Private Jet Business Driving General Aviation Growth

Fixed-base operators are like truck stops for small aircraft, but some of the pilots pull up in $40 million vehicles and spend $5,000 to $10,000 to fill their tanks.

Private jets are driving growth in general aviation. Dolphin Aviation, the dominant jet service provider at Sarasota-Bradenton International Airport, for example, saw its fuel flow nearly double over a five-year period.

All that activity -- and cash -- is attracting some big-money investors to a field once populated by mom-and-pop operations.

Global investor-backed chains are buying out independents, and some deep-pocketed start-ups are building their own FBOs -- or "fixed-base operators," as they are known in industry jargon.

Come winter 2007, the two long-standing local FBOs, Dolphin Aviation and Jones Aviation, will have a new competitor, Rectrix Aerodrome Centers.

The Massachusetts-based company founded by a Bird Key resident will spend $15 million on 160,000 square feet of hangar space and a pilot and passenger service center.

"There'll be nothing like it in the country," Rectrix President Richard Cawley said.

Rectrix is setting up most of the hangar space, 115,000 square feet, as "hangarminiums." Cawley said he has sold three-quarters of the space.

Rectrix also will have charter service and host fractional ownership programs. Cawley is most excited about the plush reception area featuring a conference room and library.

The new FBOs tend to boast luxurious facilities, but their main source of income is the same as any other: pumping fuel.

That means they need planes in the air. The Federal Aviation Administration expects a 9.8 percent average annual increase in fuel consumption by small jets through 2017. However, that forecast is based on the sale of a new type of very light jets, or microjets. It also assumes corporate demand for private jets will continue to grow.

The newcomers

Rectrix, which is the word for birds' guiding tail feathers, was started by Tom Russell, a corporate director who bought his own plane in the late 1990s.

Russell kept his plane at Dolphin Aviation. He came to realize the demand for more hangar space through mingling with other airplane owners, Cawley said.

The Rectrix team also knows that fuel has been flowing at a good clip and that Sarasota and Manatee counties have a growing number of wealthy households.

The two FBOs at Sarasota-Bradenton pumped 3.2 million gallons of fuel in 2004-2005. One expert said that amount of fuel flow could allow three operators to survive, but it is remains to be seen who will capture future growth.

Dolphin Aviation, which serves most of the jet traffic now, stands to lose the most.

Owner Ron Ciaravella, an airport tenant since 1969, opposed Rectrix's approval as an FBO in January 2005. Ciaravella said at the time that he could lose more than one-third of his business.

Ciaravella now says he expects the arrival of Rectrix to draw more attention to the airport, increasing business for everyone.

"You may not get the same level of growth when there's a third FBO," he said.

Dolphin saw its fuel flow increase 80 percent from 1999 to 2004.

Dolphin pumped 999,433 gallons in the 1999 fiscal year. The number increased every year through the 2004 fiscal year to 1.8 million gallons.

Business travel is driving the growth nationwide, but in Sarasota, the activity comes from personal wealth and recreation, Ciaravella said.

Wondering just how many people in the Sarasota area can afford to travel on private jets?

Consider that one financial services firm found that Sarasota County is home to 24,056 households, 16 percent of the total, with a net worth of at least $1 million.

Ciaravella said his growth followed the housing boom. People flew in to use their third or fourth homes, and construction industry managers flew from site to site.

Although home sales are falling, no one expects Sarasota to lose the luster that has attracted a greater number of wealthy residents.

National player?

Rectrix hopes to build a chain of FBOs beyond Massachusetts and Florida, but the competition nationwide is stiff.

"The business jet industry is the strongest part of aviation these days," said Matt Thurber, senior editor at Aviation International News. "A lot of financial interests have discovered it and are building very strong, high-class FBO chains."

Several chains have a head start on Rectrix.

Signature Flight Support, part of the British BBA Group, has an FBO at its headquarters in Orlando, as well as in Fort Lauderdale, Palm Beach and Jacksonville.

Galaxy Aviation, which bought a family-owned FBO at St. Augustine-St. Johns County Airport in January, is in several smaller airports: West Palm Beach, Boca Raton and Stuart.

Signature and Galaxy are just two of the major operators in Florida, a top state for general aviation.

Equity firms, including Macquarie Group and The Carlyle Group, also have companies in the FBO game.

The investor-backed groups have paid outstanding prices for a few strategically located FBOs, and that has made buying into the market difficult for upstarts, said Phil Botana, vice president and general manager at Tampa International Jet Center, which opened in October 2004.

The prices that existing FBOs command is the main reason that Rectrix will build from the ground up, Cawley said.

"It's cheaper. It's painful, but it's cheaper," he said.

The airport first leased to Rectrix in May 2004. The company's due diligence period was extended twice because of permitting delays.

Construction was supposed to be complete this fall.

Rectrix has all the necessary clearances from the Federal Aviation Administration, but Cawley said he had trouble finding qualified contractors.

Building from scratch is not unusual. Professional football agent Michael Azzarelli led a group that spent $12.5 million to build Tampa International Jet Center.

Azzarelli went into an airport dominated by one FBO, Raytheon Aircraft Services, and turned a profit fairly quickly, Botana said.

Botana, who at one time oversaw a chain with 21 sites, said his rule of thumb for FBO survival is to pump 750,000 to 1 million gallons of fuel a year.

"It's a terrific cash business," said Thurber, who has written about aviation since 1985. "The volume is huge. You gas up a Gulfstream (a popular 15-seat jet), you're talking $5,000 to $10,000 right there.

"If you can build a good repeat business, it's definitely worthwhile."

Like Azzarelli in Tampa, Russell and Cawley are relying on aviation veterans to make Rectrix a success.

Chief Operating Officer Bill Weibrecht left his post as manager of the Martha's Vineyard airport, which handled all ground services. He previously oversaw ground operations for a small commercial airline.

"We hired who we felt was the best guy in the industry," Cawley said. "His dog's name is Boeing, and his son's name is Logan. What does that tell ya?"

Cawley, an electrical contractor and consultant from Sherborn, Mass., is a cousin of Russell's wife. He joined the company as president overseeing construction.

Russell is a biochemist who in recent years has served as a corporate director alongside Robert Louis-Dreyfus, a member of the French family company that has agriculture, energy and real estate interests worldwide. Russell and Louis-Dreyfus are major shareholders and directors of Emcore, a New Jersey company that makes electrical components.

They also hired James Hausch, a Bradenton resident who was president of Adler Aviation Services. Hausch is on the Rectrix board of directors.

Cawley said the decision to get into fixed-base operations was simple. Fuel and aircraft sales were increasing. And the threat of terrorism will only drive more corporations to private travel.

"It all adds up," he said.

Rectrix started leasing land at the airport in 2004 and in the meantime opened a smaller FBO at Barnstable Municipal Airport in Hyannis, Mass.

The company will rely on private money to build new FBOs at underserved airports, Cawley said. He is on the lookout for at least three more locations across the country.

In Southwest Florida, the marketing push will start 30 to 60 days before opening, Weibrecht said.

Rectrix will hold open houses for fractional ownership programs and send mail to potential customers.

Rectrix is keeping in mind Sarasota's growing wealth as it builds what Cawley likes to describe as the "Ritz-Carlton" of FBOs.

The analogy has practical implications as well. Weibrecht plans to find a least some of his new crew, about 20 people to start, in the local hospitality industry.

"We want to make sure the focus is on the customer," he said.

While Sarasota and Manatee counties have a wide base of airplane owners and potential owners, the key for FBOs is popularity among pilots.

Cawley said he wants Rectrix to land at the top in an annual ranking of FBOs by Aviation International News. The magazine's rankings are based on a large survey of pilots.

"Over the years, the attractive facilities have built very good businesses and their customers keep coming back," Thurber said.



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