue. We live in a time where more and more airport development in the future is going to rely on the private sector.” The idea of regulating length of leases is not a new one. Several years back a New Mexico legislator proposed national legislation to require 75-year leases for tenants at U.S. airports. Perhaps an intriguing idea, but it went nowhere. And, one of the challenges that arose is that there are states that already mandate the length of leases. (Who needs the feds?) As they say, past is prologue. The history of the modern FBO industry has its roots in the aftermath of World War II, of course. During the war, the federal government had essentially created the system of airports we have today. Many cities and counties were handed war-created airports for public use. They tapped the expertise and entrepreneurial spirit of veterans coming out of the aviation side of the war. The learning curve was huge, and they were happy to find companies (start-ups) willing to provide services, for a utility they were just learning how to manage/operate. Thus, they often offered 40- to 50-year leases. Fast forward to the 1980s. Not all operators were successful, or with a 50-year lease in hand there was little incentive, oftentimes, to invest in upgrades, etc. As a result, there were FBOs who ‘rode out’ their initial investment as long as they could. It left some communities with a bad taste in their mouths when the subject of the local fixed base operator came up. After all, services at the airport had deteriorated and there was no remedy, because of the long-term lease. That, in turn, led to airport sponsors at times only offering five-year leases or other short-term arrangements to new or replacement entrants – for the ones that went out of business. Communities weren’t going to get stuck again. Problem is, that created the counter problem … how do you get a private company/FBO to invest thousands or millions of dollars into a facility with a short-term lease? The answer is, you don’t. Airports which took that approach generally figured out that wasn’t the path to success or improved services either. It’s tough getting someone to invest in your airport when you’re not investing in them. As NATA’s Coyne points out, “The airport landscape is much different and more sophisticated today than back in the ‘60s or ‘70s. Many airports we deal with understand and want these investments made. We’re doing what we think is necessary to persuade airports to have long-term leases. I think any serious airport that wants GA on its airfield will support this. “I’m on an airport commission and the airport has a lot of leverage to encourage companies to invest and develop; even with a 50-year lease, we have these standards to maintain. In ‘50s and ‘60s, you had very inexperienced landlords who said here’s a lease, sign it. They didn’t put into the leases the terms to invest and improve the facilities. Today, they hire very sophisticated real estate lawyers who can ensure tenants will not allow the property to deteriorate. We support that. They are really separate issues.” One of the complaints that has come out of Capitol Hill through the years is that aviation doesn’t come at the legislative folks with a unified voice. An arm-chair quarterback might suggest it would have been helpful if NATA and the airport groups voiced this issue together. But then, had they gotten to that point they might have come to a “best practices” agreement with no need for Capitol Hill. Thanks for reading. jfi