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Tuesday
May172016

Dissecting The Fourth Element of the Six Intangibles that Build FBO Equity

Part One: Building a Sound Balance Sheet with Consistent EBITDA Performance

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our continuing series expounding on the six intangibles that can build equity in your FBO, we break down the fourth intangible: Building a Sound Balance Sheet with Consistent EBITDA (Earnings Before, Interest, Taxes, Depreciation and Amortization) Performance.

The value of putting together a sound balance sheet consistently over several years has a lot of weight with the banking community, which is your primary ally when it's time to finance capital improvements to your facility. A strong balance sheet can also be viewed favorably by the airport authority when it's time to renew a lease or extend a lease for multiple years.

Adding in the dimension of demonstrating a consistent EBITDA performance is a plus when an FBO ownership is looking to sell the enterprise. Often, investors and buyers look to EBITDA performance in order to determine the value of an FBO, or for that matter any business. The resulting evaluation, and thus the offer, is usually based on a multiple of the EBITDA number.

The benefits of producing a sound balance sheet include:

  • Provides a business snapshot of your FBO at a specific time.
  • Easily calculates financial ratios to determine the company's fiscal outlook and profitability.
  • Determines credit worthiness for investors and banks in order to obtain loans and funding.
  • Show financial transparency into the company's assests and liabilities.
  • Discloses the solvency of the FBO business to minimize investment risks.

In future blogs, we'll share some tips on how you can use your balance sheet to understand your current ratio, cash–to-debt ratio and debt-to-equity ratio. These numbers allow you to fully understand your FBO's financial position and how to measure liquidity. In addition we will discuss how to achieve consistent EBITDA performance.

There are many factors and nuances to developing a sound balance sheet that we will not be able to cover in this blog. Therefore, we encourage you to attend one of our FBO Success Seminars where we spend additional time discussing this important topic as well as others.

Please Share your comments in the space below.

ABOUT THE BLOGGERS:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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© 2016 ABSG

Tuesday
May032016

Pazos FBO Services: Putting the Customer First in San Juan, Puerto Rico

Part Two: Customer Service, the Universal Language Spoken Everywhere

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

Employees of Pazos FBO Services refuel an aircraft on their ramp at Luis Munoz Marin International Airport, San Juan, Puerto Rico.In a previous blog post, we talked about delivering our customer service training program to the good folks at Euro Jet in Prague and how great customer service in the FBO business is truly a universal language spoken everywhere.

Last week we had the privilege of conducting another international training seminar of our Don't Forget the Cheese!™ customer service training program for Pazos FBO Services located at the Luis Munoz Marin International Airport, San Juan, Puerto Rico. And once again we were blown away by the friendly reception we received and the way this FBO goes about its business of delivering a great customer service experience.

Although Pazos is currently operating out of a very limited space, this does not stop the hardworking and dedicated employees from greeting every aircraft and its passengers and crew with the same zeal and enthusiasm that is embodied in their call-to-action statement: Powered by a Passion for Excellence!

Without exception, they were already practicing one of the basic customer service tenets of putting the customer first.

Under the leadership of FBO president José Maldonado and manager Zuleika Caballero, Pazos is making great strides to go to the next level. As a World Fuel Air Elite fuel provider, the FBO has a new expansive fuel farm in place and a fleet of refuelers including two 10,000 gallon trucks.

At the heart of the expansion program is a new 12,000 sq. ft. FBO terminal facility, which is currently under construction and scheduled to open in August. A strategic and integral part of the new terminal will be a ramp side U.S. Customs and Border Protection services facility. This feature will help make Pazos an important turnkey port-of-entry facility for international flights with a U.S. destination.

Customer Service Tip

As part of our customer service training, we introduced Pazos to the art of turning a disgruntled transaction into a tranquil transformation. It all starts by being tactful and choosing your response carefully.

Adding some cheese to the equation means you think tactfully about your response and look and act in a responsible way. In a sense, you become re-sponse-able. That is, your facial expressions display openness and show you are ready to listen.

If you are being confronted by a customer who is disgruntled, show your concern by listening with empathy. Nod your head up and down to show you understand the complaint or the grievance or the criticism. By doing so, you are not showing you agree with the complaint but rather that you are genuinely concerned.

By listening, apologizing, problem solving and acting quickly on a solution, you can transform a dissatisfied customer transaction into a profitable long-term client relationship.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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© 2016 ABSG

Tuesday
Apr122016

Rules and Regulations Section of a Lease Provides Protection

Part Four of the Four-Part Crafting Advantageous Hangar, Office and Tie-Down Agreements Series

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our previous blog, we wrote about developing a tie-down agreement as the third post for our series about crafting advantageous hangar, office and tie-down agreements, which together are the third component of the six intangibles that can build equity in your FBO.

In this final post for the series, we discuss the rules and regulations section of crafting these types of agreements.

The rules and regulations section should not be taken lightly as it provides the language that spells out the expected performance of both the leasee and lessor. Therefore, it can be viewed as protection should one of the parties in an agreement default in some way.

Here are few tips to keep in mind when writing and adopting a rules and regulations section as part of a hangar, office and/or tie-down agreement:

  • It’s important to stipulate in all agreements that aircraft, either in a hangar or a tie-down area, must be in airworthy condition. This includes keeping tires inflated and keeping the aircraft free from other obvious maintenance issues. Be sure to include language regarding aircraft maintenance. Do not allow maintenance on the aircraft unless you authorize the specific maintenance to be performed in writing.
  • Your tenant should have aviation liability insurance coverage. We recommend at least $1 million in coverage. Your agreement should also include a good indemnification clause for your protection.
  • If your tenants expect to drive their vehicles onto the ramp, they should have to comply with the airport’s safety and security requirements as well as your FBO training and insurance policy standards. Aircraft towing movements should be restricted to trained FBO personnel only.
  • Tenants are subject to the terms and conditions of your FBO master lease. Therefore, when you draft an agreement, include language that covers this requirement. Specify that any fueling of aircraft is restricted to being performed solely by your FBO. Also, hangar and office tenants should be apprised of any regulations concerning controlled access points for guests or other visitors.
  • Spell out what specific services tenants will receive. Office tenants should not expect the FBO to provide free office services such as copy, fax, phone answering, etc. This section should also have specific language regarding normal operating hours and restrictions for setting up on-site living accommodations. Hangar and office tenants should also be made aware in writing of any restrictions regarding pets/animals on the premise.

There are many factors and nuances to developing a rules and regulations section of a lease that we will not be able to cover in the blog. Therefore, we encourage you to attend one of our FBO Success Seminars where we spend additional time discussing these important topics as well as others, in addition have your legal counsel review your agreements.

Please Share your comments in the space below.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

Subscribe:

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© 2016 ABSG

Tuesday
Apr052016

The Best Ground Might Be Your Tie-Down

Part Three of the Four-Part Crafting Advantageous Hangar, Office and Tie-Down Agreements Series

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our previous blog, we wrote about developing a favorable office lease agreement as the second post for our series about crafting advantageous hangar, office and tie-down agreements, which together are the third component of the six intangibles that can build equity in your FBO.

In this post, we discuss creating a tie-down agreement that can turn often overlooked space into some the best ground at your FBO location.

Your aircraft tie-down ramp should be viewed as a viable leasing area that has the capability of creating a consistent revenue stream, whether it’s a month-to-month lease with base tenants or an RON situation with a transient customer.

Here are a few tips to keep in mind when developing a tie-down agreement:

  • Don’t give it away. Put a true value on the tie-down space and stick to it.
  • Just like hangar queens, be wary of aircraft owners who fly their aircraft infrequently. We’ve seen tie-down areas at some FBOs that are full of aircraft with flat tires and parts missing. Chances are these customers are not paying their tie-down fees on a regular basis and not buying fuel.
  • Keep the tie-down areas up to snuff. Attracting and keeping tie-down tenants requires a ramp that is attractive and well kept. That also means replacing the tie-down ropes on a regular basis.
  • It’s important to keep in mind that, like hangar agreements, FBOs should not devalue the true worth of tie-down space based on promised potential fuel sales. Work with the tenant to determine monthly fuel sales potential, spell out specific fuel sales goals in the lease, and revisit these amounts frequently. Include language that escalates tie-down rates if consistent fuel sales goals are not met.  
  • All aircraft that tie down on your ramp should have an agreement. This protects you and the tenant in case of insurance claims by establishing the terms of the tie-down agreement.
  • As part of your agreement, make sure you establish the rules, such as prohibition of derelict aircraft, flat tires and aircraft maintenance conducted in the tie-down area.
  • Tie-down agreements are usually simple contracts and for the short term. You can make them month-to-month and evergreen, meaning they renew automatically. Also, you can make provisions to terminate the agreement upon a 30-day notice. This gives you flexibility in running your business.

Tie-down lease agreements are a sublease just like hangar and office lease agreements, They must conform to the master lease agreement between your FBO and the airport authority. Signatories to tie-down subleases have a right to know the contents of your master lease because they must also comply with its contents. In addition, terms for rate increases in your subleases should be similar to the master lease, and the term of subleases cannot be longer than the master lease term.

There are many factors and nuances to crafting an advantageous office lease agreement that we will not be able to cover in the blog. Therefore, we encourage you to attend one of our FBO Success Seminars where we spend additional time discussing these important topics as well as others.

Share your comments in the space below.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

© 2016 ABSG

Monday
Mar282016

Why Office Space Is Premium Space at Your FBO

Part Two of the Four-Part Crafting Advantageous Hangar, Office and Tie-Down Agreements Series

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our previous blog, we wrote about developing a favorable hangar agreement as the lead post for our new series about crafting advantageous hangar, office and tie-down agreements, which together are the third component of the six intangibles that can build equity in your FBO.

In this post, we center in on crafting an advantageous office lease agreement.

As with a hangar lease agreement, an advantageous office lease agreement can help generate passive rental income for the FBO. Therefore, it should stand as a separate but complementary component if it is to be tied to a hangar lease package for a flight department.

In determining the value of an office space to be let, keep in mind that an office area is really premium space. It is often finished out and is heated, cooled and may be plumbed for hot and cold water as well as lavatory facilities.

An FBO has a couple of options to consider when leasing commercial office space. First, a triple net formula is often applied that takes into consideration the tenant or lessee agreeing to pay all real estate taxes, building insurance and maintenance in addition to any normal fees that are expected under the agreement  to include rent, utilities, etc. In such a lease, the tenant may be responsible for a portion or all costs associated with the repair and maintenance of any common area.

The second option for a prospective tenant would be for the utilities, taxes, repair and maintenance to be included in the rental cost. This may be a simpler option for office space that is part of an office/hangar building. Multiple offices in a building may not have separate meters for electricity or water and may include multiple common areas such as lobbies, elevators, etc. The key issue for the FBO is knowing its costs of the facilities. They include the common areas and expenses for utilities debt service, lease costs, etc.

It’s important to keep in mind that like hangar agreements, FBOs should not devalue the true worth of office space in order to please a current or potential base tenant who wants a deep discount for the space based on promised potential fuel sales. It’s better to hold the tenant to measureable specific fuel sales goals that are spelled out in the agreement when considering any rent discounts.

As with hangar lease agreements, office lease agreements are a sublease and must conform to the master lease agreement your FBO has with the airport authority. Signatories to office subleases do have a right to know the contents of your master lease because they must also comply with its contents. In addition, terms for rate increases in your subleases should be similar to the master lease, and the term of subleases cannot be longer than the master lease term.

Please keep in mind that there are many factors and nuances to crafting an advantageous office lease agreement, and we will not be able to expound on all of them in the framework of a blog. Therefore, we encourage you to attend one of our FBO Success Seminars where we spend additional time discussing these important topics as well as others.

If you have a comment you'd like to share, please do so in the space provided below.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

Subscribe:

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