Characteristics of the FBO Industry 2018-2019 (2020)

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9 The FBO industry provides aeronautical services to a wide spectrum of aircraft operators that includes business and personal flying, charters, air medical, aerial applicators, firefighting, search and rescue, commercial, military, and air cargo airlines. Services needed by these users are diverse and summarized in Figure 4. FBOs tend to specialize with respect to aircraft, services, and clientele. Because FBOs operate in such different markets, there are many external and internal factors that influence the scale of operations, demand for services, customers, competition, operating costs, and revenue potential. Catalysts for change are coming from multiple directions and include the following: • Economic conditions, • Structural change within commercial aviation, • Changes in general aviation segments, • Trends within the FBO industry, • Customer strategies and preferences, • Airport operating environment for FBOs, • Ongoing challenges to the industry, and • Innovation and technology. Figure 5 summarizes the key factors shaping the FBO industry. The remaining sections of Chapter 2 discuss these factors in more detail. Economic Conditions “It’s the economy”—a much touted phrase, with meaning. Aviation has historically per- formed well during strong economies and poorly during recessions. This correlation is especially true for commercial aviation and somewhat true for general aviation. The Economy and Commercial Aviation U.S. airlines performed well in 2018, lengthening an undisrupted stretch of positive profits to 8 years. Figure 6 shows real net income for domestic U.S. scheduled-service passenger air- lines and gross domestic product and underscores the strong connections between economic activity and airline performance. Today’s domestic airline industry, however, despite consis- tently profitable results, looks very different than it did a decade ago. Recovery following the recession of 2007–2008 was cautious. Airlines lowered operating costs by eliminating unprofit- able routes, grounded less fuel-efficient aircraft, and experimented with new pricing strategies. The number of domestic airlines operating in the United States also declined through mergers and bankruptcies. C H A P T E R 2 Key Factors Shaping the FBO Industry

10 Characteristics of the FBO Industry 2018–2019 The Economy and General Aviation Several factors outside of economic conditions have contributed to a smaller general avia- tion industry that peaked in the 1970s. Recreational flying has declined as older, single-engine piston aircraft have left the active fleet and many private pilots retired. That said, general aviation (GA) has stabilized since the recession of 2007–2008, with considerable growth in the business aviation segments of the industry. Figure 7 shows the total number of aircraft shipped and GA operations at airports with air traffic control towers. Following 2008, both U.S. shipments and GA operations declined, then stabilized, and have improved in 2018. In 2018, U.S. shipments of piston aircraft increased by 43 total aircraft over 2017 piston shipments; turbine shipments increased by 104 aircraft over the previous year. The number of GA operations was an even more positive indicator of growth, as GA operations increased by an estimated 915,000 or by 3.6% in 2018 (FAA Aerospace Forecasts). Figure 8 examines the positive relationship between changes in real U.S. gross domestic prod- uct (GDP) and changes in GA operations at airports with FAA and contract control towers. General aviation will continue to wax and wane with economic conditions. Many industries depend on aviation support to conduct business. For example, helicopters and fixed-wing air- craft support the oil and gas industry, air medical, forest management, search and rescue, and firefighting. The Impact of Fuel Prices on Aviation Activity and FBO Fuel Revenue There is a substantial discretionary component of aviation activity, particularly in the recre- ational and personal flying segments, but also in the logistics industry. Integrated carriers such as FedEx or UPS are always weighing the relative costs of transporting packages and freight by air or by truck. For commercial airlines, fuel costs can represent between 25% and 30% of operating costs, so the price of fuel is important. General Aviation •Full-service/self-service aircraft fueling •Fuel storage and quality control •Hangar rental •Flight training •Aerial tours and photography •Aircraft rental and charters •Aircraft sales or leases •Aircraft management •Maintenance, repairs, and parts •Aircraft painting, interiors, and modifications •Line services, cleaning, and detailing •Avionics sales and services •Customs clearance support •Courtesy transportation Commercial Service •Fueling aircraft •Fuel storage and quality control •Above- and below-the-wing aircraft services •Deicing •Passenger services •Customs clearance support •Agricultural inspections Military •Fueling aircraft •Fuel storage and quality control •Temporary ground-staging support, ramp space, and facilities Air Cargo •Consolidated air cargo facility •Small and large package handling •Warehousing •Fueling aircraft •Fuel storage and quality control •Above- and below-the-wing aircraft services •Deicing •Customs clearance support •Agricultural inspections Figure 4. Demand for FBO services by different users.

Key Factors Shaping the FBO Industry 11 •Strong economy/strong aviation industry •GA aircraft shipments and operations have staged a modest recovery •Stable and low fuel prices a plus Economic Conditions •Capacity of ultra low-cost carriers (ULCCs), which are the fastest growing segment of commercial service •ULCCs tend to use local FBO for ground and passenger services •Charters and 9 seat aircraft are replacing air service in small markets and often use FBO services Commercial Aviation Structural Changes •Growth in corporate flying and charter activity •Small piston-aircraft fleet reductions suggest limited growth opportunities in this segment, although student pilots increased for the first time in decades •Demand for and production of Avgas declining •U.S. regions vary for GA growth General Aviation Trends •Customers have more information in advance of flight •Tankering strategies reduce en route fuel purchases •Corporate customers pre-negotiate contract rates or discounts for fuel Customer Efficiency Strategies and Expectations •Minimum standards influencing FBO buildout, investment, and level of services •Exercise of proprietary (exclusive) services at some airports •Provision of ground and passenger equipment/support as air service incentives •High valuations of airport property, raising lease and assignments costs Airport Operating Environment •Fuel sales remain important, but not always the cash cow •Unbundling of FBO services in response to market conditions •Active use of digital tools •FBO networks, franchises, and affiliates expanding coordinated services and brand FBO Responses to Industry Change •Self-fueling by large fuel customers can limit FBO competition or growth •Competitive pressures from low price fuel at certain FBOs •Pilot and mechanic shortages/FBO staff retention •Transition to non-leaded fuel •2020 compliance with ADS-B requirements Ongoing Challenges Figure 5. Summary of key factors shaping the FBO industry.

Source: Compiled from IHS Markit and the Bureau of Transportation Statistics. 14,000 14,500 15,000 15,500 16,000 16,500 17,000 17,500 18,000 18,500 19,000 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 $20.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 GD P (B ill io ns 2 01 2 $) An nu al N et In co m e (B ill io ns 2 01 2 $) Net Income GDP Figure 6. Domestic U.S. scheduled-service passenger airlines annual net income GDP, 2010–2018 (billions of 2012 dollars). Source: Compiled from General Aviation Manufacturers Association (GAMA) 2018 Annual Report and FAA Aerospace Forecasts, Fiscal Years 2019–2039. - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GA O pe ra tio ns a t T ow er ed A irp or ts (0 00 ) U .S . G A Ai rc ra ft Sh ip pe d GA Operations (000) U.S. GA Aircraft Shipped Figure 7. U.S. aircraft shipped and GA operations at towered airports, 2000–2018 (2000 is listed as a benchmark). Source: Compiled from the U.S. Bureau of Economic Analysis and FAA Aerospace Forecasts, Fiscal Years 2019–2039. -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 2011 2012 2013 2014 2015 2016 2017 2018 Pe rc en t C ha ng e in G A O pe ra tio ns Pe rc en t C ha ng e in R ea l G DP GDP GA Operations Figure 8. Percentage change in real GDP and GA operations at airports with air traffic control towers, 2011–2018.

Key Factors Shaping the FBO Industry 13 Figure 9 shows fluctuations in the wholesale price of fuel (not adjusted for inflation) and the long-term trend lines. Both avgas (100 low lead, or 100LL) and jet-fuel wholesale prices are well below their respective trend lines. The price of 100LL, however, is trending higher at a faster rate than jet fuel. This is because demand for 100LL is declining, refining costs are higher than jet fuel, and only eight refiner locations in the United States make 100LL (Kramer et al. 2019), contributing to high transportation costs for delivered product to many small airports. Figure 9 also shows the volatility of fuel prices. From an FBO perspective, changes in the price of aviation fuel translate into higher or lower costs for purchasing new fuel supplies. If an FBO receives fuel deliveries multiple times per week, price differences would average out. However, for an FBO with less frequent deliveries, price fluctuations can impact the sales margin. Table 2 demonstrates how fluctuations in the price of jet fuel can affect FBO fuel margins. For example, assume a smaller FBO receives deliveries of 7,500 gallons. If the operator purchased a delivery Figure 9. Jet and 100LL fuel wholesale/resale price by refiners, 1999–2019 (nominal dollars per gallon). Source: Compiled from Energy Information Administration, https://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_ nus_m.htm. $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Do lla rs p er G al lo n Jet Fuel Avgas Linear (Jet Fuel) Linear (Avgas) Week Wholesale Price ($) Cost ($) Difference from Week 2 ($) 1 1.73 12,975 (300) 2 1.77 13,275 0 3 1.80 13,500 225 4 1.82 13,650 375 5 1.89 14,175 900 6 1.92 14,400 1,125 7 1.95 14,625 1,350 8 1.93 14,475 1,200 Source: From Kramer et al. 2019. Table 2. Example of short-term changes in spot fuel prices.

14 Characteristics of the FBO Industry 2018–2019 at prices available in Week 7, the operator would pay an additional $1,335 over prices available in Week 2. Likewise, had the FBO made the purchase in Week 1, it would have cost $300 less. Structural Changes Within Commercial Aviation Some FBOs manage fuel farms and fuel inventories for commercial airlines. In addition, FBOs fuel large aircraft and provide above- and below-the-wing services such as cabin cleaning, catering, auxiliary power to the aircraft while on the ground, baggage handling, and aircraft towing. Sometimes an FBO will perform minor maintenance and check in passengers and baggage. Some airport sponsors, either as part of airport operations or through the FBO, have offered these ground and passenger services at favorable rates as incentives to attract or retain an air carrier. Fueling of commercial service aircraft can be an important revenue stream for FBOs. In the aftermath of the 2007–2008 recession, structural changes within commercial aviation has pre- sented FBOs with new revenue opportunities, particularly at small commercial service airports. Growth of Ultra-Low-Cost Carriers In 2018, there were far fewer mainline U.S. airlines than existed in 2007. The remaining carriers divide into three groups: network, value, and ultra-low-cost carriers (ULCCs), each representing different business models and operational characteristics. Figure 10 groups mainline carriers in the United States. Of the three groups, it is the ULCC carriers that offer limited frequency schedules (i.e., less than daily) and often rely on local airports and FBOs to provide fueling as well as other ground and passenger services. While ULCCs represent a smaller group of airlines, in the 12 months ending 2018, capacity offered by this group grew by 16.2%, contrasting with value-carrier capacity growth of 5.1% and network carrier capacity growth of 3.8% (Wyman 2019). The three mainline groups have focused attention and service in the largest commercial air service markets. Seats per aircraft are increasing. Domestic load factors reached historic highs of 84.7% in 2018. Domestic departures, however, remained about 17% below 2007 levels (FAA Aerospace Forecasts). According to the Regional Airline Association (RAA), when comparing Official Airline Guide (OAG) scheduled departures in 2013 with OAG scheduled departures in 2018, reductions in service are dramatic. They are as follows: • 246 airports reduced by 10% or more • 180 airports reduced by 20% or more • 109 airports reduced by 33% or more • 77 airports reduced by 50% or more • 42 airports reduced by 75% or more • 32 airports lost all service Source: Oliver Wyman, Airline Economic Analysis, 2018–2019. Network Carriers •American •Delta •United Value Carriers •Alaska •Hawaiian •JetBlue •Southwest Ultra Low-Cost Carriers •Allegiant •Frontier •Spirit Figure 10. Mainline U.S. airlines.

Key Factors Shaping the FBO Industry 15 The smallest cities were among the hardest hit, as Table 3 indicates. With fewer departures from smaller airports, the door may be open for FBOs at these airports to provide fuel and ground services to remaining carriers. Regional Carriers Opportunities Diminished Given that declines in scheduled service have occurred in the smallest cities, the regional carriers have not enjoyed the same recovery mainline airlines have experienced. Regional carrier capacity has grown 0.5% since 2007, and passengers are down 1.5%. With reduced service to smaller market and fewer mainline carriers, regional carriers are competing for even fewer contracts. Figure 11 compares growth in domestic-revenue passenger enplanements for main- line carriers and regional carriers. Startup Air-Service Options Remain Active Using Very Small Aircraft Despite pressures on small-community air service, these cities remain active areas for inno- vative solutions. Use of nine-seat aircraft and scheduled charter service has allowed for some service continuity. Cape Air using a Cessna 402 and Boutique Airlines flying a Pilatus PC-12 Hub Departures (%) Routes (%) Large 0.7 7.0 Medium -4.7 1.3 Small -13.9 -10.3 Nonhub -15.1 -2.8 Nonprimary -19.3 -24.2 Source: Regional Airline Association, July schedules for U.S. domestic operations. Table 3. Changes in scheduled departures and routes, 2009–2018. Source: Compiled from Form 41 and 298C, U.S. Department of Transportation. 140 145 150 155 160 165 0 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015 2016 2017 2018E Re gi on al E np la ne m en ts (M ill io ns ) M ai nl in e En pl an em en ts (M ill io ns ) Fiscal Year Mainline Regional Figure 11. Scheduled domestic U.S. revenue passenger enplanements in millions (E = estimated).

16 Characteristics of the FBO Industry 2018–2019 aircraft have been leaders in these markets. Both airlines have limited on-airport footprints in the cities they serve and use local FBOs for fuel and, sometimes, ground and passenger services. Changes Within General Aviation Since FBO services is a demand-driven business, changes within the different segments of the GA industry reflect sooner or later on FBO sales revenue, customer base, and growth prospects. This section highlights some of the national and regional trends within GA that have impacted FBOs already or may impact them in the future. Composition of the GA Fleet The FAA estimates active aircraft in the GA fleet, hours flown, and utilization rates based on an annual survey distributed to aircraft owners and operators. Figure 12 shows the FAA’s estimated composition of active aircraft in the U.S. GA fleet. Single-engine and multi-engine piston aircraft, despite annual declines for over the last decade, still dominate two-thirds of the GA fleet (67%). Helicopters represent 5% of the fleet and jets 12%. Experimental and light sport aircraft may be the replacement aircraft for some recreational enthusiasts at 14% of the fleet. Customer Groups Are Growing or Contracting at Different Rates The FAA takes information collected from the annual General Aviation and Part 135 Activity Survey and prepares assumptions about aircraft deliveries (from GAMA), retirement rates, and forecasted economic growth to estimate the future fleet size and level of GA activity. Table 4 shows historical trends starting in 2010 and FAA forecasts for fleet size, hours flown, and fuel consumed. Of note, in 2010 turboprop and turbojet (turbine) aircraft made up 15% of the active fleet. By the end of the forecast period, the number of active piston aircraft in the fleet had declined by 36,777 aircraft and turbines had increased by 18,718. In 2039, turbines are projected to be 27% of the active fleet. These forecasts imply that FBOs that rely on 100LL sales Source: Compiled from FAA Aerospace Forecasts, Fiscal Years 2019–2039. Single Engine, 129,885, 61% Multi-Engine, 13,040, 6% Turbo- Prop, 9,925, 5% Turbo-Jet, 14,585 , 7% Rotorcraft Piston, 3,335, 2% Rotorcraft Turbine, 7,370, 3% Experimental, 27,365, 13% Light Sport, 2,665, 1% Other, 4,715, 2% Figure 12. Composition of the U.S. active general aviation and air taxi fleet.

Key Factors Shaping the FBO Industry 17 as a principal source of revenue are likely to experience declining sales unless they increase market share, offer new revenue services, or attract additional customer segments. Figure 13 and Figure 14 show the FAA forecasts of hours flown and fuel consumed. In terms of sheer numbers, piston aircraft remain the dominant aircraft in GA. However, in terms of hours flown and fuel consumed, turbine aircraft represent greater growth opportunities and volume fuel sales for an FBO (see Table 4). Since 2010, fractional aircraft owners have added substantially to the fleet available for Part 135 charter activity and are large contributors to the increase in private jet and turboprop aircraft hours. Fractional owners often engage charter companies, such as NetJets, to manage the operation and maintenance of their aircraft, who in turn will offer charter services to nonowners Source: Compiled from FAA Aerospace Forecasts, Fiscal Years 2019–2039. 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2010 2018E 2019 2029 2039 Tu rb in e Ai rc ra ft Ho ur s F lo w n Pi st on A irc ra ft Ho ur s F lo w n (0 00 ) Piston Turbine Figure 13. FAA forecasts of hours flown by piston and turbine aircraft (E = estimated). Source: Compiled from FAA Aerospace Forecasts, Fiscal Years 2019–2039. 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 160,000 170,000 180,000 190,000 200,000 210,000 220,000 230,000 2010 2018E 2019 2029 2039 Je t F ue l G al lo ns C on su m ed (0 00 ) Av ga s G al lo ns C on su m ed (0 00 ) Jet Fuel AvGas Figure 14. FAA forecasts of 100LL and jet fuel consumption (E = estimated).

Active Aircraft Hours Flown (000s) Gallons of Fuel Consumed (000s) Per Piston Aircraft Per Turbine Aircraft Year Piston Turbine Piston Turbine 100LL Jet Fuel Hours Fuel Hours Fuel 2010 159,007 27,367 14,773 8,311 220,737 1,434,835 93 1,388 304 52,429 2018E 146,260 31,880 14,404 9,578 208,000 1,613,000 98 1,422 300 50,596 2019 145,700 32,385 14,305 9,929 207,045 1,674,626 98 1,421 307 51,710 2029 133,085 38,580 12,792 12,802 191,000 2,089,000 96 1,435 332 54,147 2039 122,230 46,085 12,265 15,543 184,000 2,335,000 100 1,505 337 50,667 Average Annual Growth 2010– 2018 -1.0% 1.9% -0.3% 1.8% 1.5% 1.2% 0.9% 1.0% 1.3% -0.4% 2019– 2029 -0.9% 1.8% -1.1% 2.6% 2.2% 1.9% -0.2% 0.1% 0.8% 0.5% 2019– 2039 -0.9% 1.8% -0.8% 2.3% 1.7% 1.5% 0.1% 0.3% 0.5% -0.1% Source: Compiled from FAA Aerospace Forecasts, Fiscal Years 2019–2039. Note: E = estimated. Table 4. Historical and forecast general aviation active aircraft, hours flown, and fuel consumed.

Key Factors Shaping the FBO Industry 19 through a subscription card or a per-hour fee. These revenues help to offset the cost of owner- ship. At some GA airports (e.g., Naples), fractional (charters) are the most frequent customers of FBOs (Byers 2019). General Aviation Activity Varies by Region and Is Fluid Among Airports in a Region Many factors explain the growth or reduction of GA operations in a region. For some airports, a large component of activity is local operations. Local operations are flights that arrive or depart within a 20-mile radius of an airport, stay within the local traffic pattern, and are usually associ- ated with flight training. Itinerant operations are arriving and departing flights that go outside the local traffic patterns. GA is composed of itinerant and local operations. Part 135 charters are tracked by air traffic control as air taxis and not distinguished from commercial regional air carriers, so for the purposes of this report, charter operations are not counted in this analysis. Increases or decreases in regional GA operations occur because of changes at individual air- ports or the regional level. Aircraft operators may relocate to a different airport because of pricing or available services. New flight training services can add to local operations at an airport. At the regional level, economic and tourist developments can bring in more traffic or special events such as the Super Bowl, and political conventions can increase operations during a specific year. Population growth also can add new GA users to a region. To gain perspective on regional changes in GA, Table 5 compares 2013 and 2018 local and itinerant GA operations at five of the more active areas for GA: Chicago, Dallas, New York, Phoenix, and South Florida. Table 6 shows estimated population growth during the same period for the metropolitan statistical areas that encompass these airports. Region 2013 2018 % Change % Local 2018 Phoenix-Mesa-Scottsdale, AZ Area 1,561,064 1,644,020 5.30 65 Miami-Fort Lauderdale-West Palm Beach, FL Area 902,992 1,145,559 26.90 45 Los Angeles-Long Beach-Anaheim, CA Area 1,085,659 1,052,279 -3.10 45 New York-Newark-Jersey City, NY-NJ-PA Area 558,127 525,765 -5.80 32 Dallas-Fort Worth-Arlington, TX Area 421,904 512,751 21.50 35 Chicago-Naperville-Elgin, IL-IN-WI Area 237,766 260,235 9.50 36 Source: Compiled from Air Traffic Activity Data System (ATADS). Table 5. General aviation local and itinerant operations in high activity areas. Table 6. Population change in high-activity areas. Metropolitan Statistical Area (MSA) 2013 2018 Population Gain or Loss 2013–2018 (%) New York-Newark-Jersey City, NY-NJ-PA Metro Area 19,901,696 19,979,477 77,781 0.4 Los Angeles-Long Beach-Anaheim, CA Metro Area 13,106,114 13,291,486 185,372 1.4 Chicago-Naperville-Elgin, IL-IN-WI Metro Area 9,553,268 9,498,716 -54,552 -0.6 Dallas-Fort Worth-Arlington, TX Metro Area 6,817,518 7,539,711 722,193 10.6 Miami-Fort Lauderdale-West Palm Beach, FL Metro Area 5,849,411 6,198,782 349,371 6.0 Phoenix-Mesa-Scottsdale, AZ Metro Area 4,404,675 4,857,962 453,287 10.3 Source: Compiled from the U.S. Census Bureau, Population Division, Metropolitan and Micropolitan Statistical Areas Population Totals and Components of Change: 2010–2019.

20 Characteristics of the FBO Industry 2018–2019 Airports included in metropolitan areas: Phoenix Area CHD - Chandler Municipal DVT - Phoenix Deer Valley FFZ - Falcon Field GEU - Glendale Municipal GYR - Phoenix Goodyear IWA - Phoenix-Mesa Gateway PHX - Phoenix Sky Harbor Int’l PRC - Ernest A. Love Field SDL - Scottsdale South Florida Area BCT - Boca Raton FLL - Fort Lauderdale/Hollywood FXE - Fort Lauderdale Executive HWO - Hollywood/North Perry MIA - Miami International OPF - Miami/Opa-Locka PBI - Palm Beach International PMP - Pompano Beach Airpark TMB - Miami/Kendall-Tamiami Executive Los Angeles Area BUR - Burbank-Glendale-Pasadena FUL - Fullerton Municipal HHR - Hawthorne Mun/Northrop LAX - Los Angeles International LGB - Long Beach/Daughtery Field SMO - Santa Monica Municipal SNA - Santa Ana/John Wayne TOA - Torrance/Zamperini Field VNY - Van Nuys New York Area CDW - Caldwell/Essex County EWR - Newark Liberty Int’l FRG - Farmingdale/Republic HPN - White Plains/Westchester JFK - John F. Kennedy Int’l LGA - La Guardia MMU - Morristown Airport TEB - Teterboro Dallas Area ADS - Dallas Addison AFW - Fort Worth/Alliance DAL - Dallas Love Field DFW - Dallas/Fort Worth Intl FTW - Fort Worth Meacham GKY - Arlington Municipal RBD - Dallas Redbird Chicago Area DPA - Chicago/DuPage GYY - Gary Regional MDW - Chicago Midway ORD - Chicago/O`Hare Intl PWK - Chicago/Palwaukee Muni UGN - Chicago/Waukegan Regional From an FBO perspective, examination of regional and individual airport trends in opera- tions are an important indicator of which regions are growing and which individual airports are generating new business, retaining its customers, or losing market share. With a GA industry that is experiencing low growth, customer retention, and increasing market share are competi- tive marketing strategies that are evident when examining individual airport trends. The Phoenix, Dallas, and Miami Metropolitan Statistical Areas (MSAs) have experienced the largest population growth in the five years from 2013 to 2018. The Phoenix area also stands out because it has the largest number of GA operations of the five regions. Digging deeper, Phoenix has a high concentration of local operations, conducted at Phoenix Deer Valley, Falcon Field, and Ernest A. Love Field in Prescott due to extensive flight instruction programs. DuPage Airport in the Chicago area greatly expanded local operations and accounts for most new GA operations in 2018. Table 6 also shows high growth in the South Florida and Dallas area airports over the last 5 years. Itinerant operations accounted for most of the growth in operations at Dallas Addison Airport; at Fort Worth Meacham, itinerant operations grew by 50% and local operations more than doubled. The South Florida area experienced sustained growth, primarily in local operations across most airports. However, Hollywood/North Perry accounted for nearly half the region’s growth in both local and itinerant operations. The New York and Los Angeles

Key Factors Shaping the FBO Industry 21 regions experienced declines, primarily in itinerant operations. These two areas also have the lowest population growth. Customer Efficiency Strategies and Expectations With changes in aircraft technology and the availability of software to plan and cost a trip, aircraft operators usually know in advance where they will refuel and what FBO they will stop at either en route or at the destination. Corporate flight departments and private pilots now routinely have the following: • Immediate access to fuel prices and fees charged by FBOs; • Branded fuel card memberships with discounted fuel pricing; • Software to inform decisions about the cost and efficiency to carry extra fuel onboard or refuel during a trip (tankering decisions); • Route planning software that optimizes travel time and cost; • Current weather conditions to make “on-the-fly” route changes; • Trip records for each flight and segment as a history and basis for similar flight plans; and • 24-hour customer service, equipment manuals, and support. With planning and cost tools at hand, established relationships with FBOs are also a key determinant of where an aircraft might stop to take advantage of contract or discount rates for fuel or fees. FBOs that operate multiple locations promote consistent quality of service and discount pricing across all FBOs within their network. For smaller one- or two-location FBOs, prior relationships with customers, exceptional customer service, and competitive pricing (in the bottom quadrant) is a must (Kramer et al. 2019). Airport Operating Environment Minimum Standards Underlying market conditions and an airport’s operating environment are key factors in arriving at a level of FBO services that can be supported and competitive. The FAA recom- mends, but does not require, that airport sponsors prepare minimum standards for commer- cial service activities at an airport that sets out requirements for all providers that seek access to the airport “on reasonable terms and without unjust discrimination” (Smith 2019). Mini- mum standards for FBOs outline the physical requirements (building and ramp space), pilot and passenger amenities, and required specialized aircraft or training services to be offered. Mini- mum standards often articulate the application requirements and the airport-sponsor review and decision process. Minimum standards are usually published as guiding documents and incorporated by refer- ence into a commercial lease. They are useful tools for managing development and protecting the airport sponsor from allegations of unjust discrimination (Smith 2019). Because market conditions change, it is important to periodically review minimum standards to make sure that requirements for an FBO match the airport’s market situation. In this sense, minimum stan- dards are unique to every airport and are reflective of the aeronautical services that can be practi- cally and financially supported. Proprietary (Exclusive) Services Where at one time most FBOs were privately owned and operated, many FBOs have failed over the years and airport sponsors either found replacements or took over the provision of

22 Characteristics of the FBO Industry 2018–2019 FBO services. Some airport sponsors at the end of a lease agreement with a private FBO have elected to exercise a “proprietary exclusive right” to be the sole provider of FBO services or specific individual services such as fueling or deicing. The FAA recognizes this right with the condition that the exercise of this right requires the airport sponsor to use its own employees and resources to provide aeronautical services. The sponsor is not permitted to contract for these services with third parties. The number of FBOs that airport sponsors operate is large, estimated in 2018 (Kramer et al. 2018) at 1,562 locations (or 43% of all FBO locations). While many airports have exercised pro- prietary exclusive rights, others have chosen to operate FBO services through LLCs, which are separate from the airport sponsor. The majority of publicly owned FBOs, however, are small operations offering just fuel services and minimal aeronautical services. In many instances, these airports serve markets that would be unlikely to have the financial feasibility to attract interest by a private FBO. Ground and Passenger Services as Air Service Incentives It is noteworthy that some airport sponsors have offered incentives to attract and retain com- mercial air service by providing fuel farm management, into-plane fueling, baggage handling, and passenger check-in services. Once airport sponsors purchased equipment to handle pas- senger aircraft, the provision of FBO services to charters and GA aircraft was a logical addition. Some airports accomplished these services with airport employees; others formed LLCs as separate ground and passenger service companies. FBO Lease Assignments, Reasonable Fees, and Transfers Over the last 20 years, the underlying value of existing long-term ground leases accompanied by low lease rates became well-understood by both FBO lessees and airport sponsors. Many long-term leases crafted 30 to 40 years ago became valuable assignment opportunities for FBO operators ready to sell. Many airport sponsors expressly state in leases that assignment of a lease, improvements, and subleasing of leased premises must have written consent by the sponsor, and, sometimes, there is a negotiated fee due or a commitment for development projects when a lease renews or an assumption or sublease transaction takes place (Kramer et al. 2018). However, more than a few airport sponsors remained on the sidelines as lease assignments transferred FBO assets to new operators, often at high premiums. A decade without recession has helped to support high valuations of leaseholds and capi- tal investment in FBO facilities, but some industry observers have expressed concerns about whether FBOs with leveraged financial positions will survive a period of recession and dimin- ished aviation demand (Epstein 2019). FBO Responses to Industry Change The FBO industry is a nimble adaptor to changes in the market environment. This section briefly addresses fuel sales; unbundling of FBO services; the growth of FBO networks, franchises, and affiliates; brand identity developments; and the nature of national competition. Beyond Fuel Sales Fuel sales continue to be a principal source of revenue for FBOs. However, structural changes in fuel markets have permanently altered this component of FBO services. The wide availability of retail pricing for 100LL on the Internet makes fuel a competitive commodity at the local,

Key Factors Shaping the FBO Industry 23 regional, and national level. Piston aircraft operators with access to this information can make route planning decisions based on fuel prices. FBOs serving this customer group are now advertising to a national audience. For charters and corporate flight departments, wide use of contract pricing, negotiated corporate discounts with fuel suppliers, and preferred network organizations [such as the Corporate Aircraft Association (CAA)] have made public data about actual prices paid for jet fuel more difficult to obtain. For an FBO, remaining price- competitive and maintaining fuel margins has grown increasingly complex. Large differences exist in the 100LL and Jet A fuel markets, and they are highlighted in the following lists. 100LL Market • 100LL is one of a few fuels that use tetraethyl lead (TEL) in the blend. There is only one producer of TEL in the world. • Despite research and testing of alternatives for 100LL, engine performance, storage, and distribution challenges remain. • Only eight refiners in the United States make 100LL, resulting in limited supplies and high transportation costs to move fuel supplies to airports. • Demand for 100LL is in decline and highly dispersed across the United States at small airports. • Because of low demand, some FBOs must manage fuel inventories carefully to avoid fuel spoilage. It is also important to watch fuel prices to minimize fuel supply costs and to price retail fuel to cover the direct costs for delivered 100LL and the indirect costs for labor, equip- ment, and maintenance of the fueling operation. • 100LL is largely a retail market whose customers are highly price-sensitive. • Some FBOs purchase partial-load deliveries at a higher price to better manage fuel inven- tories or because fuel tanks are sized below full-tanker truck deliveries (usually 7,500 or 8,000 gallons). • Prices for 100LL are widely advertised on the Internet. To stay competitive, most FBOs now advertise retail fuel prices digitally and keep their prices current. • SS 100LL has become the norm at airports with low-volume fuel demand. To keep operat- ing costs at a minimum for this fuel, a majority of FBOs offer 100LL as an SS product. As of December 2018, over 2,300 (63%) of FBO locations reported offering SS 100LL; only 822 (22%) reported a full-service (FS) 100LL product. Jet Fuel Market • The jet fuel market is far less transparent than the 100LL market. Most corporate flight depart- ments negotiate contract rates for fuel and frequent FBOs that honor these contract rates. FBOs receive reimbursement for contract sales, primarily through an upload fee. Upload fees are determined by the FBO and submitted to a fuel supplier. There is limited public informa- tion about upload fees charged, but FBOs do try to keep these fees competitive and at the same time have the fees accurately reflect the cost of fuel services. Depending on the upload fee, margins on contract fuel sales can be lean, and volume sales may be required to offset lower margins on contract fuel sales. • Those FBOs that fuel commercial airlines may be making money on fuel storage management and into-plane fuel fees. The fuel is often owned by the carrier or a consortium of airlines. The airlines contract with the FBO for the direct and indirect costs to store and pump their fuel plus a profit margin. • With sophisticated software, flight departments can evaluate the trade-offs between carrying jet fuel onboard the aircraft or refueling en route at potentially a higher cost than the operator’s own fuel supply. This practice of tankering can reduce fuel purchases at away airports.

24 Characteristics of the FBO Industry 2018–2019 • The combination of contract rates and tankering practices has put some FBOs that are out of network at a disadvantage in competing effectively for transient-aircraft fuel sales. • Refiners produce more jet fuel than 100LL. Transportation for delivered jet fuel tends to be conducted in bulk, either by pipeline, ship, or rail. Unlike 100LL, jet fuel is produced in refin- eries throughout the United States and, consequently, fuel distributors can obtain supplies closer to their final market. Thus, jet-fuel transportation costs tend to be lower than those for 100LL. Some FBOs with high-volume fuel sales can maintain relationships with multiple suppliers to effectively manage the cost of fuel supplies and sales margins. • Aircraft performance has greatly improved over the years. With greater fuel efficiencies and extended ranges, aircraft can travel longer distances without requiring an intermediate fuel stop. The shift to highly competitive pricing for fuel has shifted the 100LL market to a primarily SS (gas station) model. For jet fuel, contract rates and discounts favor higher fuel-volume purchases for customers using these rates. Unbundling of FBO Services Changes in fuel markets have led FBOs to reevaluate their business model. Historically, an FBO at an airport was an FS organization that offered fuel, aircraft handling, maintenance and repair, flight training, aircraft rental, hangar space, concierge services, route planning, lounges, and other passenger or pilot support services. Occasionally, an FBO would manage the airport as well. In sum, the FBO served as the GA gateway to the airport. In the 1960s and 1970s, there was enough growth in the industry to support many small FBOs and often multiple FBOs at a single airport. A diversified set of FBO services does not always make financial sense today and presents practical challenges to retaining mechanics and staff for low-volume services while at the same time preserving adequate revenue to cover expenses. The FS FBO business model needed to evolve, and it did. For many small airports, the challenges were insurmountable. Fuel sales have been the princi- pal source of revenue. Some FBOs have closed permanently, with the airport sponsor taking over and providing limited FBO services. Given a smaller GA industry and stagnant growth of GA activity, FBOs and airport sponsors are experimenting with unbundling FBO services. Limited demand for 100LL has caused many airport sponsors to set up an SS facility for aircraft-based owners. Signature Flight Support offers hangar space, line, and concierge services at all locations and has established relationships with specialists on the airfield for maintenance, repair, or flight training or refers its customers to a nearby location where these specialty services are available within the Signature network. It is also apparent from this report that on-airport specialists are branching out to serve as fuel providers. For example, aerial applicators based at a public air- port will sell retail fuel. Sometimes, on-airport specialists with core businesses in flight training, charters, or avionics will take over fueling and even airport management. Active Use of Digital Tools Given use of flight planning software by private pilots and flight departments, customers expect immediate or informed responses from FBOs of all sizes. This translates into expectations for the following: • Easy-to-use FBO reservation systems; • Privacy with respect to individual flight plans; • Available current pricing for fuel and services, including contract rates and discounts; and • Ability to communicate with customers through various social media channels.

Key Factors Shaping the FBO Industry 25 Fixed-base operators have added electronic capabilities to address these expectations and to participate more effectively in local, regional, and national markets. Digital capabilities have enabled FBOs to do the following: • Manage fuel inventories. • Time fuel orders and deliveries. • Keep track of SS and FS transactions on a point-of-sale (POS) system. • Pay bills, transfer revenues to the sponsor, and keep records that can be audited. • Maintain current fuel prices on the Internet. • Communicate regularly with existing and new customers. FBO Networks, Franchises, and Affiliates Continue to Build Out Market Reach and Service Portfolios The largest FBO service companies have built substantial service networks throughout the United States and worldwide. In February 2016, BBA Aviation, a global aviation support and service provider group and owner of Signature Flight Support, completed its purchase of 68 Landmark Aviation FBOs. As of August 2019, Signature Flight Support owned and operated a total 124 FBO locations in the United States and had affiliations with seven additional FBOs under the Signature Select program. Worldwide, Signature operates an additional 76 FBO loca- tions. Atlantic Aviation, a wholly owned subsidiary of Macquarie Infrastructure Corporation (MIC), has invested more than $2 billion to build its large FBO chain, which has grown from 18 locations in 2005 to more than 70 in 2018 (Moorman 2008). Million Air has 31 franchise and corporate-owned FBOs worldwide, and Paragon Network has 25 affiliates in the United States and 32 worldwide. The CAA also has a list of 254 preferred FBOs in the continental United States, as well as two offshore in Nassau, Bahamas, and St. Thomas, U.S. Virgin Islands, that offer fuel and ramp fee discounts to members. While the field of FBO candidates for acquisition may have narrowed, acquisitions have nevertheless continued, especially among long-time FBO operators and private equity firms. Jet Aviation has continued to expand with new or renovated facilities at Teterboro, Van Nuys, and Dallas in the United States and acquisitions of Hawker Pacific FBOs in Australia and KLM Jet Centers in Amsterdam and Rotterdam. Sheltair expanded into the Colorado market at Rocky Mountain Metropolitan. Lynx FBO, owned by Sterling Group private equity, acquired five loca- tions, including facilities at Fort Lauderdale Executive, Allegheny County Airport in Pittsburgh, Napa Jet Center, Anoka County-Blaine Airport (Janes Field) near Minneapolis-St. Paul, and the FBO at Little Rock. Modern Aviation, funded by Tiger Infrastructure Partners, which formed in 2017, has acquired FBO facilities at Boeing Field, Centennial Airport, and Wilmington Inter- national Airport. Ross Aviation has completed acquisition of Rectrix Aviation (five FBOs) and two other FBOs, one in the Cayman Islands and another in Fairbanks, Alaska. Fixed-base operator networks are also developing and expanding their portfolio of avia- tion service businesses. BBA Aviation operates 16 aircraft maintenance companies, 13 in the United States, under the TECHNICAir brand. In May 2018, BBA acquired EPIC Fuels, a fuel and fuel-related services supplier. The acquisition gave BBA connections with an additional 205 privately owned and independent FBOs and built out their non-owned network of FBOs initiated through the Signature Select program. The acquisition of a fuel supplier also provided a conduit for well-priced fuel to all FBOs in the network. Avfuel Corporation went in the other direction, beginning first as one of the leading independent suppliers of fuel in the United States. Having established supply and logistics relationships, Avfuel developed its branded net- work of 15 FBOs, Avflight, and has a total of 634 locations that are branded Avfuel dealers participating in a virtual network.

26 Characteristics of the FBO Industry 2018–2019 Large-Network FBOs Dominate Business Aviation and Smaller FBOs Support Flight Training Centers at the Busiest GA Airports Network FBOs participate in large markets where there is extensive business aviation activity. Small private FBOs and publicly owned FBOs serve a wide range of GA situations, from the smallest GA airports to airports where extensive flight training is offered. The airports where network FBOs locate tend to have more itinerant GA operations and notable business jet activity. Table 7 shows the 10 busiest U.S. airports for GA operations in 2018 and the FBOs that are located on the airfield. Airports with more than 60% local operations are highlighted in blue and indicate the presence of extensive flight training operations and relatively few arrivals and departures of business jets. The airports where network FBOs locate have more itinerant GA operations and notable business-jet activity. Ongoing Challenges for FBOs Self-Fueling by Large Customers Self-fueling is the right of an aircraft owner or operator to self-fuel their aircraft with their own employees, equipment, and fuel tanks (with caveats) at any airport where the sponsor has entered into grant agreement with the FAA, binding the sponsor to all federal obligations. Self- fueling is distinguished from a commercial SS pump that allows a pilot to fuel an aircraft from a fueling tank that is owned by an FBO or an airport sponsor. Even in an instance where an airport sponsor has exercised proprietary exclusive rights, an individual owner or operator may self-fuel, provided that self-fueling is done “in accordance with reasonable rules, regulations, or standards established by the airport sponsor” (FAA AC 150/5190-6, Exclusive Rights at Federally Obligated Airports, Washington, D.C.). Self-fueling is prevalent at some airports and can include private companies, fuel consor- tiums, and public agencies that maintain their own fuel tanks and self-fuel. These airport tenants tend to be large fuel consumers. From an FBO perspective, these groups are at the airport but not available as fuel customers. Pricing of Fuel and Services to Cover Direct and Indirect Costs At some smaller airports, fuel prices are established primarily by the delivered product cost and the going rate at nearby competing airports. If there is a competing airport that is a low-price leader, the price floor may be set very low to attract customers. Covering both the delivered cost and expenses for operating and maintaining the fuel facility is an ongoing challenge, especially in low-volume markets where fuel customers primarily purchase 100LL. (See Kramer et al. 2019, Chapter 12, for a full discussion of fuel pricing.) Pilot and Mechanic Shortages and FBO Employee Retention Issues Persist In a full employment economy and rising wages, job mobility is not only possible, but preva- lent. For FBOs, a robust economy has magnified issues of mechanic shortages and retention of employees, particularly line service employees, because of the following: • Workforce demand is outstripping workforce growth. • Starting average wages are low compared with the job requirements and responsibilities. • Training and regulatory requirements, particularly for mechanics, are arduous. • There is strong competition from other industries.

Rank Facility ID Airport Name and State FAA Airport Asset Category Total GA Operations Local Operations Percent Local (%) Domestic Operations by Top 12 Business Jet Aircraft FBOs on Airport 1 DVT Phoenix Deer Valley, AZ GA - National 415,684 269,689 65 813 Cutter, Sibran 2 APA Centennial Airport, CO GA - National 304,259 163,040 54 15,460 Denver Jet Center, Modern Aviation, Signature, TAC Air, The Heliplex 3 HWO North Perry, FL GA - Regional 299,161 201,023 67 1 The Fuel Depot, North Perry Central FBO, Hollywood Aviation 4 TMB Miami Executive, FL GA - Regional 259,976 112,302 43 3,096 Reliance Aviation, International Flight Center, Signature, Advanced Aircraft Center 5 GFK Grand Forks, ND Non-hub 258,777 246,399 95 238 Avflight Grand Forks 6 VNY Van Nuys, CA GA - National 250,779 90,441 36 22,909 Signature, Castle & Cooke, Clay Lacy, Jet Aviation, The Park VNY 7 SEE Gillespie Field, CA GA - National 249,630 157,467 63 658 Golden State, Circle, High Performance Aircraft, GS Jet 8 PRC Ernest A. Love Field, AZ GA - Regional 232,767 157,671 68 446 Legend Aviation 9 SNA John Wayne, CA Medium Hub 232,324 112,047 48 14,152 Atlantic Aviation, ACI Jet 10 LGB Long Beach, CA Small Hub 229,810 115,243 50 3,128 Signature, Ross Aviation Source: Compiled from FAA Operations Network (OPSNET) via GAMA 2018 Annual Report, AirNav.com, FAA Traffic Flow Management System Counts (TFMSC), Aviation System Performance Metrics. Note: The business jet aircrafts with the largest number of operations in 2018 included the following: C56X – Cessna Excel/XLS; E55P – Embraer Phenom 300; H25B – Bae HS 125/700-800/ Hawker 800; C560 – Cessna Citation V/Ultra/Encore; CL30 – Bombardier (Canadair) Challenger 300; GLF4 – Gulfstream IV/G400; BE40 – Raytheon/Beech Beechjet 400/T-1; C680 – Cessna Citation Sovereign; EA50 – Eclipse 500; and C510 – Cessna Citation Mustang. Table 7. FBOs at airports ranked highest for GA operations in 2018.

28 Characteristics of the FBO Industry 2018–2019 When many FBOs were family-run businesses, staff also were family and trained in all aspects of the business, with the expectation that the children would one day take over the business. Fast forward to today and for multilocation FBOs, owned by large companies or private equity firms, staffing is more traditional and hierarchical. A typical wage for a line service technician is $13 to $25 per hour for a private FBO (Indeed); publicly owned FBOs tend to pay living wages that may be higher and conform to local government personnel rules. Some GA FBOs with high seasonal variations in traffic will maintain a core staff and hire seasonal workers without fringe benefits (e.g., health insurance or personal time off) for peak periods to control operating costs. Line service personnel have important responsibilities. They are the first face a customer sees and are typically responsible for the following: • Customer service; • Traffic control and aircraft parking on the ramp; • Safety of the aircraft while on the airfield; • Fueling and handling of expensive aircraft; • Testing fuel quality and inventory levels; • Maintaining equipment in clean and functional condition; and • Airfield maintenance, snow removal, and possibly deicing (if a publicly owned FBO). At some airports where the FBO is publicly owned, line service personnel are cross-utilized for providing airfield maintenance (e.g., mowing), snow removal, and some support aircraft rescue and firefighting. In a full employment environment, working in FBO management or becoming a pilot (now that pilot shortages have led to higher salaries) are attractive career paths, but may leave con- tinual openings in line service. FS FBOs have also experienced shortages in aviation maintenance technicians and mechanics. To address mechanic shortages, some FBOs use third party mainte- nance specialists on the airfield instead of in-house maintenance technicians. At larger airports, affiliations with SASOs are increasingly common. Replacement for Leaded Fuel Lead is a required additive in gasoline for preventing detonation of fuel in piston engines operating at altitude and at high performance. According to the FAA, “Lead is a toxic substance that can be inhaled or absorbed in the bloodstream, and the FAA and EPA and industry are partnering to remove it from 100LL. 100LL emissions have become the largest contributor to the relatively low levels of lead emissions produced in this country” (FAA, Aviation Gasoline 2019). The Piston Aviation Fuels Initiative began in 2013 with a goal to develop replacement options for 100LL as leaded fuel. In September 2014, the FAA selected four unleaded fuels for a Phase 1 testing program. Subsequently, in March 2016, Shell and Swift fuels were selected for more intensive engine and aircraft testing. Initial Phase 2 testing resulted in identification of several issues to resolve. In September 2018, Swift suspended testing, but Shell has agreed to continue to address problem areas. New flight and engine testing are delayed now until mid-2020, making piston aircraft conversions to an unleaded fuel an issue beginning early in the next decade. For airports and FBOs owning 100L storage tanks, a replacement fuel for 100LL may require envi- ronmental cleanup, new storage tanks, and fuel lines. 2020 Compliance with ADS-B Requirements Automatic Dependent Surveillance-Broadcast (ADS-B) systems are foundational for imple- mentation of NextGen as the FAA moves from reliance on ground radar for air traffic con- trol to navigational aids that track aircraft using satellite signals. On January 1, 2020, the FAA

Key Factors Shaping the FBO Industry 29 required all aircraft operating in defined airspace according to Federal Regulation 14 CFR § 91.225 (CFR-2011-title14-vol2-sec91-225.pdf) to install an ADS-B transponder in an aircraft that transmits GPS coor- dinate data to a ground-based receiver, where they are processed for air traffic control. Not all aircraft will be required to equip for ADS-B, but flying will be restricted in controlled airspace. The FAA estimates that between 106,000 and 167,000 GA aircraft may need to be equipped with ADS-B. As of September 2019, approximately 60,000 aircraft have been equipped with ADS-B Out avionics and are ready for the 2020 mandate. FBOs that purchase an ADS-B “in-only” receiver can monitor ADS-B–equipped aircraft in a range of 200 miles of airspace around an airport and keep track of arriving and departing aircraft. From the FBO’s perspective, knowledge of inbound aircraft can help to plan for impending ramp space and line service needs. Wrap-up on Trends During solid performance of the economy, commercial aviation has remained profitable. Yet, GA is still an industry that has seen little growth in the fleet, especially for smaller personal aircraft. GA has achieved stability, offsetting declines in the large and dominant piston aircraft segment with growth in business aviation. The FBO industry has learned to be a nimble responder to changes in demands for service, an evolv- ing GA fleet, implementation of new technologies, and development of new revenue sources and capital requirements to continue operating. Growth of network services, software management solutions, cultivation of loyal customers, and useful alliances with specialty service providers are some of the many ways that FBOs continue to manage their business and preserve margins. The following types of airspace require ADS-B: 1. Class A, B, and C airspace. 2. Class E airspace within the 48 con- tiguous states and the District of Columbia at and above 10,000 feet mean sea level (MSL), excluding the airspace at and below 2,500 feet above the surface. 3. Class E airspace at and above 3,000 feet MSL over the Gulf of Mexico from the coastline of the United States out to 12 nautical miles. 4. Around those airports identified in 14 CFR part 91, Appendix D [FAA].