Looking Ahead - Cautiously
Paul Bowers, Publisher
May 1999
There is little argument that the aviation industry mirrors the overall health of our economy. And, certainly most of us have been enjoying good times over the past few years.
The year 1998 should go down as one of the best ever. Most everyone made money: airlines, FBOs, airports, and suppliers. Inflation was virtually non-existent, technology enabled us to do more with less, and demand was stronger than ever.
But that was 1998 and despite the Dow Jones breaking the 10,000 barrier, we shouldn't expect another relatively easy year, especially in the FBO industry. What we're in for are dramatic increases in costs, competition (for customers and employees), and expectations. Whether our performance this year duplicates the overall economy's remains to be seen.
Since the beginning of 1999 fuel prices have increased by 27 percent or so. How many FBOs hiked their avgas or jet-A by that amount? Probably the same percentage that lowered the prices a year ago when fuel went down to levels not seen in ten years — not too many. So even if an FBO is selling as much or as little as a year ago, it's still probably not coming out at the overall level of profitability reached in 1998.
Competition is more pronounced. More FBOs are advertising, exhibiting at trade shows, and upgrading facilities than they were in the past. Certainly, by the amount of employment ads for personnel in industry trade magazines and newspapers, it appears the price for quality employees is rising significantly faster than the rate of inflation.
Expectations are also changing — our own as well as those of the customers. I refer back to our story in the April issue regarding Executive Jet. What it's doing to aviation is revolutionary, bringing to us unparalleled growth, innovation, and vision. But to take part in this revolution it will take a change of thinking, an investment in structure and systems.
If one accepts the fact that conditions that fueled GA's excellent year in 1998 no longer exist in 1999, what can and should be done to combat the forces of reality? Look no further than Signature Flight Support's buyout of AMR Combs. Acquisitions to create economies of scale and strategic advantages are a good first step. A company needn't be the top FBO chain in order to execute this philosophy. Barring a rare reduction in the cost of such a basic element as fuel, the only way to achieve greater profitability is to be more efficient and to sell more.
The remainder of this year should still bring growth but, just like the U.S. economy, aviation's growth will become much more tempered than the giddiness that was enjoyed in 1998.
