Airport Operator Options for Delivery of FBO Services (2018) / Chapter Skim
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From page 10... ...
10 CHAPTER TWO LOCAL CONSIDERATIONS FOR FBO MODEL SELECTION CHOICES FOR DELIVERY OF FBO SERVICES Airport sponsors that are nearing the end of long-term fixed base operator leases have options for delivery of these services going forward. This chapter will discuss the main local considerations that go into deciding how best to provide fueling, flight continuation services, maintenance, and concierge services, and will address real estate leasing and development options as well as rates and charges.
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11 airport-owned FBO facilities. The Rhode Island Airport Corporation has contracted for management of all services and operations at its general aviation airports.
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12 Models Compared TABLE 5 FBO DELIVERY OPTIONS COMPARED FBO Delivery Options Traditional Lease Contract Management Self-Perform Relationship of Parties Independent lessee Independent FBO management contractor with limited agency NA Risk and Control Passed to operator Assumed by airport Assumed by airport Justifiable Duration of Lease or Operation The commercial amortization period on the minimum capital investment, not to exceed 30 years 5 to 10 years Indefinite On-Airport Competition Open to additional operators Open to additional operators Exclusive proprietary rights Business Plan and Budgets Responsibility of lessee FBO management contractor prepares a business plan and annual contract year budget that must receive airport sponsor approval Airport developed Decision Making About FBO FBO lessee Airport sponsor Airport sponsor FBO Expertise FBO lessee Management contractor Airport recruits and hires FBO manager FBO Staff FBO recruits and trains staff Contractor recruits and trains staff Public employees recruit and train staff according to HR rules or on a special basis; potential for cross utilization Capital Investment Operator responsibility; sometimes airport sponsor invests Airport sponsor Airport sponsor Revenues Revenues to operator less rents, fuel flowage, and percentage of gross receipts to airport sponsor Fixed management fees to operator plus incentive bonuses in contract; residual to airport Revenues to the airport sponsor Costs to Airport All costs borne by operator except potential infrastructure improvements provided by airport All costs assumed by airport unless management contract stipulates specific maintenance requirements All direct and indirect costs borne by the airport Insurance Requirements FBO insures both property and operations; if airport sponsor property is included, insurance responsibilities negotiated in lease Airport sponsor insures property, and management contract insures operations Airport sponsor insures both property and operations FBO Promotion and Business Development Joint FBO and airport responsibility Primarily airport unless marketing specified in terms of contract Airport responsibility, possible joint marketing with fuel supplier; can use FBO ground handling for air service recruitment or retention Sources: Adapted from Fort Wayne-Allen County Airport Authority, AAAE Airport FBO Ownership Workshop, April 2016, and Michael G Monroney & Associates.
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13 • History of FBO services at the airport • Analysis of airport internals • Regional competitive factors to consider • Important macro factors • Aviation community considerations History of FBO Services at an Airport The history of FBO services at an airport is extremely important to inform future options. Has the airport engaged a thirdparty operator(s)
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14 Fuel Sales Volumes Fuel sales are not the revenue producer they once were, but they are still used as an important measure of FBO scale. Although no hard rules of thumb can be applied, sales of Jet-A fuel are a strong indicator of third-party FBO viability.
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15 Airport Facilities and Services Taking into account existing facilities, level of services, and current FBO management model are important precursors to an evaluation of alternative FBO management models. Table 8 presents a template to summarize the availability and management of current FBO functions.
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16 FIGURE 6 What airport customers and tenants may want. Source: Prepared by KRAMER aerotek inc., 2011.
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17 Governance, Labor Rates, and Propensity to Self-Operate Governance considerations are important when evaluating options for the delivery of FBO services. Airport sponsors oversee the airport.
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18 • Specialized services such as flight training, maintenance, and charter aircraft • Terminal amenities • Customs and border protection An airport that is reviewing current offerings or contemplating a change can conduct an opportunity assessment to determine saturation levels for GA services and facilities in the area and to identify underserved customers. This type of assessment would include an analysis of GA activity in the region, strengths and weaknesses of competitors, and "the extent to which consumers are content with the level of service provided by the competition" (Wells and Chadbourne 1994)
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19 2. Prepare a strengths, weaknesses, opportunities, and threats (SWOT)
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20 FIGURE 7 The FBO decision team. Source: Prepared by Michael G
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21 TABLE 10 PRO FORMA FINANCIAL TEMPLATE Year 1 Year 2 Year 3 Year 4 Year 5 Operating Revenue GA Fuel Flowage Hangar Rent GA Terminal Rent Ground Rent Concession Fees (or Total Income) on Other Rent and Services Other GA Revenue Total Operating Revenue Direct Operating Expenses Salaries and Benefits Training Contracted Management Fee Incentive Management Fees Contracted Maintenance Supplies and Materials Small Equipment and Software Marketing Utilities Insurance Other Expenses Total Direct Operating Expenses Start-Up Costs Administration Expense Allocation Net Profit (Loss)
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