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General Aviation 39 4.2 Critical Issues--Fixed-Base Operators For many airports, their fixed-base operators (FBOs) are the most visible tenants. The FBOs are in many ways an extension of airport staff and are what users (particularly transient visitors) often remember most about an airport. It is therefore vital that FBOs be governed by an agreement that ensures outstanding customer service while maximizing revenue for the sponsor and providing an opportunity for the FBO to earn an adequate return on its investment. To create such an agree- ment, some critical issues must be faced, including the following: · Mandatory FBO services · Leased area and premises · Terms of relocation · FBO construction · Sponsor investment · Provisions for existing tenants · Construction compliance · Maintenance responsibilities · Technology requirements · Security requirements · Monitoring FBO activities · Appraisals and fair market value · Procedure for collecting landing fees · Environmental issues 4.2.1 Mandatory FBO Services For most airports, the quality of general aviation services depends on the FBOs present at the facility. Because FBOs can take many different forms, many airports specify a list of minimum or mandatory services to be provided by FBOs. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the AUS and PDX FBO Agreements for examples of provisions regarding minimum services to be provided by FBOs. 4.2.2 Leased Area and Premises For all FBO agreements, the area and premises leased to the FBO must be carefully defined to ensure differentiation between public-use and FBO areas, because this can affect the interpretation of maintenance responsibilities and other operational issues. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the PDX FBO Agreement for example of detailed description of the leased premises and parking facilities. 4.2.3 Terms of Relocation GA facilities at commercial service airports are often in areas that may eventually be needed for other development, because of expanded commercial airline activity or required airfield expansion. As such, contracts should carefully explain the rights of both parties in the event of relocation. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the AUS FBO Agreement for example of provision regarding right to relocate the FBO operations and for excerpts from the PDX FBO Agreement for example of provisions regarding rights of early termination for airport purposes.
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40 Guidebook for Developing and Managing Airport Contracts 4.2.4 FBO Construction FBOs often engage in construction on their leased areas. To ensure that construction does not adversely affect airport operations beyond what would ordinarily be expected, the agreement must explicitly lay out the timeline of construction, excusable delays, damages for delay, and other obligations of the FBO. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the PDX FBO Agreement for example of provisions regarding construction obligations of FBO operators. 4.2.5 Sponsor Investment There are instances where airport sponsors are investing in facilities to be leased or managed by an FBO. Sponsors should take great care to ensure these investment monies are included in the airport's capital plan and are available at the time of contract execution to avoid possible instances of default. 4.2.6 Provisions for Existing Tenants If a new FBO is replacing an old one that held many subleases for aircraft storage and so forth, the new contract must address the assignment of subleases to ensure a smooth transition. Ensuring that subtenants to the agreement are seamlessly transitioned to a new agreement can eliminate some potentially sensitive issues for airport management. 4.2.7 Construction Compliance As with any contract that may result in construction of either temporary or permanent struc- tures, language requiring compliance with airport design criteria is necessary. In particular, FAA orders and circulars, as well as pertinent sections of the FARs, should be cited wherever neces- sary to ensure compliance. 4.2.8 Maintenance Responsibilities Because an FBO will be representing the airport to the GA users, the airport sponsor should ensure that the contract includes detailed language regarding the maintenance requirements of the tenant, and, in particular, the requirements that directly pertain to the image the FBO pres- ents to airport users. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the AUS FBO Agreement for example of provisions regarding maintenance responsibilities of the FBOs operators. 4.2.9 Technology Requirements Older FBO contracts may not have envisioned the significant recent increase in the use of technology on-airport and by airport users in general. New contracts must address technology and connectivity, by wired or wireless means, to ensure exceptional service is provided to users of the FBO. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the AUS FBO Agreement for example of provisions regarding telecommunications and connection to the airport's premise distribution system.
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General Aviation 41 4.2.10 Security Requirements Airports with old FBO agreements may find that at the time of their execution, there were relatively few security requirements compared with today. With numerous enhanced security requirements since late 2001, airport sponsors must address all elements of airport security in their FBO agreements, including background check requirements, badging requirements, and other requirements that protect the airport from security breaches. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the AUS FBO Agreement for example of provisions regarding compliance with the airport security plan. 4.2.11 Monitoring FBO Activities More and more airports are taking an active role in observing and monitoring of their FBO oper- ations. Sponsors choosing to be active in monitoring the activities of an FBO may conduct annual business reviews. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the PDX FBO Agreement for example of provisions regarding annual business review meeting with the FBO operator. 4.2.12 Appraisals and Fair Market Value In some cases, an airport's FBO contract consists of a land lease in addition to or instead of a building lease. The rent for the property, and the manner in which the rent is escalated over time, sometimes is tied to a concept called "fair market value." The determination of that fair market value, if not explicitly defined, can be questioned, thereby delaying the implementation of rent increases. Best practices incorporate detailed language to describe the method for resolving a dis- pute or objection to the calculation of fair market value. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the PDX FBO Agreement for example of provisions regarding process for objection to fair market rental determination. 4.2.13 Procedure for Collecting Landing Fees Many airports have experienced difficulty in establishing a system for having FBOs collect land- ing fees. Airports are often concerned about the accuracy of the collections, the accounting meth- ods, and the ability of FBOs to collect the fees while still providing excellent customer service to airport users. FBOs sometimes contend that their fee for performing the collections is inadequate. A well-written agreement will strike a balance between the concerns of both sponsor and FBO. See CRP-CD-81 (enclosed herein), Appendix to Chapter 4, General Aviation, for excerpts from the PDX FBO Agreement for example of provisions regarding the procedures for the FBO Operator's collection of landing fees. 4.2.14 Environmental Issues Environmental awareness is expanding rapidly in virtually all industries and among the gen- eral public. Airport sponsors have also been very active in enhancing their efforts to become more eco-friendly. Although green issues are typically reported with respect to commercial avi- ation (e.g., emissions from air carrier jets), many FBO functions can affect an airport's efforts to