National Academies Press: OpenBook

Landscape of the FBO Industry in 2022 (2023)

Chapter: Summary

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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. Landscape of the FBO Industry in 2022. Washington, DC: The National Academies Press. doi: 10.17226/27295.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. Landscape of the FBO Industry in 2022. Washington, DC: The National Academies Press. doi: 10.17226/27295.
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Page 2
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. Landscape of the FBO Industry in 2022. Washington, DC: The National Academies Press. doi: 10.17226/27295.
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1   In 2020, the Transportation Research Board published ACRP Synthesis 108: Characteristics of the FBO Industry 2018–2019 (Kramer, 2020), which described the characteristics of the fixed-base operator (FBO) industry using data collected in 2018 and 2019. The objective of that work was to establish a baseline and framework to profile and track the industry as it evolves. ACRP Synthesis 108 analyzed publicly owned and private FBOs operating in the United States at public-use airports, the prevalence of multiple FBOs at airports in the United States, and the types of services offered to different segments of the general aviation market. The objectives of this follow-up report on the FBO industry were to investigate how gen- eral aviation fared during the pandemic and how FBOs, as the principal service agents for the industry, met pandemic challenges and addressed changes that predated COVID-19. These changes include continued FBO consolidation, a low-interest-rate market (until 2022) that supported both the aircraft and real estate markets, evolving technologies for alternate fuels and electrification, and environmental issues concerning fire suppression systems in hangars and the use of leaded aviation fuels. To address an expansive scope of issues, the synthesis methodology involved an extensive review of the digital record about FBOs. This included investigating FBO and airport websites, journal articles, and industry websites and webinars [webinars were hosted by the National Air Transportation Association (NATA), American Association of Airport Executives, Air- craft Owners and Pilots Association, Airports Council International–North America, and the General Aviation Manufacturers Association]. These references are listed in Appendix B. In addition, the synthesis included an online survey distributed to more than 700 FBOs and follow-up telephone calls and examination. This synthesis is organized into five chapters and three appendices: • Chapter 1 provides an overview of the project. • Chapter 2 examines what happened to general aviation and the economy during the pandemic. • Chapter 3 discusses how different segments of the FBO industry responded to new demands and protocols brought on by the pandemic. • Chapter 4 reviews the findings of the online survey. • Chapter 5 offers concluding thoughts and next steps in the ongoing effort to keep track of this vital component of aviation. • Appendix A presents the questions asked in the online survey. • Appendix B is the bibliography and references. • Appendix C is a list of abbreviations. The major findings and conclusions of the study are highlighted in the following pages. S U M M A R Y Landscape of the FBO Industry in 2022

2 Landscape of the FBO Industry in 2022 The FBO industry remains a diverse group of enterprises that have vastly different char- acteristics, business models, and customers. For the most part, all FBOs provide fueling and aircraft services, parking, hangars, and customer care. That is where the similarities end. The authors of ACRP Synthesis 108 divided the universe of FBOs into groups primarily by ownership and number of locations. There is a third relevant dimension that became espe- cially important during the COVID-19 pandemic: mix of customers and aircraft—in other words, the FBO’s market. COVID-19 accomplished the unexpected: during the initial shutdown, demand for com- mercial passenger flights slowed to a trickle. Certain segments of the general aviation market prospered during the pandemic—most notably, private aviation, pilot training, and air-reliant companies. Private aircraft were able to offer a more controlled and a more controlled cabin space and provide access to airports with limited commercial air service. Pilot training con- tinued as an essential service throughout the pandemic. Prospective pilots were in demand, and in the early stages of lockdown, urban air space was uncongested with commercial aircraft. Airports that supported air-reliant businesses such as hospitals, banks, construction companies, grocery store chains, and manufacturing plants—which need just-in-time deliv- eries of parts and personnel or medical airlift—also experienced continuous demand. To a large extent, local economic activity determined the impacts of COVID-19 on specific air- ports and their FBOs. In many ways, the pandemic created the perfect opportunity for the largest FBO chains with multiple locations in the United States or Canada, or locations at international air- ports. The aviation industry was shut down. There was widespread apprehension about the future. Leisure FBO markets offered expansion opportunities, and the largest existing urban markets were either not affected by COVID-19 or likely to recover from the pandemic. Today, most of the large chains are owned by private equity firms and infrastructure funds whose main strategy for FBOs is to build and operate networks of FBOs that complement each other and offer economies of scale. The pandemic was the perfect storm that resulted in the third wave of mergers and acquisitions documented in this synthesis (See Chapter 3). COVID-19 focused attention on new FBO markets. Stay-at-home orders and home- schooling made it possible for some to work remotely from any location. In late 2020, demand for second homes doubled from the previous year, helped by historically low mort- gage interest rates and the fact that destination locations in the United States were accessible during the pandemic (Strum, 2020). Vacation spots—such as Aspen, Colorado; Cape Cod, Massachusetts; Coeur d’Alene, Idaho; Jackson Hole, Wyoming; Lake Tahoe, California; Naples, Florida; and Palm Springs, California—experienced high population growth. The flow of new visitors and residents to these locations markedly raised the level of airport activity and contributed to increased costs for housing. There was also an uptick in invest- ments in and acquisitions of FBOs in these vacation spots where second home purchases translated into increased demand for private aviation. This phenomenon was present at both public and private FBOs. Publicly owned FBOs experienced the same swell of activity as private FBOs, provided they were in the right community. Because of the degree of new investment in hangars and FBO facilities in these towns, FBO owners are hoping and count- ing on second home locations becoming frequent or full-time residences. Not all airports benefited from this boom of activity. For example, Teterboro Airport (TEB), 12 miles from Midtown Manhattan and one of the largest business aviation air- ports in the country, experienced a 50% decline in operations during 2020, followed by partial recovery in subsequent years. Other general aviation airports had mixed experiences, heavily influenced by local business travel patterns during the pandemic. Survey responses

Summary 3 from public and private FBOs reported a common set of immediate operating challenges in ranked order: • Rising prices and wages • Hiring and retaining staff • Diminishing fuel margins • Availability of hangars Surveyed FBOs were also concerned about future funding for new and updated FBO facilities and near-term integration of sustainable fuels. Electrification was viewed as more than five years away, but FBO operators are interested in how they might participate in advanced air mobility. This synthesis collected readily available information and as a consequence focused on larger airports, where data were more readily available. The synthesis also identifies addi- tional questions for further inquiry: • Will remaining independent private FBOs be acquired by the larger chains in what seems to be an ongoing consolidation of good locations and smaller-network FBOs? • What is the trajectory of growth for private aviation going forward? Was this growth a COVID-19 phenomenon or a long-term trend? Will first-time users of jet cards and charters stick with private aviation or migrate back to commercial aviation? • How will the next stages of consolidation develop? Will current private equity firms sell their investments to new owners? Will FBOs become integrated with charter and frac- tional operators; fuel suppliers; maintenance, repair, and overhaul service providers; or even with the commercial airlines that want to offer a private aviation service to some of their customers? • Will Department of Transportation–authorized public charter operators (14 CFR 380) that resell individual seats on private aircraft continue to expand scheduled public charter service? • Is advanced air mobility going to happen? What role will FBOs play in servicing this new technology, obtaining sufficient electricity capacity, and monetizing new required services for these aircraft? For independent private FBOs and public FBOs that did not participate in the wave of COVID-related growth, long-standing issues remain: • How will they fund improvements to FBO facilities—including upgraded terminals, new hangars, ramp space, and ground support equipment—to service newer and larger private aircraft in use? • Will it be possible to make a profit on fuel sales if margins continue to be squeezed? What scale of operation would allow fuel sales alone to be economically viable, especially as newer aircraft become more fuel efficient? • Is it time to rethink rates and charging structures so that FBOs can recover rising operat- ing costs, monetize the use of electricity for recharging, and adequately replace revenues lost from fuel flowage fees? The chapters that follow provide an update on the economy, aviation activity, and what happened to the FBOs during the pandemic. Special thanks to the industry experts who pro- vided their perspective, excellent feedback, and ideas.

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In 2020, ACRP Synthesis 108: Characteristics of the FBO Industry 2018–2019 described the characteristics of the fixed-base operator (FBO) industry using data collected in 2018 and 2019. The objective of this synthesis was to follow up ACRP Synthesis 108 by examining selected recent and current trends in the aviation industry and their impacts at FBOs.

ACRP Synthesis 129: Landscape of the FBO Industry in 2022, from TRB's Airport Cooperative Research Program, investigates how general aviation fared during the COVID-19 pandemic and how FBOs, as the principal service agents for the industry, met pandemic challenges and addressed changes that predated COVID-19.

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