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Thursday
May192011

The Cost of Aviation Fuel, Part 2

FBOs Might Need a Two-Pronged Pricing Strategy

"Everybody has accepted by now that change is unavoidable. But that still implies that change is like death and taxes — it should be postponed as long as possible and no change would be vastly preferable. But in a period of upheaval, such as the one we are living in, change is the norm." – Peter Drucker, Management Challenges for the 21st Century (1999)

Recently, I was reading an article posted to Eye on the Economy on msnbc.com. The article was titled “As oil prices drop, Fed should get credit.” After reading the article, I decided to write Part 2 to a previous blog post titled The Cost of Aviation Fuel.

In the first post, I talked about continued increases in the cost of aviation fuel and what FBOs can do to mitigate high retail prices. We looked at a number of the reasons for the increasing cost of fuel:

  • The Fed policy of a weak dollar — a weak dollar requires more dollars to buy a barrel of crude oil.
  • The continued unrest in the Middle East.
  • Uncertainty with the federal deficit.
  • Speculators betting on the increased price of fuel.
  • Lack of offshore drilling in the United States.

Since then, here is what is happening in the world markets:

  1. The dollar’s value is up 3 percent so far this month after sliding 15 percent against other currencies over the past year.
  2. Global growth seems to be slowing.
  3. The inflation threat from easy money policies may be easing.
  4. Oil stocks have remained high even with the unrest in the Middle East.
  5. Inflation fears in Europe have prompted European central banks to raise interest rates.
  6. China has required its banks to hold larger cash reserves to help curb inflation.

The Platts fuel index prices peaked two weeks ago. The Gulf Coast Pipeline mean was $3.3239 per gallon. Looks like the West Coast took the prize for the highest Platts prices at $3.4275.

So what happened in the last two weeks? Prices dropped more than 15 cents last week (May 10). This week, we have seen nearly an additional 8 cent drop (May 16). We now have a drop of 23 cents!  Perhaps your customers are wondering why you haven’t dropped your price.

I’ve seen posted retail prices of Jet A as high as $8.74 per gallon. Who is going to pay that for jet fuel?

And what’s going on with oil futures? The trend right now is good, but will it last? There are many factors in the national and world marketplace that can affect what is happening.

On a national basis, we have the debt ceiling vote coming within two weeks or so; the economy might continue to slow; demand might be down; the Middle East could get more unstable. All these issues can negatively affect the markets and drive up prices again.

It appears the oil commodities markets/speculators are backing off the high prices to be paid for futures.

Simply put, the forces that drove the market up are now down.

All this begs several questions:

  • Will the fuel prices continue to drop?
  • How do I react and price my fuel?
  • The customers want better prices now! How do I help them while trying to keep my business profitable?

What Can You Do?

First, do not change your price! You have all that high priced fuel in storage — the same goes for the terminals and pipelines. This high-priced inventory will take a few weeks to work itself through the system. So when you purchase you next load of fuel, you will then be able to purchase at the lower price. How fast you turn over your fuel will determine how and when you pass along price reductions to your customers.

In a previous blog post, we talked about FBO Fuel Pricing: Seeking a Silver Bullet, so we won’t plow that ground twice. Suffice it to say you must maintain your margin to sustain your profitability and understand pricing theory. But the high price of fuel is making the customers very price sensitive. Change is coming!

Dual Pricing Strategy

One possible scenario is to establish a dual pricing strategy by providing an a la carte service as well as a full-service offering.

Remember when gas stations offered two levels of service, self service and full service? You would pay extra if you wanted everything under the hood plus your wipers and tire pressure checked. Otherwise, you saved by doing it yourself.

An FBO could offer two levels of service as well. For instance, you could offer full service for one price, whether retail or contract fuel. Under this pricing scenario, you continue to offer all your usual amenities for one set full-service price.

Then you could offer a discounted or a la carte “basic” service price. If the operator wanted other services, he could pay for ice, coffee, papers, lounge, transportation, baggage handling, galley and lav servicing, etc.

Our advice is to stay in touch with your fuel suppliers and what is happening in the national and world marketplace. Change will continue to happen, and you must be aware of it and react in a reasonable businesslike manner to be successful. Think seriously about an a la carte or full-service pricing methodology.

FBO Success Seminar Registration

The next NATA FBO Success Seminar is scheduled for Nov. 8-10 in Atlanta. Register at nata.aero.

John Enticknap

John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series.

Thursday
May122011

FBO Marketing, Part 2: Affordable Promotions

As any FBO owner or operator knows, attracting new customers and keeping current customers is the lifeblood of your business.

In previous blog posts, we have discussed the aspects of keeping current customers by providing an exceptional customer service experience: Be the restaurant owner, and don’t forget the cheese!

In this multipart series, we talk about attracting new customers with little or no cost. In Part 1, Low- or No-Cost Promotions, we discussed the basics of promoting your FBO on a limited budget. In this post, we’ll talk about public and media relations as an affordable promotion that will help extend your brand reach even further.

Public and Media Relations

Writing and distributing a news release is a cost-effective communications tool. However, there are some basic guidelines that FBOs need to follow in order to ensure their announcements make their way to the selected media.

1. Ask yourself if the news is newsworthy.

Many companies, including FBOs, will send a news release out on everything that happens at their place of business. Trouble is, most of it is not newsworthy and, therefore, gets ignored. If you do too many of these, there is a chance that when you have something that is truly newsworthy, it may get passed over because of your past history. 

Editors and writers keep very busy, so only offer announcements that are at least potentially newsworthy. Here are a few ideas that most editors find of interest:

  • New facilities or expansion of current facilities
  • Any significant renovations
  • Acquisitions of other facilities on your airport or other FBOs
  • Key personnel changes to your organizations

Here are some things editors would rather not see:

  • Announcements about a new web site
  • Releases that are not timely or current
  • News that is completely off target and irrelevant to the industry

2. Be clear and concise.

In journalism school, you learn to write in an "inverted pyramid" style. In other words, say what is most important in the first sentence or paragraph.

  • Then support the main information with other facts and figures. Think of the five “Ws”: Who, what, where, when and why?
  • Include a relevant quote by a key manager or employee
  • Follow up with what we call a “boilerplate” that is a concise overview of your company information, the services you provide and your contact information.
  • Keep the information as short as possible, and don’t use flowery language.

3. Include a photo if possible.

  • Use a fairly good camera. Make sure the photos are in focus and of high resolution. Most publications request a resolution of 300 dpi.
  • Frame your photo so you are not too far from your subject.
  • Watch out for background clutter. This is particularly important when you shoot a photo of an employee for what we call a ‘head shot’. I’ve seen photos taken against a wall with a clock in the background, pictures, bright colored paintings and even model aircraft that look like the airplane is flying right out of the person’s head.

4. Timely and relevant: Think outside the box!

Earlier, we talked about being timely and relevant with your information. A couple of years ago, I worked with one of my clients on a short news release relating to the popular green movement. They had just replaced all their gas powered ramp courtesy carts/golf carts with state-of-the art electric carts. They also invested in a new ramp sweeper to pick up FOD.

For this announcement, I took a photo of their new cars along with the ramp sweeper, and framed it with an aircraft in the background to add relevance to the aviation market. I also used their distinctive terminal building with company logo as a backdrop. As they say, a photo is worth a thousand words.

Then I issued the photo with a photo caption only, not as a long news release. Of course I included details about “going green” on the ramp. This announcement was picked up by many on the media database.

Media Database

Now that you’ve crafted your new release, it’s time to send it out to a qualified database. First of all, you should always send it out to your local media, including newspapers and business journals. Also include local TV and radio if possible. You never know when someone needs a story like the one you send in or maybe just a filler story.

Also, you should build a list of aviation writers and editors. You can find these contacts in the front part of magazines and newspapers in what they call the masthead. Also, for most media, you can go to their web sites and get either specific email addresses or a generic one that goes to their news department. 

And don’t forget the electronic newsletters, like acukwikalert.com. They’ll be happy to review your release for posting.

In addition, you should give a courtesy call to a few of the selected media to make sure they received the information.

Electronic and Social Media

All news releases should be published on your Web site as well. Services like Google send out crawlers that search for keywords that help push your news item to the top of a search. Speaking of keywords, your release should use key industry words and phrases in both headlines and the body of your copy.

Also, post a link on your company’s Facebook page to your news release on your Web site, and issue a tweet to your followers.

If you have any questions regarding writing or issuing a news release, please contact me at Ron@thejacksongroup.biz.

Ron Jackson

Ron Jackson is co-founder of ABSG and president of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the Ultimate FBO Customer Service Experience.

Friday
May062011

The Value of a Business Plan in Managing Your FBO

“A business plan is primarily an organizing tool used to simplify and clarify business goals and strategies, which might otherwise appear complex and intimidating. However, a business plan is also a sales tool. … Having no plan is like sailing the seven seas without a compass, digging a ditch without a shovel, or hunting for pirate's treasure without an 'x' marks the spot. Without one, you're better off heading down to the horse races and betting on the 'Win Three.' A plan helps keep you on schedule, makes it easier to recognize success and failure, helps pump you up when things aren't going so well, and most importantly, provides an essential focus.”Peter J. Patsula, The Entrepreneur's Guidebook #9, "Supercharging Promising Projects with a Plan of Action.”

In some of our previous blog posts, we have mentioned the need to develop a strategic business plan, not only as a way to define business goals, but also to help formulate your personal goals, such as detailing an exit plan from your FBO business.

As most of you know, if you want to borrow money from a bank, the SBA or other sources, one of the first things they will ask you for is a business plan. This alone is a good reason to develop one. However, beyond this basic need, a business plan can be much more and serve your business in many different ways.

The quote above illustrates the many benefits in developing a business plan. As any pilot knows, without a proper flight plan, you will never get to your destination efficiently.

Developing a plan can be intimidating, but it’s not too bad when you keep it simple. Do some organized research on your business; ask some fundamental questions; do a SWOT (strengths, weaknesses, opportunities and threats) analysis; conduct a market and pricing analysis; then lay out your plan in an organized manner.

Plan Basics

Let’s look at some basics involved in developing a plan:

Company Description: First, we need to establish the baseline information for your firm, including the type of business you run, the management and employee structure and a statement to define the mission of your company as well as a sense of your vision and direction for the growth of the company.

Industry Analysis and Trends: Define the marketplace you operate in now and the near future; this includes seasonal factors, maturity of the industry, etc.

Target Market and Audience: Define what markets you serve and detail any new business areas in which you wish to operate. Also define your target audience or audiences (customer groups) you would like to attract to your business.

The Competition: Define and isolate your competition by looking in detail at not only your competitors on your airport but also within a 50- to 100-mile radius.

Strategic Position and Risk Analysis: Consider doing a SWOT analysis to evaluate your company’s strengths, weaknesses, opportunities and threats. Included should be an internal survey of all your employees to gain their input as well as vendors and suppliers who know your industry and perhaps sell to your competitors. Find out what may differentiate the way you do business from your competitors and use this to position your brand in the marketplace.

Marketing Plan and Sales Strategy: Analyze what you are doing to promote your business now, and develop new ways you can penetrate existing markets and branch out into others. Also, define your sales goals and objectives in terms other than the amount of money you want to make. Rather, state in terms of actionable items that can be obtained and measured in terms of results.

Operations: Review your existing business and how it operates — labor, equipment, technology, customer service and management information systems.

Community Involvement: We all know this is a relationship business, so include in your plan what you are doing, or willing to do, within your own general and business community. If you’re already involved, think what you would like to do better.

Development, Milestones & Exit Plan: Detail your long-term goals, growth strategy and exit plan including a timeframe to complete.

Financial Plan: This is the bottom line. Determine what the business is doing from a profit-and-loss point of view, and define the short-term and long-term capital needs to get where you want to go.

Guide Points

To sum up the critical path in starting, developing and finishing a plan, think of these three simple guide points:

  • Develop a fundamental understanding of where you are today.
  • Take a realistic view of your options moving forward.
  • Think of your plan as a roadmap to success, a guide you refer to along the way to keep you on course.

The whole point of a business plan is to have firm ideas of where you are and where you want to go while realizing there are some hard choices to be made along the way. In the end, keeping focus is the key ingredient to success, and a plan will help you keep that focus.

Have any additional thoughts? Please email me at jenticknap@bellsouth.net.

John Enticknap

John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series.

Thursday
Apr282011

FBO Marketing, Part 1: Low- and No-Cost Promotion

Did you know there are ways you can market your FBO with little or no out-of-pocket expense?

At our NATA FBO Success Seminars, we examine various aspects of marketing for an FBO. One of the most popular sessions is Marketing and Communications for Any Size FBO.

Many FBOs that attend our seminars believe they can’t compete with the big FBO chains because they don’t have the money and resources. To that, I kindly say, “Bunk”. There are plenty of ways you can “shake hands” with your customers or potential customers without breaking your budget or robbing your kids’ piggy bank.

Getting Down to Basics

In the business of running an FBO, there are basically two ways to increase your business and, thus, the amount of fuel you sell.

  1. Increase the number of base customers you service.
  2. Increase the number of transient customers you service.

For the purpose of this blog post, we will concentrate on the second item of reaching out to the transient customer. However, if you are having trouble filling your hangars and think you can do a better job of increasing your base customer population, read on. There are tips for you as well.

Here is what I call the Level One, or Basic Communications, Checklist. You might be already doing these, but they are worth the review. These are not all free, but we’ll get to those shortly:

  • A listing in a major FBO directory and Web site, such as AC-U-KWIK and acukwik.com. There are various listings and offerings to choose — some at little or no cost. You need to create some kind of awareness at the most basic level.
  • Fuel supplier listing. Most FBOs have a relationship with a major fuel supplier. Make sure you are listed accurately in everything they produce, including their Web site and other promotions.
  • Basic Web site. By now, most FBOs have built at least a basic Web site. Believe it or not, though, some companies forget to put their phone numbers up front to make it easy for the customer to make contact. Instead they bury it on an obscure page.

You must remember the most basic reason for a Web site is to provide information quickly. Therefore, you don’t need a lot moving pieces, fancy graphics, etc. Also, you should test the viability of your Web site in terms of search engine optimization (SEO) by doing a Google search of keywords for your area and business segment. Keep in mind keywords a customer would use to do a Web search. Some keywords for the fueling side of the business are obvious:

  • FBO Dallas, TX (Your City and State) and FBO DAL (Your airport identifier)
  • FBO Dallas Fort Worth (or) FBO North Texas
  • Aviation Fuel Dallas, TX (or) Jet A Dallas, TX (or) Avfuel/Jet A DAL

Note: If your facility does not appear at or near the top after keyword searches, you need to look into rewriting the copy for your Web site to include keywords and phrases for your business segment and geographic locations. There are numerous free articles on the internet that can help you.

Web Site Tip: Refresh your copy on a regular basis. Keep keywords and phrases intact, but create something new that will be of interest. And don’t forget to post any press releases or news articles that may have been published. Look for ways to post your press releases to the free aviation sites, such as acukwik.com. Do some research, and create a PR database to which you may send your news.

  • Get Social! Create a business Facebook page, list with LinkedIn, and investigate Twitter but only if you are serious about keeping social networks active and up to date with frequent posts.
  • Giveaways. Don’t be afraid to put out a bunch of low-cost pens or other freebies at the customer service desk or in the pilots’ lounge. What’s the worst thing that could happen? So what if they disappear? That’s a good thing. They just might get back to the customer’s home base where a dispatcher gets a hold of one and, presto, your brand is right there, top of mind!

The Really Free Stuff

As mentioned, there are a number of things you can do that really don’t cost anything except some time and effort.

  • I Spy Program. One of the techniques we teach at the FBO Success Seminars is creating your own I Spy Program. This is simply building a database of potential customers by tracking the transient customers who use your airport, or surrounding airports, but don’t come to your facility.

In the old days, you would simply use a pair of binoculars and scope out your competitor’s ramp and record the aircraft registration numbers. Now there are a number of electronic programs you can access that track flights into and out of your area. Usually a registration number is associated with the flight, and you can then cross-reference this registration number with a database of aircraft owners and operators. Some of these databases do cost money, but most that use these services do find them to be worthwhile.

Once you’ve started to build your database, send out a postcard to the potential customer offering an incentive to come to your facility on the next occasion. Incentives can be a one-time fuel discount, lav cleaning, interior cleaning, a fruit tray, etc. Note: Most of the time, one contact will not do the job. You need to be consistent and aggressive in making frequent contacts.

  • Pick up the phone. Sounds simple, but if you can track a potential customer with an address, you should be able to get a phone number. Don’t be afraid to ask for their business.
  • Be aware of customers who haven’t been back in a while. Getting customers to come back is like finding new customers. Again, pick up the phone, and find out why they haven’t been back. Ask them if you did something wrong, and offer an incentive to get them back in the fold.
  • Be aware when a new customer does come in. Have your line service personnel and CSRs become aware when you do attract a new customer. Then be the restaurant owner. Meet, greet, thank him or her for the business, etc. And don’t forget the cheese!
  • Write hand-written notes. It doesn’t cost anything to write a note thanking customers for their business. Anytime you can keep a customer coming back time and time again is one fewer customer you have to replace.
  • Network, and be a part of the community. FBO owners, operators and general managers should use opportunities for community involvement, which will strengthen local aircraft owners and operators’ and their flight department staff’s awareness of your business. There are usually high-profile clubs, fellowships and nonprofit organizations that rely on volunteers that include high net worth individuals. Moving in the right circles can strengthen these relationships and help provide referrals. This is a great way to increase your base customer prospect list.

And because business aviation is such a small niche market, you never know who a pilot for a new base customer knows. Chances are they know more pilots at other companies who just might give you a try.

These are just a few strategies and tactics we teach at our FBO Success Seminars. If you have something that works for your FBO, please let me know by emailing me at Ron@thejacksongroup.biz.

Ron Jackson

Ron Jackson is co-founder of ABSG and president of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the Ultimate FBO Customer Service Experience.



Thursday
Apr212011

Is Your Cost of ‘Plastic’ out of Control?

Get a Grip on Credit and Debit Card Fees!

"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic." – Peter Drucker

One of our more popular courses at our FBO Success Seminar is Maximizing Your Credit Card Transactions. We discuss in detail the credit /debit card processing system and how it affects your FBO business. Needless to say, the cost of this vital service is substantial and increasing.

Debit Card Update

First, let’s take a look at the use of debit cards. In the process of updating our seminar course materials, I’ve been researching the recently enacted regulations by the Federal Reserve to reduce debit card interchange fees. Here’s a little background information.

The new laws are still being written and are scheduled to be completed by April 21 with an implementation date of July 21. The laws change the fees from percentages to fixed fees. Some efforts in Congress may further delay the implementation or change the regulations.

Currently, debit card swipe fees average $0.44 per swipe. The new requirements reduce them to $0.07 to $0.12 per swipe. The banking and credit card industries are not in favor of the new requirements because they stand to lose some $12 billion in fees; therefore, they are lobbying Congress and others for changes.

As an example of the impact this would have on a retailer, look at The Home Depot’s operations. If the debit card fees are reduced as planned; The Home Depot will see a reduction of $35 million in debit cards costs. Obviously, the average FBO doesn’t have the volume of debit card transactions of a large box retailer, but we’re talking about potential savings over the long term and revenue to your bottom line.

A Look at Credit Card Fees

Regarding credit card fees, each transaction fee in the FBO business varies greatly. The fee can be zero for your branded oil company card to a high of four percent of the transaction. During the classes we teach at the FBO Success Seminar, we provide a detailed analysis of fees, but for now, here’s a look at an example of an average transaction:

First of all, the current national average cost of Jet A is $5.38 per gallon. Based on the Platts index, this average is an increase of more than 92 cents per gallon in only the last six months. For the FBO operator, this adds up to an increased credit card transaction charge of just over $0.02 per gallon or a total of $0.11836 per gallon, assuming the average fee is 2.2 percent. Under this scenario, a 500 gallon sale would result in credit card fees totaling $59.18, which includes an increase of $10.02 in extra charges resulting from the rise in fuel costs over the past six months.

We would venture to say that credit card fees are a bigger portion of your costs than you imagined!

If you are selling 1.5 million gallons a year at $5.38 per gallon, your annual credit fees will be $177,540. In this scenario, your credit card fees have gone up approximately $30,360 per year, based on recent fuel price increases.

Bottom Line

Here is the bottom line: The credit card processors are profiting during this crazy volatile spike in fuel prices, and the FBO is not! So what do we do?

The first step is to look at your processing fee costs and where the fees are being generated. Start by analyzing your sales and payment history:

  • Retail sales and payment by what credit card or debit card?
  • Factor out no-fee cards such as oil company cards.
  • Factor out contract fuel sales. (By the way, are you getting paid promptly by the contract supplier?)
  • Take a look at based customers vs. transient customer sales and payments.

Once you have completed your research, look at changing customer buying/payment habits, — not an easy task!

  • You should want all your base customers paying with a no-fee oil company card. If they don’t, figure out an incentive to make this happen.
  • For your transient customers, you should train your CSRs to ask for no-fee cards for payment.
  • Make sure your contract fuel suppliers are paying you quickly and within contract terms. If they are late paying or otherwise, you need to rethink your contract fuel supplier relationships.

As your business changes with all the turbulence in today’s marketplace, you need to analyze all of your cost structure. Credit card fees are sometimes a cost we think we cannot manage. Not true!

With the tools and ideas we have presented here, these costs can be reduced. As Peter Drucker indicates in his quote, new thinking is most important in business, not only for this issue, but for all your business management concerns.

Let us know your thoughts on this issue or any of our FBO Connection blogs. Please contact me at jenticknap@bellsouth.net.

John Enticknap

John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series.