The simple answer: It depends on the facts and circumstances. In my December 2020 Article “Single FBO Airports: Is There An Impermissible Exclusive Right? What Can You Do About It?” I provided advice to those new entrant fixed based operators for whom an Airport Sponsor had precluded them from operating. In that article, I explain not every single fixed based operator (“FBO”) airport is indicative of an exclusive right. In this article, I provide guidance and advice for when an Airport Sponsor can deny a new entrant FBO the right to operate on the airport without creating or protecting an impermissible exclusive right.
Each of the 2,800 federally obligated airports in the United States are precluded from “granting an exclusive right to any person or entity providing or intending to provide aeronautical services to the public.” (FAA Order 5190.6B, Change 1, Chapter 8, Section 8.1). “An exclusive right is defined as a power, privilege, or other right excluding or debarring another from enjoying or exercising a like power, privilege or right.” (FAA Order 5190.6B, Change 1, Chapter 8, Section 8.2). Exclusive rights are precluded because they limit the usefulness of the airport and deprive the public the benefits of competition. A single FBO on an airfield is not demonstrative of an exclusive right. This obligation is derived from the Federal Grant Agreements that an Airport Sponsor entered when it received federal funds which are commonly referred to as the Federal Grant Assurances.
There are a number of reasons why there may only be a single FBO at an airport including the following: (1) the FBO is operated by the Airport Sponsor who is exercising the airport’s “proprietary exclusive right.”; (2) lack of interest in a second FBO; (3) lack of space; (4) lack of qualified applicants; and (5) safety concerns. In these cases, the FAA will not find a violation of the federal obligations.
An Airport Sponsor may exercise its’ proprietary exclusive right and operate an FBO and preclude others from operating an FBO at that particular airport. If the Airport Sponsor operates an FBO and exercises its right to preclude a second FBO, the Airport Sponsor must run the FBO using the Airport Sponsor’s own employees and resources. Airport Sponsor’s exercising their proprietary exclusive right are precluded from doing so through a management contract.
An airport may have only one FBO because there is a lack of interest in having a second FBO at the Airport. There may simply may not be interest in a second FBO because there is not sufficient business interest in having a competing FBO. Additionally, an airport may have only one FBO because of space constraints. If bringing a second FBO to the airport would require the existing FBO to reduce space that it is actively using for aeronautical operations, the Airport Sponsor should deny the new entrant’s application. The Airport Sponsor must have adequate documentation and the facts supporting this decision and be prepared to present them to the FAA upon request.
An Airport Sponsor may deny a new entrant FBO if the new entrant is not qualified. A new entrant who cannot meet the minimum standards is not qualified and the Airport Sponsor could deny the new entrant FBO’s application provided that the minimum standards are applied uniformly to all similarly situated providers, they are reasonable and not unjustly discriminatory, they are relevant to the activity for which they apply. When an Airport Sponsor “implements minimum standards for the purpose of protecting an exclusive right, the FAA may find the sponsor in violation of the exclusive rights prohibition.” (FAA Order 5190.6B, Change 1, Chapter 10, Section 10.3).
Often times there is controversy when the new entrant FBO is not new to the airport but rather an existing tenant who now wants to provide FBO services. This scenario is complicated and requires an Airport Sponsor to carefully consider all the facts and circumstances before just rubber stamping and approving an application. In these circumstances, the Airport Sponsor must carefully evaluate the following: (1) Is the change in use of the leased premises consistent with the Airport Master Plan and Airport Layout Plan? (2) Can the new entrant meet the Minimum Standards? (3) Does the new entrant’s lease need to be modified?
Concerns Relating to the Minimum Standards. Can the new entrant comply with the minimum standards? Are the minimum standards relevant to the activity for which they apply? Have the minimum standards been applied uniformly to all similarly situated providers? This is very important because the existing FBO is required to abide by the Airport’s minimum standards. Compliance may require significant cost, expense and hassle. Thus, the existing FBO will be closely monitoring whether the new entrant will be held to the same standards. Generally, when an Airport Sponsor imposes reasonable and not unjustly discriminatory minimum standards and denies a new entrant access based on those minimum standards the FAA will not find the Airport Sponsor in violation of the Federal Grant Assurances.
Concerns relating to the Airport Master Plan and Airport Layout Plan. How are the premises that are being proposed to be a new FBO designated on the Airport Layout Plan? Is the Airport Master Plan and Airport Layout Plan ready to be updated? Were they just updated?
Are the premises leased by the new entrant designated for use as an FBO? If not, the Airport Sponsor will need to make a change to the Airport Master Plan and Airport Layout Plan. The change will require approval by the FAA. Before the Airport Sponsor proceeds with seeking to modify the Airport Layout Plan the Airport Sponsor should consider: when was the Airport Layout Plan last updated? What are the unintended consequences of changing the designation? For example, if the Airport Layout Plan was just updated and designated other areas of the airport for future development of a second FBO within the next five years, the Airport Sponsor may want to consider denying the application for the preferred location and offering the new entrant the opportunity to develop the area for future development. The FAA has approved of this approach in Mansfield Heliflight, Inc. v. City of Burlington, VT, (FAA Docket No. 16-14-06, 2017 FAA LEXIS 185, Director’s Determination (September 5, 2017)). In Buffalo Jet Center, Inc. v. Niagara Frontier Transportation Authority (FAA Docket No. 16-98-01, 1998 FAA Lexis 1132. 1998 WL 1083383, Director’s Determination (August 19, 1998)) the FAA determined that an Airport Sponsor did not have to give a lease to a new entrant at the new entrant’s preferred location because that location was inconsistent with the Airport Sponsor’s overall plan of separation of general aviation, cargo, and commercial activities. The FAA deemed it not unreasonable to separate these activities in the Airport Layout Plan and that this was a recognized concept in airport planning and further that it was not impermissible for the new entrant to be required to develop the unused portion of the Airport consistent with the existing Airport Layout Plan.
Another point to consider, if the Airport Sponsor approves the change in use and allows the new entrant to operate an FBO in that space, it may make it harder for the Airport Sponsor to generate interest in developing an undeveloped area of the Airport. If there is a lack of interest for a private developer, the Airport Sponsor may have to undertake that future development on its own and/or with the assistance of Federal Airport Improvement Grants. In that scenario the Airport Sponsor’s decision would not have been consistent with its obligation to make the Airport as self-sustaining as possible.
Lease Concerns. Does the new entrant’s lease need to be modified if it is allowed to operate an FBO out of the premises? Does the Lease permit FBO operations? If not, does the rental rate account for the fact that FBO operations will be conducted out of the premises. An Airport Sponsor may charge rent based on what the premises are being used for. In those circumstances, it is not uncommon for the rental rate for premises used for FBO operations to be significantly higher than premises used for other purposes. Failing to address this in an amendment to the lease may result in a claim that the Airport Sponsor has engaged in economic discrimination in violation of Grant Assurance 22 (Economic Nondiscrimination).
In sum, if you are the new entrant you should carefully consider whether your use of the premises is consistent with the existing Airport Layout Plan, whether you can comply with the minimum standards and whether your use of the premises is consistent with the use specified in your lease. If you are an existing provider and a new entrant is proposed you should be asking those same questions of the Airport Sponsor. If the Airport Sponsor is less than forthcoming with the information, you should consider whether you would benefit from consulting with counsel to make sure your interests are being protected.
Alison L. Squiccimarro is an attorney with the Law Offices of Paul A. Lange, LLC with offices in New York and Connecticut. Squiccimarro's nationwide practice focuses on aviation related commercial litigation with an emphasis on FAA and DOT regulatory issues, airports, insurance coverage and employment matters.
