The biggest competitive threat to a single FBO at a small, federally obligated airport isn’t always another FBO. Sometimes, it’s the municipality that owns the airport.

Assume that a municipality has a small airport with one FBO and a city council intending to increase revenue by making the sponsor the sole provider of aeronautical services.

Airports that have accepted Airport Improvement Program (AIP) funding agree to a set of federal grant assurances that run with the land for as long as the property operates as an airport. Grant Assurance 23, Exclusive Rights, provides that the sponsor “will permit no exclusive right for the use of the airport by any person providing, or intending to provide, aeronautical services to the public.”

Grant Assurance 23 and FAA guidance note that a single FBO on the field is not, by itself, an exclusive rights violation.

But what are the signs that the airport sponsor may have plans to exclude the sole FBO and insert itself as the sole provider of aeronautical services? When does such conduct risk noncompliance with Grant Assurance 23?

This article offers guidance for these scenarios by:

• Exploring how such a scenario could implicate Grant Assurance 23 concerns (Exclusive Rights)
• Identifying caution signs for FBOs to stay aware of
• Offering practical strategies and solutions

What services can an airport sponsor provide?

An airport sponsor may elect to provide any or all of the aeronautical services needed by the public at the airport under its proprietary exclusive right. This right, however, is narrow.

FAA Order 5190.6C, Chapter 8, spells out that a sponsor may elect to provide aeronautical services itself, but only if it"

• Uses its own employees and resources to perform the service as a principal, not a contractor operating under the airport's name
• Does not designate an independent commercial enterprise as its agent by outsourcing the exclusive right to a private management company
• Confines the proprietary exclusive to fuel sales and support services
• Continues to honor self-fueling rights

Which caution signs should FBOs pay attention to?

There are signs that a municipality may be attempting to exceed its lawful authority and exercise an impermissible proprietary exclusive right. There are several patterns to look out for, such as: 

Termination or non-renewal of the FBO lease agreement

It may be a sign that a sponsor intends to displace an FBO if they take actions like:

• Terminating an FBO’s lease agreement
• Declining to renew an FBO’s lease agreement
• Declining to grant a lease amendment

Minimum standards applied selectively

Be aware of a sponsor that intends to exercise its proprietary exclusive right yet lacks the capabilities to fulfill all the services required under the Minimum Standards.

In addition to implicating Grant Assurance 23, such conduct could implicate Grant Assurance 22 concerns (Economic Nondiscrimination) wherein the sponsor applies the Minimum Standards in a favorable way to itself while unfairly treating the FBO.

Aircraft refueling designated to municipality

An airport sponsor that obtains its own contract with a fuel provider and begins fueling aircraft, or an airport manager that quietly competes for based-aircraft fuel contracts, may intend to displace the existing FBO.

Take note if a sponsor provides these services with non-airport employees or contracts with an independent commercial enterprise, as such conduct likely indicates that the municipality is exercising an impermissible proprietary exclusive right, contrary to Grant Assurance 23.

How an FBO can stay ahead of and respond to changes

There are many ways that an FBO can stay on top of potential concerns, such as:

Always stay updated on agendas and budgets.

FBOs can benefit from continuously paying attention to city council and airport commission agendas and budget documents.

Line items proposing new equipment purchases such as fuel trucks or self-service pump upgrades, or discussion of RFPs for services the FBO currently provides are early indicators worth flagging immediately.

In these cases, FBOs should attend all meetings and foster relationships with airport management and all members of the airport commission.

Document everything contemporaneously.

Document sponsor actions, such as: 

• Verbal instructions from airport staff
• Denied lease amendments
• Instances of the sponsor or a third party performing aeronautical services

Record dates, names and specifics. Remember that Part 13 investigations and Part 16 proceedings are fact-intensive, and the burden of proof lies with the complainant.

Know the sponsor’s ability to provide aeronautical services.

A sponsor desiring to provide aeronautical services should be able to demonstrate that it is ready, willing and able to provide the full range of services of the current FBO on or before the date that the lease for the private FBO ends.

Be wary of a sponsor that intends to terminate or not renew the sole FBO’s lease but has disclosed no definitive plans for providing all the services required by the Minimum Standards. This could become an important fact in a Part 13 or Part 16 complaint.

Understand the complaint process.

A Part 13 informal complaint is faster and less resource intensive. A part 16 formal complaint is a full administrative adjudication with a written director's determination, appealable within the agency and ultimately to a federal court of appeals.

Get the lease and minimum standards reviews by aviation counsel.

It’s important to take this step before there is a live dispute.

Confirm exactly what space and services the lease entitles the FBO to and whether the sponsor’s conduct is consistent with it. Be alert for “no-cause” termination provisions in the lease.

Why knowing about Exclusive Rights is crucial for FBOs

Federal law gives airport sponsors discretion to manage their fields, including the option to provide aeronautical services. However, it does not allow them to do so by leaning on a favored contractor or selectively applying the rules to disadvantage the FBO already performing the work.

For FBOs operating as the sole service provider at a small municipal airport, the best protection is knowing the proprietary exclusive right doctrine well enough to recognize the moment a sponsor starts to drift from it, rather than waiting for clear noncompliance.

Remember that a sponsor found in violation of Grant Assurance 23 risks having AIP grant assistance withheld, and potentially Facilities and Equipment funding as well, until the violation is corrected.

That exposure is often the most persuasive argument in a pre-complaint negotiation.