Niches Offer New Growth Opportunities for FBOs
ORLANDO -- While non-aviation money is now flowing into the industry with international investors buying FBOs, the local FBO still needs to turn to its local bank for expansion loans. There are no national sources of expansion loans, explained Mark Chambers of Aviation Resources Group International, speaking at a Thursday morning forum on new business ideas presented at the NATA FBO Leadership Conference, part of the 2007 Aviation Industry Week.
Chambers comments that, at some point, a long-term fixed base operator faces the difficult decision to take on new debt to grow the business through expansion -- or sell to an investor prepared to take the operation to the next level.
It used to be that an FBO could be successful by being a jack-of-all trades, attempting to offer something for everyone. That is no longer the route to success, comments Dale Froehlich of the Encore FBO in Sioux Falls, SD. Instead, FBOs are developing specializations, or niches, including maintenance, charter, and freight handling.
Some other ‘niches’ which the session’s speakers offered for consideration:
Maintenance: Don Campion, CEO of Banyan Air Service based at Fort Lauderdale Executive Airport, is a full-service operation with a 40-person maintenance staff and a separate 20-man avionics department. Even as a maintenance facility, it’s better to specialize with a core group of aircraft rather than trying to be everything for everyone, he says.
Possible opportunities:
- Manage inspections and all maintenance needs
- Handle aircraft modifications
- Perform pre-purchase inspections. (Long-term relationships can be formed with both buyer and seller, says Campion.)
- Authorized service center repairs
- Insurance work
- Transient aircraft
Freight and airline services: Froehlich at Encore, an FBO with annual sales of $25 million and 225 employees, has developed a specialty handling freight and servicing freight carriers, which at times has accounted for as much as one-third of its business.
Possible opportunities:
- Build and manage corporate hangars for freight carriers
- Develop freight and ground handling units
- Develop services for airlines and charter carriers. Encore handles all local ground and terminal tasks for Allegiant Airlines. Due to its record, Allegiant now contracts with Encore to provide similar services in the Upper Midwest and in some Florida cities.
- Service local rental car vehicles
- Deliver lost luggage
- Manage local airport security forces.
Charters: Frank Milian, CEO of Jet Source based at Carlsbad, CA, says there
is an opportunity to develop a specialty in handling the new VLJs, Milian notes.
Possible opportunities:
- Charter services
- Aircraft management
- VLJs, including charters, aircraft management and forming flight clubs.
Real estate and hangars: Mark Chambers, a principal at Denver-based Aviation Resources Group International, says that real estate is a way to add value to an FBO, and it is what attracts potential buyers or investors the most.
Key advice:
Educate at least two local bankers before seeking a loan
- Have commitments for hangars before construction starts. “Build it and they will come” is a myth in general aviation, Chamber notes.
- Obtain all airport concessions and incentives before construction begins.
- Seek long-term lease extensions with each new major capital investment, thereby making the property more attractive to real estate investors.