FBO Report Card

September 27, 2007
Written by Rob Seaman
319-fboIt is that time of year when reports come from the various ‘alphabet organizations’ telling us who made what and how many. The reports all agree and show that GA and corporate aircraft sales plus new orders are at all-time highs. Add to that the swell in commercial aircraft orders, and you would tend to think that a business that sells fuel and supports aircraft ops would be swimming in good times. Well, increased business has its up and down sides, and FBOs in Canada have a series of continuing challenges to their profitability and success. The short answer is that none of them are celebrating with money flowing in the door at an uncontrolled rate. There is without question growth in the market, new players and expansion in some markets. But while they are busy, most FBOs will report a variety of issues facing them as they try to be profitable – and profitability is why anyone gets into a business of any sort.

THE BIG NAMES ARE BUSY AND GROWING
Space is the biggest issue facing most FBOs. New aircraft mean more demand for hangar space, especially in a climate like Canada’s. As Landmark Aviation’s Andrew Storey reports, they currently have 120,000 sq ft of hangar space and 70,000 sq ft of office space on the north side of Toronto International Airport. And while that is more than enough for most airports to handle all their corporate and GA business, Storey needs more. “We are currently developing 100,000 sq ft of hangar space and an additional 22,000 sq ft of related offices,” he says. Along with that will be another flight lounge and three new ramp areas. Is that enough? For today, perhaps – but one new Global Express or BBJ and good run of itinerant traffic over the winter and that space will quickly be gone. Storey expects that new space will be available in mid-May.

Meanwhile at Landmark’s Vancouver International Airport site, Scott Harrold reports that they too have started on expansion plans. The airport and city are already starting to plan and develop for the 2010 Olympics – expecting corporate as well as commercial traffic to increase their sales and service demand. Helicopters will play a big role in these games and Landmark will be prepared to handle the need. At the same time, the RCMP have just completed an agreement to increase their presence as tenants of Landmark and will be adding additional aircraft and staff to their airbase. On the service and support front, Harrold and his team has always offered their meeting and conference facilities to the community at large – not just the aviation folks. To help that support even further, they recently added a full-service business centre in-house – copying, presentations and office support – and it is proving to be very popular.

Over on the Esso-branded side, Skyservice FBO Inc. – the corporate aviation support wing of the Skyservice brand – has not been sitting idly by while Landmark grows. At YYZ it has expanded its hangar capacity by undertaking the management and day-to-day operation of two large bays that the GTAA built in the midfield area. This adds around 90,000 sq ft to existing facilities. Once again, the space is used in a combination of roles – some longerterm and many itinerant. But YYZ has really been the smaller part of the Skyservice story, says Jean Langevin, VP Customer Care. The firm has had considerable growth in the recent past, and foresees continued growth. In the early fall of 2005, Skyservice became the new operator of the existing Avitat facility at Calgary International Airport. It has identified a need to enhance the Calgary facility through infrastructure improvements, customerfocused staff, GSE equipment and other elements. Skyservice also has a new and larger ramp area at Montreal International Airport, adding a finishing touch to the new FBO lounge and terminal that were completed last year.

SMALLER OPERATORS GROWING TOO
In Atlantic Canada, Irving Oil operates three FBOs, in Goose Bay, Gander and St. John’s. The firm has been planning upgrades to the Gander site for a year or more and now plans to start construction of a new facility this spring. And in Montreal, Starlink Aviation, an Air BP branded dealer – Zoran Bratuljevic, general manager – advises that it will formally announce a name modification in April to include the Million Air moniker. This will make it the 34th and newest in the growing chain of Million Air facilities in the US, Canada and Caribbean. There are two other Million Air facilities in Canada, at Vancouver International and Toronto Buttonville.

City Centre Aviation is the newest player at Toronto’s City Centre Airport. Jamie Sargent, VP and general manager, says the entire facility is being refreshed and reworked. It has started by consolidating the FBO operations into the western facility and has closed the older eastern FBO. An investment of $2 million will be spent on capital improvements such as renovating the 120,000 sq ft of hangar and FBO space, first bringing everything up to current cosmetic and building code standards and then replacing the roof on all buildings and adding new heat and air conditioning to the FBO and tenant areas. The FBO with be getting new executive and pilot lounges, meeting facilities and amenities. A grand re-opening is expected by September. As an added service amenity, starting in May City Centre Aviation will include dedicated staff to facilitate a passenger shuttle service.

WITH GROWTH COME CHALLENGES
As TG Aviation/Marsh Brothers Aviation’s Ken Klein points out, they are constantly upgrading their overall service offering – new tug, new hangar lighting and updating electrical services. But despite adding fuel volume to their sales at Avitat Hamilton with the addition of Air Canada’s JAZZ service, the added business, while welcome, does not contribute a great deal to the overall profit margin. It does, however, help offset the 24/7 operating costs of maintaining the service commitment and availability. Klein shares the view of many when he says it is a lot harder today for an FBO to make money, as it always needs to provide a high level of customer support, facility and equipment updating as well as look after the employees’ training, benefits and salary needs. TG Aviation’s maintenance/ avionics operation continues to grow – and that will be the key factor, combined with success of the FBO operation – that will eventually result in a hangar addition or new facility.

LOOKING FORWARD
Skyservice has a practical view of the business challenge/ service balance in FBO operations. It sees the FBO market facing some margin erosion, creating a need for alternative revenue schemes such as charges for services that used to be bundled in the fuel price offering. Accordingly, it is consistently analyzing market trends and its competitors’ plans in order to remain competitive.

Other issues ahead will include revisions to security, relating to the facility, staff, aircraft and their passengers. Transport Canada will launch a series of regional forums on this subject at select locations over the coming months. Another issue may or may not be the introduction of Very Light Jet (VLJ) aircraft. This new category of aircraft will unquestionably find its way into new airfields and hangars and so push the service capacity of the resident providers. Smaller, typically owner-operated aircraft, VLJs may also drive some smaller regional FBOs to require more diversified products and support tools – from Jet A fuels to new GSE that was not required before, like tugs and towbars.

One last issue that will continue to challenge both FBOs and aircraft operators will be ramp service fees. The simple truth is that many operators do not want to pay for them – especially as the price of fuel always seems to go up and not down. The FBOs on the other hand have little choice in the matter. The profitability that used to be inherent in fuel sales has gone. Just about everyone who buys jet fuel – and in growing cases GA fuels as well – does so on a ‘program’ of some sort, be it from the branded fuel refiner, the FBO or one of the many third-party products. So to keep the ground equipment in good operating order, the floors clean and swept, the helpful staff in place, the courtesy shuttle and even the coffee and ice – the FBOs have to charge a service and support fee of some sort.

How much is quickly becoming the competitive differentiator between on-field competitors – and even site-tosite locations as the larger FBOs introduce companywide service programs. At smaller, GA-focused sites, this has been solved to some extent by the introduction of selfservice pumps. But we really can’t see the pilot of a Challenger or Gulfstream pulling up to the pump and uploading on their own – or maybe we will? In the interim, ramp and support fees will be a sore point, but will not be going away anytime soon.

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