Unfinished Business

July 13, 2007
Encore — just some guys from the Trajen experience who see more opportunity

HOUSTON — As has become commonplace in the business of fixed base operations these days, Encore FBO LLC popped on the scene in July, 2006 as a new player in the acquisition arena. It announced at last fall’s NBAA Convention that it had established FBO businesses at Dublin, Ireland and Addison, TX. It’s not the typical ‘build a chain’ model, admits president/CEO Dan Bucaro — but that’s the point. He says that Encore grew out of the Trajen experience. A number of reps from the FBO chain and from the company that provided the capital created Encore to go after some opportunities they still see in the marketplace. In fact, Bucaro says it’s a hot market, and a new consolidation tide is building out on the horizon.

Prior to joining Trajen Flight Support, Bucaro, 46, had been educated as an accountant and managed sales in the U.S. and abroad for Goodyear and an auto parts chain. He was lured to Trajen by the investors, he says, to streamline management of the chain and explore new opportunities.

Comments Bucaro, “We were owned by a group called [The] Cap Street [Group], which is here in Houston. They were a traditional equity firm, meaning they had to have some kind of liquidity event in five to seven years. I really thought at Trajen, when I went in, that we had four years. About two years into it, Macquarie approached us and we worked out a deal.

“At Trajen, we didn’t do some of the things that we thought we could. We didn’t have the time to do it.

“So, myself, the CFO David Byers; Ted Hamilton, the head of operations; Don Prescott, the head of our acquisitions; and, Greg Elliott from Cap Street — we formed a new group. And we got a different partner this time, Platform Partners.

“It’s much different, though. It’s not a traditional equity firm. It is basically a group of wealthy individuals that don’t have a liquidity event need in five to seven years.”

Since last fall, Encore has acquired bases in Houston; Sioux Falls, SD; Bullhead City, AZ; Frederick, MD; and a pending operation in Nice, France.

The intent, says Bucaro, is to build a “worldwide” network, dominated by a large U.S. contingent and a strong European presence. Asia also has potential, he says.

Market of opportunity
Bucaro says that the company is in an aggressive acquisition mode. He relates that Encore is actively talking with ten to 12 FBOs, but the potential is there for much more.

“We think that in the U.S. alone you could easily do 50 to 100 locations,” he says. “For us, there are at least 350 locations that we would at least spend the time to look at.

We think in Europe we probably would look at 12 to 15 locations.

“We’re small, but we see ample opportunity throughout the whole world.”

At the same time, jumping into a market that’s hot for sellers is a challenge, admits Bucaro. Expectations, he says, are to be offered six to 12 times earnings. “We’ve walked away from plenty of deals,” he says.

Lease length is the top consideration, says Bucaro, along with having an enforceable set of minimum standards at the airport.

The core philosophy, says Bucaro, is this: provide consistent customer service and safety, at the airports to which business aviation wants to fly. Then allow the local general managers to lead each specifiic operation. What corporate brings to the network is streamlined financials and human resources, says Bucaro — and money to expand the chain.

“It was clear to me, even though I never had an aviation background, what had to drive this business was safety and customer service. Whether they walk into Addison or Paris, they should expect the same kind of service, the same kind of safety.”

It is corporate that sets the direction for safety and service, he says, but it’s the local GM who dictates Encore’s position in that market.

“They have a lot to say on what our pricing is in the market,” says Bucaro. “They have a tremendous amount of input on based customers. Our GMs have to understand their business.

“We don’t have regional controllers; we don’t have regional managers. We build a very streamlined business. What that means is, our general managers need to be able to run a business.”

Taking on Europe
Bucaro points out that Encore is different from Trajen in that it is not solely focused on the U.S. market, nor on just fuel and property management. Recent acquisitions have brought in aircraft management and charter, a business Bucaro says he welcomes. He also sees expansion opportunities in Europe, albeit much more limited than the U.S. market.

A recent coup, he says, was the announcement that Encore would be providing refueling services at Dublin. In Europe, the oil companies typically provide refueling.

Explains Bucaro, “We saw that there’s a huge void in service. The oil companies take care of the commercial jets first; they need to. What we want to do is to get the fueling so that we can control the service. We’ve been successful at doing that at Dublin, Paris, and at Nice now.

“We’ve been able to negotiate in Dublin and Paris to allow us to buy fuel from Esso and we put our own people, our own fuelers, and we do our own business. We were the first one in Dublin in 35 years to do it.”

In Europe, Bucaro says it’s about changing a mindset. For Encore, he says it’s about controlling a level of service. The biggest challenges, he says, have been in getting the oil companies and airport authorities to accept a new way of operating, even though the FBO can negotiate a deal that’s acceptable financially.

“It allows us to control our service,” says Bucaro. “That was the big thing. I think that market is going to continue to change; it has to.

“We see some opportunities, but it’s not going to be a fast-paced thing. We’re not going to go out and buy tons of places; we’re going to make sure it’s where we can control the service.”