Search
Advertisement
FBO Connection

Advertisement
Follow Us

 

 

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

Entries in fuel prices (7)

Tuesday
Feb062018

Survey: 53% of FBOs Increased Fuel Sales in 2017

Results of Aviation Business Strategies Group’s (ABSG) Annual FBO Fuel Sales Survey indicate that 53 percent of FBOs in the U.S. experienced increased fuel sales in 2017 compared to 2016 with 73 percent of survey respondents giving a favorable rating to the economy.

Click to read more ...

Tuesday
Jan302018

FBO Industry Update: Was 2017 a Watershed Year?

Prior to releasing the results of our Annual FBO Fuel Sales Survey and Industry Forecast for 2018, let’s compare how the FBO industry fared in 2017 to the forecast we made in February last year.

Click to read more ...

Wednesday
Aug302017

FBO Industry Update: Steady as She Goes

With the first six months of 2017 under our belts, let's take a look at how the industry has performed as we provide an update on our industry projections.

Click to read more ...

Monday
Mar272017

FBO Operations Tip: Want a Stronger Bottom Line? Mind Your Fuel Margin

Consulting with various FBOs over the years, we have discussed a strategy for improving bottom line performance that several FBOs have utilized with positive results. In a nutshell: Mind your fuel margin, and don’t be afraid to raise your fuel price.

Click to read more ...

Tuesday
Apr072015

Tip of the Week: Watch Your Discounts—Do the Math!

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

There’s a syndrome that is unique to the FBO industry. We call it the false-positive fuel pricing syndrome where the posted price is not really the selling price.

Show us another industry that establishes a pricing structure for its main product, publishes it online, feeds it to informational websites, posts it on a board in the store, and then completely ignores it when making the sale. Although this practice appears to be contrary, divergent thinking, it’s standard operating procedure for most FBOs.

When discounts are freely given to fuel brokers, base customers and transient customers, who’s left? At the end of the day, heavy discounts have eaten into the margins that were built into the posted price.

Pricing studies indicate that discounting posted prices may gain more customers but in the long-run the business is less profitable. “Making it up on volume” is a phrase we’ve all heard but this seldom works, especially in a very niche market like the FBO industry where the number of daily transactions is counted in tens instead of hundreds or even thousands.

Threaded below is an example of what a business needs in terms of additional customers to breakeven when a discount is given.

Before the Price Discount with 1,000 customers:
- Price per unit: $200
- Cost per unit: $150
- No. of customers: 1,000
- Gross income: $200,000
- Direct Costs: $150,000
- Gross Profit: $50,000

After the Price Discount with an additional 250 customers:
- Price per unit: $190
- Cost per unit: $150
- No. of customers: 1,250
- Gross income: $237,500
- Direct Costs: $187,500
- Gross Profit: $50,000

That’s an extra 250 customers you’ll somehow need to woo with your new low prices, just to stay even!!!

In the FBO industry, we’ve encountered many FBOs who have lost price-sensitive customers but have become more profitable by selling higher margin fuel on fewer transactions. 

If the math does not convince you to be very cautious with discounting, consider these facts concerning price buyers:

  • They are the least loyal customers.         
  • They complain more than premium price buyers.         
  • They expect more than premium buyers.     
  • They take up more of your time and distract from the time you need to spend with premium price buyers.         

FBO operators should keep these concepts in mind as part of the planning and management of the enterprise. Remember, a 5 percent discount will require the FBO to pump at least 20 percent more gallons just to maintain anticipated profit. The question is, where will you get these customers?

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.