Long Beach Report

June 8, 2001

Long Beach Report

Operators remain upbeat despite a slower first quarter

By John F. Infanger & Lindsay M. Hitch

June 2001

LONG BEACH, CA — "All businesses are running on thinner and thinner margins," observes an FBO fuel supplier, yet most operators remain guardedly bullish about the prospects for business and general aviation. Such was the general mood at this year’s joint NATA-PAMA convention and Aviation Services & Suppliers Supershow (AS3), held in May on the West Coast. Here’s a review of discussions, seminars.

In all, several thousand representatives of fixed base operations, FAR Part 135 charter firms, repair stations, and flight training schools took part in the meeting, sponsored by the National Air Transportation Associa-tion and the Professional Aviation Maintenance Association.
Overall, the industry reps indicated a minor slowdown in business during the first quarter, and cargo-related business in particular has been slowed for some time. Observers expect to see a continuing of FBO consolidation, although that arena has slowed in recent months. At the same time, operators are optimistic about the prospects for airline, business, and personal flying.
A question that remains in the minds of many is the impact a significant economic downturn would have on the fractional business that has transformed the business sector in recent years. United Airlines, however, signaling that there is much opportunity in the fractional market, announced that it will enter that arena over the next two years. And the leader in fractionals, Executive Jet, announced at the show that it had ordered 50 more business jets from Galaxy Aerospace. (Following the show, it was announced that General Dynamics, parent of Gulfstream, intends to purchase Galaxy.)
Incoming NATA chair Jim Christiansen, president of TAG Aviation USA, which is a partner in the CitationShares fractional program, welcomes United’s entry into the fractional fold. "It lends another degree of credibility to what we do," he says.
Operators at the show also reiterated their ongoing concern about rising insurance rates and the potential negative impact, particularly on the smallest shops.

The NATA convention included a session on current and future technologies and their impact on FBOs. The discussion which followed the presentation brought up concerns that FBO managers are facing in light of technological advancements.
According to Paul Meyers of the Denver-based Aviation Management Consulting Group, FBOs use technologies from four major areas: computers/computer systems, internet, wireless communications, and traditional phones and fax machines. Those technologies are used for fueling, management/operations, weather, and flight planning.
Meyers anticipates conveniences from other industries may work their way into FBO management. For example, e-tickets and Internet seat assignments in airlines and touch screen applications in restaurants may be adapted to the needs of FBOs.
"All of these advances are about communication and getting it right the first time," says Meyers. "People plus technology equals a level and quality of service."
Although online reservations systems are a helpful concept, session attendees feel that their logistics sometimes make it more difficult to do business. Users hope for one website that can do it all, rather than needing to visit numerous websites to plan one trip. And with many of the online programs, FBOs still have to take the information from the web page and input it into their systems. The goal of many online reservations programs is to save time, and it appears that they do not yet do so in the eyes of many FBO operators.
Another recurring concern is the cost of these services. Business operators need to see obvious improvements in efficiencies and service before they are willing to shell out money, and for those programs requiring subscription fees those efficiencies may not be worth the cost, say participants.
On an unrelated online note, a number of websites have begun offering fuel rate information. Session attendees express concern that the price of fuel often depends on a number of factors including volume and affiliations. Flight departments may choose one FBO over another based on flat-rate fuel price quotes that may not be accurate for their situation.

Without community support, many general aviation airports face dismal futures. Recognizing this, NATA released a Community Relations tool kit at the convention. As part of its American Aviation Access Initiative, the initial tool kit is a handbook developed to enhance airport relations with neighbors and community leaders.
The introduction sums up the need for and purpose of the tool kit: "Of greatest concern are isolated groups of vocal airport opponents who fail to recognize the importance of universal access to the air transportation system."
The handbook is meant as a "how-to" manual for developing and improving community relations.
During a session on community relations, speaker Peter Burgher, president of Marelco Power Systems, stressed including community leaders not ordinarily associated with the airport on an airport support group. Burgher suggests the head of the hospital might highlight the role of the airport with organ transplants; the sheriff might mention the aid in prisoner transport; other participants may include the head of a CPA firm, a major banker, a law firm partner, and representatives of other major employers. With support from leaders in the economic community, voters and politicians are more likely to follow suit.
The NATA Community Relations tool kit is available for $30 from NATA. To obtain a copy, call (800) 808-NATA.

Richard Aboulafia, director of aviation studies for The Teal Group, projects that aviation will continue to be strong economically. The sales of business jets quadrupled (dollar value of deliveries) from 1995-2000. Though they have likely leveled off, Aboulafia expects $90 billion in additional business jet deliveries for 2001-2010.
Used planes and pricing, fractional ownerships, airline reactions, and the firmness of orders booked are concerns of economic analysts, but overall the next ten years in aviation are expected to be strong.

NATA has been receiving a number of calls from members concerned about their insurance. Five years ago, 17 companies insured aviation businesses; today only eight remain.
Bill Welbourn, senior vice president for USAIG, Rick Davis, vice president/LA branch for Associated Aviation Underwriters, and Kyle Sparks, vice president of AIG Aviation Insurance, offer advice on obtaining and maintaining insurance for aviation business owners.
"Underwriters like to have all the information possible, especially what your company is doing right," explains Welbourn. He adds that companies should share all contracts with their underwriter to explore where it may be possible to transfer liability.
Davis recommends developing and supporting a proactive safety program. And in the case of aircraft owners opting to postpone maintenance procedures, Davis advises having a lawyer draw up a waiver form.
Sparks reiterates the importance of sharing all of the details of the business with the underwriter. Plans and manuals should be updated and followed and the insurance company should be aware of them.
All three mention the idea of qualifying customers. If a plane comes in that has not been maintained, don’t hesitate to turn it away. Sometimes it’s better to pass up a small profit to avoid liabilities later on, they say.
Insurance is expected to be more and more difficult to obtain in the coming years, and it will continue to be more expensive.

Airport PR Dos and Don’ts
Suggestions for improving airport community relations brought up in an NATA convention discussion by attendees and speaker Peter Burgher.

• Hold a car rally for Corvette, Ferrari, or other collectors’ group
• Don’t hold an airshow — makes the airport seem like a thrill ride, says Burgher
• Hold an open house - emphasize the subtle benefits of the airport (organ transplants, etc.)
• Attend commission meetings with supporters; the opposition may tend to exaggerate
• Don’t do it alone; get the airport support group to attend commission meetings and be prepared with economic, noise, and other facts
• Hold a breakfast or barbecue in support of a county commissioner or other candidate; collect campaign fund donations
• Don’t stop fighting for the airport, even when it appears the battle has been won
• Start campaigning for support well before there is talk of closing the airport
• Ask organizations (NATA, NBAA, AOPA, etc.) to help speak with Congressmen
• Try to positively influence big opponents via free lessons, airplane rides, etc.
• Hold a reporter/media day; give everyone a ride and an air tour of the area; hand out AOPA’s Glossary of Terms for Reporters
• Hold a grade school kids’ day
• Find the people the public will listen to and gain their support
• Hold a Teachers’ Day; hand out curriculum on lift/drag, etc.; host a paper airplane contest
• Talk to or join the community or county economic development board
• Get to know the Chamber of Commerce
• Refer to curfews as "voluntary quiet hours"; when they are not followed, explain why to the public
• Look to cargo operators for support