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Landscape of the FBO Industry in 2022 (2023)

Chapter: Chapter 3 - Current Landscape for U.S. FBOs

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Suggested Citation:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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:"Chapter 3 - Current Landscape for U.S. FBOs." 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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28 Quick Takes The following bullet points summarize the current FBO landscape. • During the pandemic, the largest FBO chains were sold or consolidated, expanding their net- works. Private equity firms continue to be active participants in the FBO industry. • Destination locations in the United States experienced rapid growth in private aviation and investment in facilities. • Certain pandemic impacts still affect FBOs. These include workforce shortages and recruitment challenges, changing demand patterns, rising costs, health and safety practices, and pursuit of alternative stable revenue streams. • Other challenges that existed prior to COVID-19 remain, including diminishing fuel margins, hangar shortages, rates and charges that cover costs, and availability of capital to improve, update, and expand facilities. • Looking ahead, new, more-sustainable fuels; electrification of aircraft and ground equipment; and advanced air mobility (AAM) present new opportunities for FBOs. Observed Changes in FBO Ownership and Facilities Since 2018 Slight Reduction in Aviation Facilities with Fuel In December 2018, extensive analysis of FBOs indicated that there were 3,661 FBOs operat- ing at 3,233 public-use airports (Kramer, 2020). These airports were a combination of publicly and privately owned facilities and included airports, heliports, seaplane bases, and a handful of specialized facilities for balloons, gliders, and ultralight aircraft. Those counts were based on analysis of the FAA Form 5010-1 database and the AirNav database. To obtain a glimpse of what may have changed during the pandemic years, Table 7 compares the number of aviation facilities listed in the FAA’s 5010 database in 2018 with the number listed in the same database in October 2022. The number of public-use 5010 airports and heliports has declined by 38 and by 3, respec- tively. Seaplane bases have increased by 12. Facilities offering fuel have declined by 24. Since those changes are less than 1%, it can be assumed that at least on an absolute basis, the number of facilities offering fuel and FBO services has remained somewhat constant. Another benchmark is the AirNav fuel price survey. FBOs can upload fuel prices to the AirNav website for Avgas (leaded and unleaded), Jet A, SAF, and motor gasoline. Fuel prices represent a 30-day rolling average. Reporting facilities can be for either public or private use, so there is not a one-to-one correspondence between the AirNav fuel statistics and aviation facilities reported C H A P T E R   3 Current Landscape for U.S. FBOs

Current Landscape for U.S. FBOs 29   in the 5010-1 database. Table 8 compares the number of reporting FBOs by FAA region in 2019 and in 2022. There are 33 fewer FBOs reporting fuel prices in 2022 and 4 additional FBOs reporting from the FAA’s Alaska and Central regions. The Western-Pacific region has 13 fewer FBOs participat- ing in the fuel survey. The net change in FBOs reporting fuel prices is about −1% of total FBOs, also indicating that the number of FBO locations in the United States has been stable over the past five years. Largest FBO Chains Merged and Expanded Their Networks At a more granular level, the FBO industry remains diverse. ACRP Synthesis 108 grouped FBOs into four categories: • Publicly owned FBOs. • Independent FBOs with one to two locations. • Small-network FBOs with three to five locations. • Large networks of FBOs and franchises with more than five locations. Change 2019 2022 Number Percent Public-Use 5010 Facilities 5,092 5,063 (29) −0.6 Airports 4,812 4,774 (38) −0.8 Heliports 60 57 (3) −5.0 Seaplane Bases 211 223 12 5.7 Other 9 9 – 0.0 Facilities with Fuel 3,302 3,278 (24) −0.7 Source: Compiled from FAA Form 5010-1, Airport Master Records, as of December 5, 2018, and October 6, 2022, https://www.airportiq5010.com /5010Web/. Table 7. Public-use aviation facilities in continental United States, Alaska, and Hawaii. Reporting FBOs Change FAA Region 2019 2022 Number Percent Nationwide 3,674 3,637 (37) −1.0 Alaska 79 82 3 3.8 Central 355 356 1 0.3 Eastern 362 358 (4) −1.1 Great Lakes 735 731 (4) −0.5 New England 145 139 (6) −4.1 Northwest Mountain 391 386 (5) −1.3 Southern 676 671 (5) −0.7 Southwest 577 573 (4) −0.7 Western-Pacific 354 341 (13) −3.7 Source: Compiled from AirNav website as of May 1, 2019, and November 1, 2022. Table 8. FBOs reporting fuel prices on AirNav website.

30 Landscape of the FBO Industry in 2022 At the time, these categories worked, but since 2019, large networks of FBOs have engaged in another wave of merger and acquisition activity, and today this group of FBOs warrants further distinctions. In 2021, more than 250 FBOs changed hands because of the sales of Signature Flight Support and Atlantic Aviation. Signature was sold to a consortium of private equity firms consist- ing of Blackstone, Global Infrastructure Partners, and Cascade Investments for $4.7 billion. KKR (Kohlberg Kravis Roberts) acquired Atlantic Aviation for $4.475 billion. Ross Aviation acquired Air Service Hawaii’s six FBOs and subsequently merged with Atlantic. Signature acquired 14 FBOs from TAC Air. Other medium-sized and regional FBOs also consolidated through acquisitions. Table 9 compares the size of the largest FBO chains as of December 8, 2018, with October 31, 2022, and characterizes FBOs as large, medium, and regional FBO chains. Table 9 shows U.S. locations only. Most of the large and medium FBO chains have multiple international locations as well. Overall, this group of FBOs has grown from 374 locations in the United States to 426 in less than four years. Notably, the Paragon Network, a distinguished group of independent operators networked together, has become smaller during this timeframe as the FBO chains consolidated further. Table 9 shows the growing dominance of private equity funds and investment companies in the FBO sphere. Since 2020, the FBO industry has had the most FBO acquisitions and mergers on record. The transactions reflect revised thinking about real estate valuations of FBO leases and development potential for new hangar and infrastructure projects (such as electric charging stations). Low inventory of used aircraft—along with high valuations of aircraft and increased Network FBOs U.S. Locations 2018 2022 Category Notes on 2022 U.S. Ownership Signature Flight Support/Signature Select 129 147 Large Blackstone, Global Infrastructure Partners, and Cascade acquired in 2021 Atlantic Aviation 68 102 Large KKR acquired in 2022 Million Air 24 30 Medium Privately owned with franchise business model Avflight 19 21 Medium A division of Avfuel Sheltair 18 19 Medium Sold 5 New York FBOs to Modern Air; operates in Florida, Georgia, and Colorado Paragon Network 25 19 Medium Network of independent FBOs Crowley 14 18 Regional Primarily distributes and sells fuel in Alaska Modern Aviation 0 16 Medium Owned by Tiger Infrastructure Fund FlightLevel Aviation 7 12 Regional Operates on East Coast and in Chicago Jet Aviation 8 11 Medium Owned by General Dynamics Hawthorne Global Aviation Services 6 10 Medium NOVA Infrastructure/Wafra acquired March 2022; acquires Choice Aviation October 2022 Jet Access unknown 10 Regional Vertical integration; merged with Eagle Creek Aviation in 2021 Carver Aero/Revv Aviation 2 7 Regional Owned by CL Enterprises Group; operates in Midwest Cutter Flying Services 4 6 Regional Southwest family-owned business Leading Edge Aviation/Skyservice 6 4 Regional InstarAGF Asset Management acquired Skyservice in 2017; acquired Leading Edge in 2019 Wilson Air Center 4 4 Regional Southeast family-owned business Lynx 6 0 Acquired 9 FBOs acquired by Atlantic TAC Air 15 0 Acquired Sold 14 to Signature; divested 3 to Atlantic Ross Aviation 13 0 Acquired Merged with Atlantic Air Service Hawaii 6 0 Acquired Acquired by Ross/merged with Atlantic Total U.S. Locations 374 436 Note: Observations made December 8, 2018, and October 31, 2022. Source: Compiled from FBO websites and ACRP Synthesis 108. Table 9. Comparison of large FBO chains, U.S. locations only, 2018 and 2022.

Current Landscape for U.S. FBOs 31   flying of cabin-class jets (despite rising fuel prices)—made a compelling case that this segment of general aviation demonstrated resilience during the pandemic and that high-net-worth indi- viduals might be a consistent group of users going forward. Consolidation of the largest chains of FBOs did not appear unexpectedly. This was the third wave of mergers and acquisitions. Between 2006 and 2016, approximately 400 FBOs changed owners. Many of these transactions occurred as long-term leases expired and leaseholds increased in value. The Great Recession of 2008 forced some transactions as well (Wilson, 2021). BBA Aviation (Signature Flight Support) and the Macquarie Infrastructure Corporation (Atlantic Aviation) have a long history of mergers and acquisitions. Figure 21 summarizes the highlights of merger and acquisition activity for the two companies, who also expanded their networks through competitive bids on new FBO leases, joint use agreements, and purchases of adjacent airport lands to expand and redevelop existing FBO real estate. Signature also has part- ner agreements with independent FBOs through its Signature Select program, bringing these FBOs into its network and rewards programs. Mergers and acquisitions have also served as catalysts for other FBO networks started by previous employees of the large FBO chains. Ross Aviation began as a spin-off of six FBOs from Signature’s acquisition of Landmark Aviation. Modern Aviation executives had previ- ously worked with Macquarie, Atlantic Aviation, and Sheltair. SAR Trilogy Management was co-founded by the former president of Signature Flight Support. This group of leaders special- ized in building scalable FBO platforms. Seasonal Markets—The New FBO Growth Area Leisure markets in the United States recovered from the pandemic faster than business and international markets. Remote work made it possible to live and work in seasonal and destina- tion markets. As a consequence, those markets observed increased travel by private aircraft and a noticeable investment in facilities. Table 10 shows examples of itinerant and local GA operations at three destinations in the mountain west: Vail, Colorado; Bozeman, Montana; and Jackson Hole, Wyoming. All three areas have extensive second home developments, and each experi- enced large increases in private aviation during the pandemic. The surge in leisure market travel did not go unnoticed by the larger FBO chains. At Bozeman Yellowstone International Airport (BZN), Signature Flight Support has operated a full-service FBO since 2000. In 2020, Jet Aviation purchased the second FBO, Arlin’s Aircraft Services, and a 40,000-square-foot hangar is under construction in 2023. In 2022, Million Air announced that it would locate a third FBO at Bozeman. In 2021, Signature acquired Vail Valley Jet Center. Jet Aviation is expanding its hangar footprint at Scottsdale (SDL). At Coeur d’Alene Airport/Pappy Boyington Field (COE), wooden boat manufacturer StanCraft acquired the sole FBO, Southfield Aviation, and developed a private jet center, which opened in May 2022. The new complex con- sists of a 15,000-square-foot terminal and the former FBO facilities. Other destination markets also experienced rapid growth in private jet activity. Naples Avi- ation, operated by the Naples Airport Authority in Florida, has experienced a major shift in aircraft mix and operations. In the past decade, jet operations have grown from 23% of total operations in 2011 to 41% in 2021, as shown in Table 11. Growth in cabin-class jet operations intensified during the COVID-19 pandemic. Increased traffic resulted in higher fuel sales. Fuel volumes grew more than 40% in 2021 and 20% in the first six months of 2022. Figure 22 com- pares aircraft operations and fuel sales at Naples Airport (APF). Growth at Naples Airport required the Naples Airport Authority to open a second FBO to increase ramp space and improve aircraft separations. Fortunately, the old commercial service terminal had previously served as an alternate FBO during the remodeling of the existing FBO,

32 Landscape of the FBO Industry in 2022 Source: Compiled from Signature website, https://www.signatureaviation.com/about/newsroom/, and Atlantic website, https://www.atlanticaviation.com /news/. Figure 21. History of Signature and Atlantic mergers and acquisitions.

Current Landscape for U.S. FBOs 33   - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 - 20,000 40,000 60,000 80,000 100,000 120,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fu el S al es (G al lo ns ) Jet A 100LL Source: Compiled from Naples Airport Authority, 2022, https://www.flynaples.com/faq/. Figure 22. Aircraft operations vs. fuel sales at Naples Airport (APF), fiscal years 2012–2021. 2019Airport 2020 2021 Change Bozeman (BZN) 71,344 78,001 79,614 12% Jackson Hole (JAC) 10,049 11,437 14,190 41% Vail (EGE) 25,249 28,285 34,971 39% Source: Compiled from Air Traffic Activity System (ATADS), 2022, https://aspm.faa.gov/opsnet/sys/Airport.asp. Table 10. Itinerant and local general aviation operations. Fiscal Year Ending September 30th 2012 2019 2020 2021 % Change 2011–2021 % Change 2019–2021 Total Operations 87,078 112,800 104,479 113,137 34% 0.3% Jet Operations 19,503 33,756 33,193 46,920 144% 39% Percent Jet Operations 22% 30% 32% 41% Source: Compiled from Naples Airport Authority, 2022, https://www.flynaples.com/faq/. Table 11. Aircraft operations at Naples Airport (APF), fiscal years 2011–2021.

34 Landscape of the FBO Industry in 2022 so the space was already set up to handle FBO operations. NetJets and other tenants moved to the commercial service terminal. Since the terminal was built in the 1980’s, the authority has been considering options for its future as a facility for reuse or rebuild. Publicly Owned FBOs Remain a Diverse Group Publicly owned FBOs are more difficult to track. They represent a large and diverse group of primarily individual entities owned directly by government entities or authorities or by other quasi-public groups. Among the largest publicly owned FBOs are Naples Aviation (APF), San Bernadino’s Luxivair SBD (SBD), and DuPage Flight Center (DPA). Each of these offers a wide range of full services that cater to both large-cabin jet aircraft and smaller aircraft. Early publicly owned FBOs at commercial airports include Fort Wayne Aero Center (FWA) and Cerulean Aviation at Greenville–Spartanburg (GSP). The majority of other publicly owned FBOs are quite small and provide minimal services, such as self-fueling, courtesy cars, and airport management. Since airport-owned FBOs function either by intention as an exercise of proprietary exclusive rights or by default as the best financially viable option in a small market, most publicly owned FBOs have remained as such since 2019 with a few notable and recent additions. Pryor Field Regional Airport (DCU), Alabama During the pandemic, some smaller private FBOs went out of business, and facilities were taken over by the airport sponsor. For example, Alabama’s Pryor Field Regional Airport (DCU)— 15 miles from Huntsville International Airport (HSV)—assumed operation of its FBO after the current operator gave 30 days’ notice of closure, citing in 2020 a slowdown of corporate traffic and difficult economic conditions during the pandemic. The airport has 124 based aircraft and an estimated 164,000 annual operations (Form 5010-1). The airport split the FBO functions with the former FBO owner, who kept the maintenance shop. The airport took over management of the terminal, car rentals, and fueling. Wichita Falls Regional Airport (SPS), Texas Wichita Falls operates two airports, Wichita Falls Regional Airport (SPS) and Kickapoo Downtown Airport (CWC). Historically the city had operated the FBO at Kickapoo, which had 75 based aircraft and approximately 33,800 annual operations. In contrast, SPS was located on Sheppard Air Force Base. This joint use facility supports three commercial flights to Dallas/ Ft. Worth International Airport and 13 civilian based aircraft. Most of the operations at SPS are military—77% of 256,000 annual operations (Form 5010-1). The city decided to take over FBO services at SPS when Signature Flight Support announced it was leaving this market. The transi- tion took place on October 1, 2020. Jackson Hole Airport (JAC), Wyoming As a third example, Jackson Hole Airport (JAC) engaged in an extended effort to take over FBO operations from an existing private FBO operator. The process began in 2017, when the airport board received a proposal for a second FBO. The board gave this proposal serious con- sideration before reversing course and announcing it would instead buy out the last five years of Jackson Hole Aviation’s operating agreement for $26 million (Koshmrl, 2020). The proposed buyout was met with several lawsuits about the public financing of this acquisition and chal- lenges to the airport for stifling competition at an airport financed in part from federal funds. The board received rulings from the courts that they could proceed by declaring their rights to a proprietary exclusive FBO operation run by airport staff. However, two years had elapsed during the court process, and the airport and FBO could not come to agreement on a three-year buyout plan. The board instead decided to wait until expiration of the existing FBO lease, which took

Current Landscape for U.S. FBOs 35   place in 2023. Since no immediate buyout agreement was signed, Wyoming Jet Center made another proposal for a second FBO. This second proposed FBO was not built because of cost and the fact that only a few months remained on the existing FBO’s lease when the airport took over FBO functions. Enduring COVID-19 Impacts Affecting FBOs Many of the trends observed in the three years since ACRP Synthesis 108 was published were already in place prior to the pandemic. COVID-19 intensified some of these issues and intro- duced other challenges for FBOs. Five pandemic-related impacts continue today as airports and FBOs deal with the aviation recovery and its aftermath. These are: • Workforce shortages and recruitment. • Remote work as a permanent feature of the workplace. • Health and safety practices. • Emphasis on alternate FBO revenue streams. • Use of contract workers and vendor partnerships or agreements. Each is discussed in the next sections. Workforce Shortages and Recruitment The pandemic brought out divisions within the U.S. workforce. Many lower-paying service jobs required employees to show up at the workplace, often for long hours, and endure the highest COVID exposure conditions. This was true of hospital workers as well as ground service and customer service personnel at FBOs. Industries highly affected by COVID experienced both less-attractive working conditions and the need for more staff during the pandemic. As the country adjusts to living with COVID and recovers, a tight labor market has persisted across the economy for a variety of reasons: • Older adults still in the workforce decided to retire during the pandemic, leaving their jobs and years of experience. • Inflation increased the cost of living; workers need and want more money. • The Great Resignation may have been brought about by a Great Reevaluation—in turn caused by “epiphany quitters” in a tight labor market with other job options. • Health concerns and vaccine hesitancies linger, especially for jobs that face the public. • High costs for childcare may discourage some workers from returning to work in lower- paying jobs. • Slowing immigration could be affecting the labor shortage. • There may be a structural mismatch between job openings and workers with the right skills. Labor and other supply-side shortages were present prior to 2020, but the pandemic crystal- lized them. Requirements for aviation safety made the labor shortage problem hit this sector particularly hard. The aviation industry has labor shortages in every category of work for many sectors: commercial airlines; TSA; airports; concessionaires and vendors; maintenance, repair, and overhaul (MRO); and private aviation. FBOs typically operate with a lean staff to handle line services; fuel quality control, fuel trucks, and aircraft fueling; towing; ramp management; ground handling; fire safety; aircraft flight coordination; and customer service and communica- tions. Many airports or FBOs function with fewer than 10 full-time-equivalent employees. Labor shortages in these instances can have a large impact on operations. For the first time, five distinct generations of employees coexist in the workplace. . . . Gen Z’ers love a work–life balance and flexible work schedules. Millennials and Gen Z’ers are attracted to companies that are ecologically savvy and friendly. . . . Hughes, 2020

36 Landscape of the FBO Industry in 2022 Recruitment for new FBO hires has its challenges. Even entry-level positions require consid- erable training and experience to safely perform duties. If the FBO offers aircraft and avionic repairs, mechanics and technicians must graduate from an FAA-approved school, have 18 to 30 months of practical experience, and successfully complete oral and practical tests prior to FAA certification. There are good resources to supplement on-the-job training, such as the National Air Transportation Association (NATA) Safety 1st Training Center and International Standard for Business Aircraft Operations program, but new recruits must be willing to train for the job. At one time, aviation jobs carried a wage premium. Today, FBOs are competing with other service industries and retail to hire and retain workers. Airlines are recruiting airframe and power plant graduates right out of school and pilots from the regional airlines. For publicly owned FBOs, established civil service wages sometimes make it difficult to compete with entry- level positions in other industries. The challenge to competitively attract and retain employees in a tight labor market requires new solutions. Many FBO operators have embraced attractive sign-on packages for entry-level jobs that include sign-up and referral bonuses, flex hours, relocation packages, 100% payment of medical insurance, 401K matching contributions, and sometimes a housing allowance. Jackson Hole Airport offers many of these benefits to its workers because the high cost of living in the area was a deterrent to workers from other places. Overall, the higher-wage and inflationary environment has affected FBO operating costs, since wage increases for new recruits have also required FBOs to increase wages for existing employees. According to Dan Rutherford, manager of marketing and business development for Canadian Fast Air, “in the FBO world. . . compensation, culture, and flexibility” are the keys to “employing the incoming and current workforce” (Epstein, April 2022). FBOs have also addressed labor shortages with more flexible solutions, such as requiring employees to work longer hours (sometime four 10-hour days) or shortening hours of FBO operations altogether. Remote Work as a Permanent Feature of the Workplace COVID-19 expanded the option for private aviation to a broader base of customers who had high disposable income or the ability to work remotely for extended periods of time. Charter operators offered air travelers the tools to purchase space on private jets without making long- term commitments. These tools included subscription fees and jet cards. New mobile applica- tions allowed access to real-time availability, pricing, and reservations. For the operators, these tools made it possible to fill empty-leg flights (Ollek et al., 2020). Families and friends could share charters for per-seat costs that were roughly equivalent to first-class seats on a commercial flight. Changes to FBO Health and Safety Practices While life after COVID-19 is yet to fully return to normal, general aviation airports and FBOs have made health and safety adjustments that may reflect a new normal. New practices instituted during the pandemic include: • Compressed shifts. During the pandemic, shift work changed. Some FBOs divided their staff into two discrete teams that do not overlap. These schedules make it possible for employees to enjoy three consecutive days off. Because of positive reviews, these schedule changes have become permanent at some FBOs. • Better sanitation. Pilot lounges before COVID offered visitors snacks such as plates of warm cookies or popcorn. These open food offerings were replaced with pre-packaged single-serve

Current Landscape for U.S. FBOs 37   snacks and water from touchless dispensers. Additional janitorial cleaning regimes were also implemented. • Remote options for back-office workers. The pandemic also revealed which jobs required customer contact. For those that do not interact with customers, such as back-office account- ing, the pandemic set in motion greater flexibility for remote work, freeing up additional space at the FBO facility (Wilson, 2021). Emphasis on Alternate FBO Revenue Streams FBOs typically have a variety of revenue streams, including from fuel, hangar rent, and con- cession fees from rental cars. Some FBOs have ground leases and revenue-sharing arrangements with on-airport businesses. The FBOs rent office space and manage fuel farms for commercial airlines. Spot fuel sales and temporary hangars for military aircraft, medical airlift, firefighting staging, and search and rescue can also bring in additional revenues. One impact of COVID-19 is a renewed appreciation of income-producing real estate assets. FBOs that supported businesses that closed or events that were cancelled experienced dimin- ished fuel sales. These FBO operators noted that while fuel revenues were dwindling, alternate sources of operating revenue were steady. Use of Contract Workers and Vendor Partnerships and Agreements Table 12 shows the extent of declines in aviation activity between March and April 2020. FBOs tried to limit losses by reducing service contracts and employee hours. Paycheck Protec- tion Program grants subsequently helped to keep employees on the payroll, but the pandemic also pushed FBOs in a direction already established before COVID-19—that of unbundling FBO services and of greater reliance upon on-airport vendors or in-network partners to provide third-party services instead of offering those services in-house. Ongoing FBO Challenges Addressing Rising Costs and Fuel Margins Rising costs for staffing, insurance, utilities, and construction have squeezed margins for FBOs. For most high-volume fuel customers, FBOs offer fixed margins (upload fees) over the wholesale cost of fuel. These cost-plus contracts are typically set each year with the fuel supplier. Upload fees are based on an airport or FBO’s cost structure. The going rate offered by nearby competitors for these upload fees is also often influential. For FBOs that sell contract fuel, these upload fees are the net fuel revenues for contract customers. Airport tenants also receive fuel dis- counts. Smaller GA airports that purchase fuel on the spot market continue to experience delays in fuel supplies, because there have been ongoing shortages of drivers to deliver fuel to airports. Month Air Carrier Air Taxi Itinerant Civil Military Mar. 2020 1,182,273 481,676 905,028 969,988 185,904 Apr. 2020 442,998 216,052 621,558 616,921 157,555 Change −63% −55% −31% −36% −15% Source: Compiled from Air Traffic Activity System (ATADS), 2022 https://aspm.faa.gov/opsnet/sys/Airport.asp. Table 12. Changes in aircraft operations, March 2020 to April 2020.

38 Landscape of the FBO Industry in 2022 The FBO business model includes a tradition of providing services for free in exchange for purchasing fuel by volume. These discounts are widely practiced and include reduced ramp or aircraft parking fees and facility fees with fuel purchases. In addition, FBO line services also include baggage services, trash removal, galley and concierge services, pilot lounges or quiet rooms, Wi-Fi, and courtesy cars for little or no cost. Figure 23 shows a sample of discounts available at San Bernardino International Airport, a highly competitive airport 60 miles east of Los Angeles. In this inflationary environment, FBOs may need to think about ways to offset increasing costs. These could include living wage fees attached to invoices. This fee is widely in practice FUEL DISCOUNTS Fuel Purchase Volume Discounts (Single Purchase) Aircraft owners/operators may enter into bulk fuel purchase agreements with San Bernardino International Airport Authority for additional fuel price discounts. 400 gallons $0.20 discount per gallon 1,000 gallons $0.30 discount per gallon 2,500 gallons $0.40 discount per gallon 5,000 gallons $0.60 discount per gallon 10,000 gallons $1.00 discount per gallon PARKING Parking fees for aircraft NOT exceeding 12,500 lbs. certified gross landing weight (more than 2 hours, not exceeding 24 hours) parked on the Luxivair SBD ramp: Parking Fee Fuel Purchase Required to Waive Parking Fee Single-Engine $10 15 gallons Multi-engine/ Piston Helicopter $15 25 gallons Jet/Turbine Helicopter $25 40 gallons Parking fees for aircraft exceeding 12,500 lbs. certified gross landing weight (more than 2 hours, not exceeding 24 hours) parked on the Luxivair SBD ramp: Group Aircraft Length Parking Fee Fuel Purchase Required to Waive Parking Fee IA Less than 50 feet $60 100 gallons IB 51–90 feet $70 300 gallons II 91–125 feet $90 500 gallons Source: San Bernadino International Airport, 2022. Figure 23. Sample of San Bernardino’s Luxivair SBD pricing policy for fiscal year 2022–2023.

Current Landscape for U.S. FBOs 39   at restaurants. Alternatively, John Enticknap and Ron Jackson have proposed a three-tier FBO pricing system: • Tier 1: Full-service pricing. Pay the full posted price and get all services included. • Tier 2: Basic fuel service with a la carte pricing. Receive a discount off the posted or contract fuel price. Then pay for all ancillary services requested. If no services are requested, then pay a facilities fee. • Tier 3: No fuel purchase. Pay a ramp fee, facilities fee, and a la carte pricing for requested services (Enticknap and Jackson, 2020). Hangar Shortages According to JetNet data, “the U.S. business jet fleet increased by 34% with a physical footprint increase of 27.5 million square feet between 2010 and 2020” (Grossman, 2022). That trend accel- erated during the pandemic and magnified the shortage of hangar space. Aircraft hangars and their construction are subject to unusual market forces. At many air- ports, there is a large inventory of box hangars and T-hangars constructed 30 or 40 years ago. Some of those hangars were built by the military or by the airport. Others were developed pri- vately on a ground lease from the airport sponsor. As the buildings aged, many languished in the last years of the leases and ultimately reverted back to airport ownership. This group of hangars is old, sometimes in disrepair, and sized to a generation of aircraft that are retired or at the end of their usable life. These hangars occupy valuable land at an airport and, because of their age, are often rented at below-market rates. To renovate these hangars, they must be brought up to cur- rent building codes, usually at a high cost. Demolition can be a financial challenge as well, given the presence of environmental hazards. Consequently, many of these older hangars remain in the inventory and tend to suppress market rates for hangar rentals in the region. New hangars are built primarily by FBOs or hangar developers. There is relatively little public funding for hangar construction, because this use has a low funding priority with the FAA. Some state governments will fund hangars. It is common for FBOs to construct hangars as part of their required leasehold capital improvement. Other developers are building hangars on speculation to lease or sell. Several hangar projects are being developed in destination markets following increased cabin-class jet activity at those locations. There are also hangar developments at second-tier airports close to metropolitan airports, where land is more available. For example, in the Los Angeles area, in 2021 there were real estate transactions for a 63,000-square-foot hangar at Hollywood Burbank Airport (BUR); 27 hangars at John Wayne Airport (SNA), in Orange County; and outside Seattle, an 18,000-square-foot hangar at Paine Field (PAE). Some airports are seeing development of luxury hangars that include adjoining offices and kitchens and offer line services such as handling, fueling, cleaning, and detailing (Kamin, 2022). Hangar revenues can be a future hedge or offset for declining fuel profits. Especially with large FBO chains owned by private equity firms, new hangar development has shifted business strate- gies to focus more on real estate and resale values. There is also a push for optimizing hangar pricing by making it consistent and at market rates. Ownership and management of hangars can include different groups: • Airport sponsors may own hangars built with public money or obtained through reversion clauses at the end of a lease. Sponsors can manage their hangars directly or through contract managers, or delegate to the FBO as part of a lease agreement. • FBOs develop hangars and rent or lease them out. • Private aircraft owners have a ground lease with the airport and build an individual hangar.

40 Landscape of the FBO Industry in 2022 • Developers build multiple hangars, which are either managed by a company or sold as hangar condominiums. • Charter operators and fractional owners build or lease hangar facilities. The hangar supply–demand equation is highly localized. Many airports and FBOs have hangar wait lists if they are operating at capacity, but many of those lists are not regularly maintained. Consequently, waitlists are often unverified expressions of demand for hangars at a specific airport. Another factor in hangar availability is the matching of hangar size to aircraft. Where the gen- eral aviation fleet is still dominated by smaller piston aircraft, newer aircraft—especially cabin- class aircraft—are often longer, wider, or heavier and do not always fit in existing and available hangar inventories. Hangar Foam Fire Suppression Systems One issue that is a significant cost component for larger hangars (≥ 40,000 square ft) is the National Fire Protection Association (NFPA) 409 standard, which recommends that large hangars have fire suppression systems. The standard was established 70 years ago, when aircraft hangars were more highly valued than the aircraft themselves. Today the reverse is true. In 1984, NFPA recommended inclusion of foam fire suppression systems in community hangars. Industry experts claim that today’s aircraft construction has all but eliminated leaky aircraft wing tanks, and refined jet fuel has higher ignition points, lowering the risk of a fuel spill fire (Epstein, June 2020). NATA commissioned a study to examine the history of foam discharge systems in aircraft hangars. According to the study, prepared by the University of Maryland’s Department of Fire Protection Engineering, there were at least 137 reported accidental foam discharges from 2004 to 2019. Accidental foam discharges can fill a hangar with a thick layer of foam 10 feet high, potentially spilling out onto the ramp. The study estimates that cleanup costs and damages of accidental foam discharges averaged $6.4 million annually, while the cost for foam discharges in response to actual fires was $1.7 million (Milke et al., 2019). Foam fire suppression systems also use “forever chemicals,” which are hard to remove and potentially hazardous. The 2022 revised NFPA standard on hangars incorporates changes proposed and supported by NATA, providing aviation businesses significant tools to protect against fire without the use of foam fire suppression systems. The 2022 edition contains provisions that: • Create an alternative, performance-based design process allowing modification of any part of the NFPA 409 standard. • Create a risk assessment process that allows businesses to propose alternative fire protection schemes, with or without foam. • Exempt Group II hangars that prohibit hazardous activities from foam requirements. • Approve the use of ignitable-liquid floor drainage systems in lieu of foam systems. The EPA is also considering a proposal to designate perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as hazardous substances under the Comprehensive Envi- ronmental Response, Compensation, and Liability Act of 1980, which created the Superfund program. This proposed rulemaking would increase transparency around releases of these harm- ful chemicals and help to hold polluters accountable for cleaning up their contamination. Fire- fighting foam contains these chemicals. An EPA designation on PFOA and PFOS would have important consequences and potential liabilities for aviation businesses that use these fire sup- pression systems, unless the EPA exempts aircraft hangars from the ruling (Castagna, 2022). No decision on the rulemaking had been announced as of January 2023.

Current Landscape for U.S. FBOs 41   The fire protection industry is undergoing a significant shift to fluorine-free foam concentrates. The revised NFPA 409 may provide some hangar developers with an alternate solution to the costly replacement of foam concentrate. NATA has been active in fire safety for aviation businesses and has assembled a toolkit that includes up-to-date summaries of revised fire protection regula- tions and rulemaking decisions (NATA, 2020). In addition, NATA has published a document that outlines the steps to select an appropriate fire protection system (NATA, 2022). The construction of aircraft hangars is ultimately guided by local building codes. Often cities and counties adopt NFPA standards as part of their building code. In some places, early versions of NFPA’s 409 standard are embedded in local building codes and may require updating to the newer, more-flexible standards. New Larger and Heavy Private Aircraft Require Additional Ramp Space and Capable Ground Support Equipment As service providers to private aircraft, FBOs require various ground support equipment (GSE) to handle different aircraft. While every FBO has its own GSE, a basic set might include: • Fuel trucks. • Direct current ground power. • Safety cones. • Nitrogen service for tires. • Oxygen service for cabins. • Cabin air conditioning units (southern climates). • Lavatory cart. • Potable water cart. • Adjustable, portable stairs. • Ladders. • De-icing capability (northern climates). • Multi-function tow bars. • Tugs with different drawbar capacity. • Well-trained line service employees (Smith, 2019). FBOs are usually set up with GSE to handle most aircraft. However, with the growth of private jet activity and the presence of larger aircraft, some FBOs do not have equipment such as tow bars and tugs that can handle the super-midsize business jets and large, heavy “bizliner” jets such as the Bombardier Global 7500. Wear and tear on GSE equipment and the capital expenditures to acquire the proper GSE equipment for these aircraft can represent an added cost for FBOs. These large aircraft also need more ramp space. Parking this new generation of longer and heavier cabin-class aircraft has resulted in crowded ramps and the need for additional aircraft parking space at some airports. Working Within the Airport Operating Environment The airport operating environment includes not only an airport’s infrastructure but also the air- port’s leasing policies and requirements as well as minimum standards. These guiding documents influence the mix of services offered by an FBO, the terms of the lease, valuation of the property, and operational conditions. They also factor into an acquisition decision to take over an FBO. Minimum Standards Minimum 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.

42 Landscape of the FBO Industry in 2022 They typically articulate the application requirements and the airport sponsor review and deci- sion process (Kramer, 2020). Minimum standards are useful tools for the airport to control development. Because market conditions have changed and FBOs are handling the mix of services offered in different ways today, it is important for airport management to review minimum standards every three to five years to make sure that the standards also meet current market conditions. FBO Lease Assignments, Reasonable Fees, and Transfers Over the past 20 years, both FBO lessees and airport sponsors have come to understand the underlying value of existing long-term ground leases accompanied by low lease rates. Many long-term leases crafted 30 to 40 years ago became valuable assignment opportunities for FBO operators ready to sell. Often airport sponsors expressly state in leases that assignment of a lease, improvements, and subleasing of leased premises must have written consent by the sponsor. Sometimes there is negotiated fee due to the airport or a commitment for development projects when a lease renews, or sometimes 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 followed by an uptick of private jet activity has helped to support high valuations of real estate and leaseholds at some airports and has raised the bar of entry at larger FBO markets. These high valuations have changed the feasibility equation for FBO sales and necessitated increased capital to complete transactions. They also help to explain why many of the large FBO chains are now owned by private equity funds, infrastructure funds, and SPACs. According to William Blair Research, these investment funds often consider initial purchases of four or five FBOs in one transaction to establish a scalable platform. Once the funds are engaged in the FBO business, they can add to existing platforms with smaller transactions. This is exactly the pattern for recent acquisitions of one or two additional FBOs at a time. Evaluation factors considered for a potential FBO transaction are: • Are there 10 or more years left on the existing FBO lease? • What capital improvements are required before the end of the lease? • How favorable are the lease terms (e.g., rent escalators and guaranteed extensions for capital improvements)? • Is there competition on the airfield and at nearby airports? • What is the location of the FBO on the airfield (especially if there is a second FBO)? • What is the mix of FBO services (e.g., fueling and hangars, maintenance, MRO, charter and aircraft management)? • What are the fuel sales trends, the mix of customers, and fuel margins? • Is there synergy between this FBO and the buyer’s existing network of FBOs? Are there oppor- tunities to reduce administrative costs? • What are the proposed buyout details (e.g., payments, stock, cashless mergers, and earnouts) (Ollek et al., 2020)? Community Engagement Airports are extensions of communities and as such reflect the values and concerns of those that live near an airport. One interesting impact of COVID-19 was the immediate decline in air- craft (and automobile) noise resulting from the shutdowns that began in March 2020. Following this period of relative quiet brought on by the pandemic, with the resumption of aviation activity many airports received an upsurge in noise complaints. Voluntary curfews and recent community interest in ending the sale of leaded fuel are two examples of ongoing community involvement in local airport operations.

Current Landscape for U.S. FBOs 43   Voluntary Curfews Aircraft noise at downtown Naples Airport (NAA) has always been a high-profile commu- nity issue. Efforts by Naples Airport Authority date back to the first airport master plan in the 1970s. Since that time, the authority has banned Stage 1 and Stage 2 jets from the airport and has instituted a voluntary curfew every night from 10PM to 7AM. Mostly the airport sees curfew violations 30 minutes after 10PM and 30 minutes before 7AM. The airport posts these violations on its website with the names and phone numbers of offenders. While the quiet hours curfew is voluntary, this approach has been quite effective, and Naples Airport reports 98% compliance with its curfew (Naples Airport, 2023). The FAA does not permit mandatory curfews. This ruling was tested in East Hampton, New York, where the town board of supervisors voted to stop receiving federal funding as of September 2021 and to either close the airport permanently or reopen as a private airport that could limit operations to certain aircraft and implement a mandatory curfew. These actions drew many lawsuits, and after meeting with the FAA, the board decided to delay closure of the airport. In October 2022, Suffolk County Judge Paul Baisley ruled against the town, saying it “acted both beyond its legal abilities and in an arbitrary and capricious manner” when making its privatization plan (Kesslen, 2022). Bans on Leaded Avgas San Martin Airport (E16) and Reid–Hillview Airport (RHV) in Santa Clara County, California, banned the sale of 100LL, a grade of leaded Avgas, at their respective airports. This triggered a part 16 complaint filed with the FAA by the Aircraft Owners and Pilots Association, arguing that a ban of the sale of 100LL caused safety issues for pilots and violated Santa Clara County’s grant assurances with the FAA (misfueling aircraft with UL94, an unleaded grade, can cause the aircraft to crash). The part 16 complaint was the latest issue between the FAA, the flying community, and the Santa Clara Board of Supervisors, who are on record as wanting to close the airport and repurpose the land. Looking Ahead The FBO industry is a nimble adapter to changes in the market environment. This section briefly addresses the outlook for additional changes in FBO ownership, new fuel products, and prospects for electric aircraft and AAM to use FBO services. FBO Ownership Changes As noted earlier, there have been three waves of FBO ownership changes, which coincided with expirations of long-term FBO leases, then recovery from the Great Recession in 2008, and most recently the COVID-19 pandemic. During these waves, some smaller FBOs were turned over to airport sponsors; some larger airports decided to operate their FBOs and exercise their proprietary exclusive rights; and a considerable number of private FBOs were acquired by private equity firms and infrastructure funds interested in building scalable networks of FBOs. FBO takeovers in the public sector will likely continue, as will merger and acquisition activity. Jackson Hole Airport (JAC) assumed control of its FBO in April 2023. Other airport sponsors are likely to take over and operate FBOs. That said, these public ownership changes are harder to anticipate because they happen one at a time. Expanded charter and fractional operators and new owners of private aircraft have contrib- uted to demand for FBO services and brought attention to FBOs as investable assets. While some in the industry believe that the low-hanging fruit has been picked, many well-run independent FBOs remain that operate one to three locations and could be the next acquisition targets.

44 Landscape of the FBO Industry in 2022 The increase in private aviation was also noticed by the mainline carriers. Delta Airlines began a relationship with Wheels Up to offer private aviation to its premium customers. Passengers using JSX airlines can earn United miles. Are the airlines the next group to acquire whole or par- tial interest in charters or fractional operators and FBOs? The prospect of further consolidation among different sectors of aviation appears likely. New Fuels Unleaded Avgas As of January 2023, there were two approved producers of unleaded Avgas: Swift Fuels pro- ducing UL94 and General Aviation Modifications, Inc., producing G100UL. Swift Fuels was the first to gain approval by the FAA for its UL94. This fuel works in approximately 66% of piston aircraft. In the fuel tanks of these aircraft, 100LL and UL94 can be commingled, but because not all piston aircraft can use Swift UL94, fuel tanks on the ground cannot mix these fuels. Conse- quently, an FBO offering UL94 fuel must maintain and dispense this fuel separately from 100LL. UL94 needs its own storage tanks, self-service fuel dispensers, and fuel trucks. The FAA has also approved G100UL. This fuel works in nearly all piston aircraft and thus has wider application. That said, in early 2023, G100UL has limited distribution. Since the Avgas market is small compared with the jet fuel market, there is likely to be con- solidation around which unleaded Avgas products will become widely available. Currently, the development and approval process for unleaded Avgas is guided by a public-private partnership: EAGLE (Eliminate Aviation Gasoline Lead Emissions), led by the FAA with the goal of eliminat- ing lead emissions from GA aircraft by 2030. The effort has four pillars: 1. Develop Unleaded Fuels Infrastructure and Assess Commercial Viability: Industry stakeholders will coordinate production of commercially viable unleaded fuels and establish necessary infrastructure, efficient distribution channels and widespread usage of these fuels. 2. Support Research and Development and Technology Innovations: The FAA and industry stake- holders will support research and testing of piston engine modifications and/or engine retrofits nec- essary for unleaded fuel operations. They will also focus on new technology development and the application/adaptation of those technologies, including electric/hybrid engine technologies to enable transition to a lead free General Aviation fleet. 3. Continue to Evaluate and Authorize Safe Unleaded Fuels: The FAA will address fleet-wide authoriza- tion of unleaded aviation fuels of different octane levels. Piston Aviation Fuel Initiative will continue to evaluate, test and qualify high-octane aviation unleaded fuels with the objective to ultimately transition the fleet to unleaded aviation fuel. 4. Establish Any Necessary Policies: The EPA is evaluating whether emissions from piston-engine aircraft operating on leaded fuel contribute to air pollution that endangers public health or welfare. EPA plans to issue a proposal for public review and comment in 2022 and take final action in 2023. If the EPA issues regulations on lead emissions from piston-engine aircraft, the FAA would subsequently publish regulations that certify piston engine modifications, new piston engines that do not require leaded avia- tion fuel, and regulate fuel components for aviation fuels. The FAA will consider policies/programs to support unleaded fuel infrastructure. (FAA, February 2022) Even as this process continues, FBOs are selling unleaded aviation gasoline and will be in a position to provide insight to EAGLE about best practices for selling these products. Wisconsin was the first state to offer unleaded Avgas in 2016. Since then, several GA airports in California have introduced unleaded Avgas as a fueling option. Santa Monica Airport (SMO) was the first airport in Southern California to offer UL94 at its self-service island. In August 2022, The Park VNY and Signature Flight Support at Van Nuys Airport (VNY) started offering the

Current Landscape for U.S. FBOs 45   product in addition to 100LL. To encourage purchase of the unleaded product, the Los Angeles Board of Airport Commissioners, which oversees VNY, voted to waive its 11-cents-per-gallon delivery fee on unleaded fuel through 2024. Long Beach City Council is also considering offering unleaded Avgas at its airport (Staggs, 2022). In the Bay Area, UL94 is available at San Carlos Air- port (SQL) and Watsonville Municipal Airport (WVI) for a $0.50–$1.00 premium over 100LL (AirNav, 2022). Sustainable Aviation Fuel Jet biofuels are in similar stages of development to unleaded Avgas. Sustainable aviation fuel (SAF) is a low-carbon alternative to conventional petroleum-based jet fuel. Biofuels are made by converting readily available feedstocks into a drop-in replacement for crude oil. Current feed- stocks include used cooking oil, mustard seeds, non-edible oils, and animal fats. The U.S. DOE’s Office of Energy Efficiency and Renewable Energy lists other resources as potential feedstocks: corn grain, agricultural and forestry residues, wood mill waste, municipal solid waste streams, manures, wastewater treatment sludge, and dedicated energy crops (U.S. DOE, n.d.). As shown in Figure 24, these products are refined into a chemically identical petroleum-based diesel fuel that can be blended with jet fuel without any changes to aircraft technology. Among the challenges in producing SAF are collecting and processing sufficient feedstock. Certain FBOs have started to sell blended jet fuel products. The highest allowable blend for any SAF is currently 50% Jet A and 50% SAF, although most commercial jet fuel blends use lower proportions of SAF. Engines are being tested on 100% unblended SAF, including engines for business jets. The expectation is that 100% SAF will be certified for use in aircraft in the near future. As of November 2022, Signature Flight Support was offering SAF blended with Jet A at the following U.S. airports: • Austin–Bergstrom International Airport (AUS), Texas • Eagle County Regional Airport (EGE), Colorado • William P. Hobby Airport (HOU), Texas • King County International Airport—Boeing Field (BFI), Washington • Mobile International Airport (BFM), Alabama • Norman Y. Mineta San Jose International Airport (SJC), California • Oakland International Airport (OAK), California • San Francisco International Airport (SFO), California • Van Nuys Airport (VNY), California Source: Honeywell, n.d. Figure 24. Overview of sustainable aviation fuel.

46 Landscape of the FBO Industry in 2022 Atlantic Aviation is offering SAF at Aspen/Pitkin County Airport (ASE), Colorado; SJC, and Jacqueline Cochran Regional Airport (TRM), in Thermal, California (Riverside County). Both FBOs at Monterey Regional Airport (MRY), California, also offer SAF. In general, the availability of SAF is growing in importance and use as more FBOs carry the blended product and commercial airlines like United, Delta, and Jet Blue incorporate the product into their fueling programs. Hydrogen Fuel Hydrogen fuel cells already power automobiles, transit buses, and unmanned aircraft. Honeywell anticipates that the use of conventional jet fuel will disappear in the next 20 to 30 years. Accord- ing to Phil Robinson, senior director of zero-emission aviation at Honeywell, “hydrogen can be used for all-electric and hybrid-electric propulsion systems and auxiliary power units, with water as the only by-product” (Honeywell, 2022). While hydrogen cells are cleaner than fossil fuels, not all hydrogen (or electricity) is created equal. How these sources of power are manufactured makes a big difference in their environmental footprint. Ideally, hydrogen and electricity would be produced using renewable sources like solar or wind power. Traditionally hydrogen and elec- tricity have been produced from petroleum sources, such as natural gas or coal. Aircraft manufacturers are investigating the potential for hydrogen propulsion systems. Air- bus is working on a liquid-hydrogen propulsion system for its A380. Dornier Luftfahrt GmbH plans to test a Dornier 328 powered by a hydrogen fuel cell in 2025. One challenge is that jet fuel has four times the volumetric energy density of hydrogen, so fuel tanks on aircraft with hydrogen propulsion systems must be much larger (Honeywell, 2022). Advanced Air Mobility According to BAE Systems, advanced air mobility “is an air transport system concept that integrates new, transformational aircraft designs and flight technologies into existing and modi- fied airspace operations. The objective of AAM is to move people and cargo in short haul markets (< 250 miles, including last mile transport) in a more environmentally friendly and low-cost manner” (BAE Systems, n.d.). An early entry in the AAM category, drones, or unmanned aerial vehicles (UAVs), were devel- oped by the military. UAVs are now used in civilian applications such as pipeline monitoring, videography, small-package delivery, and transfer of medical supplies. More recently, private capital has flowed into extensive research and development of larger versions of UAVs and elec- tric aircraft. These AAM initiatives have support and have caused “electric excitement” in many sectors of aviation—airports, FBOs, ground infrastructure developers, utility companies, and the manufacturers of aircraft, energy equipment, and battery storage. AAMs hold promise to reduce: • Fuel and maintenance costs. • Emissions in aircraft, especially for short-haul markets. • Noise, especially for airports close to city centers where aircraft noise is a perennial issue. AAMs offer an alternative to urban ground transport that could reduce costs and travel time. In that sense, AAMs make economic sense as a new solution in short-haul air travel markets (< 250 miles). Air carriers have exited the short-haul market in large part because of high costs per passenger and high carbon dioxide emissions when regional aircraft are utilized (Schwab et al., 2021). Labor shortages during the pandemic also accelerated the loss of air service in spoke-to-hub airport markets. Interest in AAM has been amplified by real advances in small all-electric aircraft and progress with battery technology and charging infrastructure. Several mainline carriers, FBOs, and frac- tional fleet operators have announced partnerships with AAM aircraft manufacturers.

Current Landscape for U.S. FBOs 47   To understand how AAM may develop, it is important to briefly describe how aircraft elec- trification is likely to roll out and what some of the barriers and challenges to implementation and adoption are. The National Renewable Energy Laboratory describes the trajectory of aircraft electrification as follows: • 2020–2025: Early stages of aircraft electrification are underway. Pilot training is taking place now on small aircraft capable of carrying a pilot and one passenger and flying at speeds of 125 mph. Some companies are also developing electric aircraft that would carry up to six pas- sengers for an average flight time of less than one hour. • 2025–2040: The projected medium-term developments include electric vertical takeoff and landing (eVTOL) aircraft (with a range of 20 to 50 miles and capacity to carry 4 passengers) and small regional (up to 15 passengers) electric aircraft. These aircraft would operate as air taxis, regional commuters, and light cargo carriers. Many companies are working in this area. United Airlines has announced a partnership with an original equipment manu- facturer (OEM) to investigate opportunities for electric aircraft to provide spoke services into United’s hub airports. UPS is working with an OEM with plans to electrify some of its cargo routes. Electric aircraft developer Joby Aviation announced a partnership in July 2021 with JetBlue and Signature Flight Support to anchor a market for aviation carbon credits (Carey, 2022). • 2040–2050: Longer term, companies are working on the development of a single-aisle aircraft with approximately 70 seats with electric or hybrid capability. In what now is a horse race in research and development, other notable participants include the engine and airframe manufacturers. Much of the early research was devoted to ground-based transportation technologies, suggest- ing that initial adoption of electrification will start at airports with airside and landside ground vehicles. This is a critical first step and will help to focus on long-term electric generation needs. It is also true that if adoption of electric vehicles is widespread in communities, electrical capacity and charging stations will become a regional issue involving local and state governments, utilities, airports, airlines, and FBOs. Fortunately for some airports, available land may make it possible to build on-site electric generation and energy storage that will support existing airport operations and charging stations for vehicles and aircraft. Much remains to be solved to support the electrification of aircraft. Aircraft batteries will require chargers with power ratings that exceed the ratings of current technology. These battery chargers are likely to require aircraft-specific specifications. No charging station connections and standards have yet been established for aircraft. It may turn out that hydrogen technology is better suited for larger electric aircraft than traditional lithium batteries. There is much to be worked out in terms of battery technologies, charging infrastructure, and the abilities of local electrical grid structures to support new levels of demand (Schwab et al., 2021). This emerging AAM segment presents an opportunity for both airports and FBOs to scale up their capabilities. Some vertiport developers in the United States are thinking about eVTOL stations as standalone facilities, but initially airports and FBOs are also likely to support AAM operations as another type of aircraft requiring line services, MRO, hangars, and fuel. Different scenarios to recharge electric aircraft from fixed locations include by portable electric charging stations on a ramp or by battery swaps. FBO Clay Lacy Aviation made an agreement with Eviation in September 2021 to provide charging and maintenance for its nine-passenger electric aircraft. BLADE entered into an agree- ment with Ross Aviation (now Atlantic Aviation) to work together on a vertiport located at Westchester County Airport (HPN), New York. The vertiport will include a facility to hangar, charge, and deploy eVTOL aircraft (Carey, 2022).

48 Landscape of the FBO Industry in 2022 The advent of electric aircraft does add complexity to ramp management depending on how electricity will be supplied. Will power be brought to the aircraft, or will the aircraft park at a charging station? How will an FBO or airport charge for electricity? What additional fire sup- pression resources are needed to put out a battery fire? AAM has all the characteristics of a startup operation in which small companies are carrying out research and development supported by established companies in the air transport business. Infrastructure planning has long lead times, as do increases in electrical capacity. In this sense, while AAM on significant scales is a few years out, it is prudent for airports and FBOs to stay current on these developments for when AAM becomes a reality. Wrap-Up on FBO Trends Private aviation and air cargo were the brightest spots in the industry during the pandemic. Increased activity led to higher valuations for FBOs and a wave of consolidation among the larger FBO chains. New participants in private aviation purchased used aircraft in record numbers, reducing inventory to a historic low and raising aircraft valuations to an all-time high. In addi- tion, charter and fractional operators offered attractive lower-cost products that do not require a long-term commitment for those not ready or interested in owning an aircraft. The ability to travel in private aircraft offered some protection from COVID-19. Increased private jet activity also led to higher demand for fuel and services at the larger FBOs. For FBOs that served air-reliant busi- nesses such as banks and grocery store chains, demand for fuel and other FBO services remained solid. Traffic to destination markets in Arizona, California, Florida, Idaho, Montana, and Wyoming experienced rapid growth as well as new FBO interest and investment. Airports with flight schools, as essential services, also prospered during this time. Year-over-year growth in private aviation between 2021 and 2022 is unlikely to be replicated, even if the group of first-timers acquiring aircraft or purchasing individual seats on charters stays with private aviation instead of returning to commercial flights. Used aircraft transactions and private flight activity did decline in 2023. Nonetheless, the pandemic did leave its mark on aviation and FBOs. The large and second- tier FBO chains increased locations. More of these FBO chains were acquired by private equity firms and infrastructure funds. Workforce shortages have increased wages and improved benefit packages for many employees. Hybrid and remote arrangements appear to be permanent for back-of-the-house employees, who do not interact directly with the customers. Rising operating costs and maintaining fuel margins remain challenges. The pandemic also increased hangar development activity at some GA airports. Fire suppres- sion systems required in larger hangars are under scrutiny for hazardous chemicals. Aviation orga- nizations, including NATA, are working toward safer, more-practical fire suppression solutions. The latest generation of large cabin-class aircraft are longer and heavier. Some FBOs report that these aircraft can put extra load on existing GSE equipment (e.g., tow bars and tugs) and that ramp space can become crowded because additional aircraft separations are required to handle these larger aircraft. Going forward, increased distribution of unleaded Avgas and SAF will improve the carbon footprint of aircraft. Electric aircraft, battery, and infrastructure technologies are under develop- ment and may present business opportunities for FBOs in a 5- to 20-year timeframe.

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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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