Despite the findings noted by Private Jet Card Comparison, JetASAP clients experienced an average 9% decrease in hourly rates over the past 90 days from quotes they received directly from charter operators. This Q3 pricing data is based on 3,924 quotes received by flyers through the app.
Read More
Getty Images - SkyF
Multi-Part Series: The 7 Immutable Elements of Building Equity in Your FBO Enterprise©
Fourth Installment on Airport Lease
For this blog post, we’ll continue our series called the 7 Immutable Elements of Building Equity in Your FBO Enterprise© with the fourth installment on our first element: Obtaining a Long-term airport lease.
In our last post, we covered: Payments, Maintenance Responsibilities and Termination. Now we are ready to discuss three additional lease elements:
1. Improvements including new buildings and renovations
2. Insurance, Indemnity and Hold Harmless Agreement
3. Environmental Liability.
Improvements, New Buildings and Renovations
Making leasehold improvements to an FBO is not only a way to improve facilities to attract and keep customers, it’s also a way to help secure future equity in the enterprise. It’s the best way to secure a longer lease term and to improve your return on investment (ROI).
Building new facilities and/or making timely and needed renovations are critical in negotiating a longer lease term and potentially adding additional optional years with the airport authority.
If and when you decide to sell your FBO, potential buyers will be interested in the remaining length of your lease as well as any additional option year periods. For instance, a remaining lease of 15 to 25 years is a good target along with one or two additional five year option periods.
If you are planning to build a new structure or renovate an existing one, having a business plan that details your goals will greatly assist you in getting the project financed and approved by your board of directors.
During your evaluation of expansion projects, it is important to keep in mind the goals of the airport authority. Airports like to see investments into the infrastructure of the airport environment, expand the business base and create jobs. Make sure your project meets these goals and adds to the success of the airport master plan.
Working hand-in-hand with your airport authority will greatly improve relations and will help you in negotiating a longer term lease.
Insurance, Indemnity and Hold Harmless Agreement
In this section we’ll discuss the elements that help you protect your enterprise from unforeseen perils that can expose you to risk and harm.
At a minimum, insurance must meet the requirements of the lease. However, in many cases the lease insurance amount requirement may be too low, especially when you need to protect your enterprise with aviation liability coverage, auto liability and workmen’s compensation insurance.
Always review these requirements with your insurance broker to make sure you are adequately insured and there are no clauses in the agreement which cannot be met. As a standard lease requirement, the airport will want to be a named insured on your policy.
When there are problems at the airport which involve your business and the airport authority, both the Indemnity and Hold Harmless clauses are very important to the FBO.
Unfortunately, in many cases the legal language covering both of these items can be onerous to the FBO. In many of the leases we’ve reviewed, the airport may want to be completely indemnified for any actions on its part and held harmless for any acts, gross negligence or misconduct. You should ask for a review of the language by your legal counsel to make sure you can live with it. In many cases, since you are operating at a government owned facility, the FBO may have to accept less than ideal language.
Environmental Liability
Today, more than ever, running an environmentally friendly operation is receiving a lot of attention. In the FBO setting, owners and operators are constantly dealing with aviation fuels and other chemicals that can be environmentally hazardous.
For instance, if you are operating a tank farm system for fuel storage you are required to provide environmental insurance. If you are operating at an older airport and you are new to the facility or the ground, you may want to consider completing a Phase 1 environmental assessment prior to use. This inspection could be a requirement of your insurance underwriters. Your legal counsel and insurance brokers should review the inspection and subsequent lease language prior to signing an agreement.
In our next blog post, we’ll examine the remaining critical element of your lease, the Airport Minimum Standards section.
Please leave any comments you have about this blog post below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.
ABOUT THE BLOGGERS: John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group (ABSG) and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.
SUBSCRIBE:
Subscribe to the AC-U-KWIK FBO Connection Newsletter
© 2022 ABSG
Credit: Getty Images - icholakov
Multi-Part Series: The 7 Immutable Elements for Building Equity in Your FBO Enterprise ©
Third Installment on Airport Leases
For this blog post, we’ll continue our series called the 7 Immutable Elements of Building Equity in Your FBO Enterprise© as we dive deeper into the topic: Obtaining a long-term airport lease.
In our last post, we covered: Term and Option Years, Operating Rights and Assignment Sale Clause. Now we are ready to discuss the next three lease elements: Payments, Maintenance Responsibilities and Termination.
Payments, including rental, gross revenue, flowage fees and out years to include escalators.
For this section of the lease, it’s important to check the exact wording so that you can protect yourself from any future disagreements or disputes. Payments may include investments in refurbishment of your terminal building and/or hangars to keep them up to date. Payments may include capital investments for a new hangar or building to exercise lease extensions. These rent payments and additional investments are all financial obligations that contribute to the success or potential failure of your FBO. Please note that each one of these elements is negotiable; therefore, do your homework by getting other comparable FBO leases in your area and region. If you have a competitor at your airport, ask to see its lease. Because it is considered a public record, you can obtain a copy under the Freedom of Information Act (FOIA). Remember, knowledge is the key to negotiating your best rates.
Building/ramp maintenance responsibilities.
Pay particular attention to the specific language for this section of the lease. Your FBO can end up on the short end if there is any ambiguity which can lead to unwanted finger pointing. If you are leasing buildings owned by the airport, most leases provide for the lessee (FBO) to pay for building upkeep, utilities and taxes. Spell out who’s responsible for various types of ramp and common area maintenance. For instance, if you operate in the snow belt, who is responsible for snow plowing ramps, approach taxiways or other areas?
A Note About Taxes
Be very clear on taxes. In many cases you don’t have to pay property taxes on buildings owned by a city or municipality. In some states you may have to pay school taxes or other fees. Therefore, be clear on defining these responsibilities.
Termination by the FBO or lessor.
In case of dispute, natural disaster, fire or other unforeseen events, it is important to spell out explicitly how the lease can be terminated by either party. What is most important is that the parties to the agreement have sufficient time to correct and negotiate any disputes or other occurrences. The “cure” clause should be at least 30 to 60 days to fix problems. This length of time is generally not used if the issues are late payment of rents or fees.
In our next blog, we will breakdown the final three components of an airport lease to include:
Improvements, new buildings and renovations.
Insurance, indemnity and hold harmless.
Environmental liability.
Please leave any comments you have about this blog post below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.
ABOUT THE BLOGGERS: John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group (ABSG) and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.
SUBSCRIBE:
Subscribe to the AC-U-KWIK FBO Connection Newsletter
© 2022 ABSG
Over the next several blog posts, we will do an in-depth dive into each of these elements, providing valuable insight to help you navigate your way towards operating a more successful FBO business. For this blog post, we start at the top: Obtaining a long-term airport lease with extension options. Your lease with the airport authority is the lifeblood of your business. Here are the critical components of your airport lease that we will look at:
Read More7 Immutable Elements for Building Equity in Your FBO Enterprise ©
There are several reasons why FBO owners and operators should want to build equity in their operation. Chief among them are:
In creating a great customer experience at your FBO, sometimes you have to go outside the box and think organically.
By that we mean taking a leadership role that involves creating an internal culture where employees have a vested interest in the outcome of the enterprise. This is accomplished by treating all employees as true stakeholders.
Read MoreManaging your brand equity is all about managing your stakeholder relationships. For the purpose of defining these terms, your brand is the name of your FBO and your equity is not only what you have invested in building infrastructure, it is also the investment in developing the kind of image that you want your brand to project.
Stakeholders are primarily your customers, employees, vendors and suppliers. These are the groups that can form an opinion of your FBO and can send or disseminate messages about your brand, whether positive or negative. That’s why managing these stakeholder relationships are critical to your success.
Read MoreIn managing the day-to-day activities of your FBO operation, it’s important to motivate your service team in order to reach your desired operational objectives.
In developing your objectives, think of what your desired goal is (which is essentially a desired outcome). Objectives will help you focus on any particular task at hand and serve as a focal point for your service team as they work to achieve these goals.
Engaging customers in a meaningful and thoughtful way creates the glue that binds them to your FBO brand and helps broaden your market reach.
The more reach or penetration you have in your geographic area or region of influence, the more awareness you create for your brand, resulting in potential gain in market share.
Attracting and keeping transient FBO customers starts with making a first good impression; it begins with ‘curb’ appeal, or more aptly, ‘ramp appeal.’
Just like in the real estate industry, how potential or new customers perceive your operations starts with the moment they first lay eyes on your facility as they taxi onto your ramp.
As the effects of the COVID-19 pandemic on the U.S. and world economies begin to wane, the FBO industry is bracing for a slow but positive recovery.
This is part of our FBO industry forecast for the next three quarters and into the first part of 2022. Our forecast, threaded below, is based on our Annual FBO Fuel Sales Survey, interviews with FBO owners and aircraft operators, analysis of the oil markets and the aviation fuel industry.
The effects of the Covid-19 bug on the FBO Industry in 2020 has left nearly 70% of FBOs in the U.S. and Canada reeling from its nasty sting. This is the overall takeaway from our recent Annual FBO Fuel Sales Survey.
In total, 67% of survey respondents said they had a decrease in fuel sales in 2020, compared to 2019. This is by far the most negative responses we have received in the eight years we have been conducting this survey.
As FBOs closed their books on 2020, the sound heard around the industry was a collective sigh of relief as we ended of one of the most trying years in U.S. history.
As we turn the page on our calendars to a new year, it is time to take stock of where we are and where we are headed.
If Charles Dickens were to write this blog post about the results of our FBO Fall Fuel Sales Survey, he may very well have begun the way he so poignantly penned the beginning of A Tale of Two Cities: “It was the best of times, it was the worst of times.”
In this Covid-19 induced time of upheaval, we find an FBO industry trying to climb its way out of a very dark March and April, seeking the proverbial light at the end of the tunnel. While some FBOs have caught a glimpse of sunlight, others are seeing shrouds of fog frosting over the lens.
When operating an FBO in the Covid-19 pandemic era, it’s easy to get caught up playing defense. After all, the natural instinct is to preserve what we have. Apply for the PPP program, adjust operations and manage cash flow.
This conservative approach seems to have worked for many FBOs until the PPP program funds ran out. Now it is a wait and see game, hoping that business aircraft traffic will pick up and fuel sales will return to pre-pandemic levels.
No one really knows what the new normal for the FBO industry will be. Now is a good time to examine your current business model and make adjustments to keep your revenue stream as consistent as possible.
With this in mind, we suggest FBOs take a closer look at the European FBO business model in which services are unbundled.
FBOs continue to face a pandemic shaking the foundation upon which the FBO industry stands.
Since our last blog post in May, there have been reports of positive progress in dealing with the virus outbreak, but, in the United States, the gains may be short-lived.
Going into June, many states started to open businesses according to government-issued guidelines. Early reports of increased business aircraft flight activity have been encouraging. Part 135 charter operators and fractional aircraft owner programs both reported higher than anticipated demand for their services. Customers were seeking an alternative to crowded commercial airline terminals and the close mingling of strangers in the confined space of a commercial airline cabin environment.
Now, as June ends with a series of the highest daily totals of new cases of infection, a COVID-19 resurgence has some states, such as Texas and Florida, backtracking their business re-opening plans. In fact, some states have considered restricting airline traffic coming from states with increased COVID-19 case activity. Is business aircraft traffic next to be scrutinized?
This start-and-stop pattern will undoubtedly have a boomerang effect on the FBO industry.
COPYRIGHT © 2025. ALL RIGHTS RESERVED. INFORMA MARKETS, A TRADING DIVISION OF INFORMA PLC.
ACCESSIBILITY | PRIVACY POLICY | COOKIE POLICY | TERMS OF USE
