Municipalities Competing with Private FBOs: Fair or Foul?

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As many of you are aware, over the past couple of years there has been an effort by a number of municipal airport managements in the United States interested in entering the aviation services business where private enterprise providers already exist.

It’s a political hot potato to be sure. No one is suggesting that municipal airport-managed FBOs should not exist. There have always been airport-managed FBOs providing essential services at small and large airports, and for good reasons.

The controversy arises when a municipal airport authority decides to either compete with or edge out an existing private FBO enterprise. This begs the question: Is it fair, or is it foul? To answer this question, let’s examine both sides of the issue.

The Case for Municipally Run FBOs

Here are some background statistics from the 2011 NATA general aviation fact book:

  • Total number of civil private-use airports: 14,353
  • Total number of civil public-use airports: 5175
  • Civil public use Part 139 airports: 551
  • Civil public use non-Part 139 airports: 4624
  • Total number of FBOs in the United States: 2987
  • Approximate number of FBOs within chain operators: 250

As we can see by the above statistics, there is a very large number of airports and a relatively low number of FBOs. Without going into details, for airports with low traffic figures that cannot support a profit-oriented FBO, municipal airport management can provide essential services — fueling, terminal operations, tie downs and hangars. Our general aviation industry would not operate efficiently if these services were not available.

The statistics above also show that the FBO business continues to be fragmented, and major consolidation will continue to occur. Add to this the fact that only about 8 percent of the FBOs in this country are part of a network or chain. In addition, the vast majority of the 14,353 civil private airports are unable to support an FBO. At these airports, the operator of the airport must provide the essential services.

The Thin Gray Line

In some recent incidents, some municipal airport authorities are muddying the waters by threatening free enterprises. With reduced budgets and reduced business, they are now looking at getting into the business of offering private aviation services as a way to increase income and defray operating costs.

What is most troubling is that at some airports, the management is trying to displace existing private businesses.

Here are some scenarios that seem to be playing out:

  • Existing privately held FBO’s lease comes to end. Airport authority takes over FBO operations.
  • Municipal airport managements builds FBO with federal funds to compete against existing privately owned FBO.
  • Existing FBO’s long-term lease is coming to end. Airport wants to build new FBO with federal funds to displace FBO. Considers federal funds “free” money.

Obvious questions arise. Should a government entity be allowed to enter an existing free market and compete against an existing private sector FBO? Should a municipal airport authority be allowed to eliminate private enterprise under circumstances listed above and become the sole source of providing a product or service where a private enterprise is available and can more than qualify?

So What Are We to Do?

There are no easy answers. Sometimes when government takes over there is not much you can do. The government has sovereign immunity, and many attorneys will tell you that you do not have a realistic chance to win a lawsuit. In the majority of cases, litigation ends up being a costly waste of time.

Yes, you can do plenty to protect your business. But sustaining your FBO with a satisfactory long-term lease is not necessarily a purely business proposition. Rather, it requires an effort to pull together your political, business and legal skills.

First and foremost, you must participate in your airport and business community. That means being a part of and taking part in the airport management processes no matter what kind of management structure the airport operates under, whether run by the city, airport authority or county municipality. You, as a tenant on the field, should be attending all public airport meetings, get to know the manager and board members, be part of the local business community and be involved in supporting local civic organizations.

These activities will give you information! You can get to know the thinking of the airport personnel, know the finances of the airport and know the political movers and shakers. By having knowledge of the local political and business community, you can get a sense of what you need to do to extend your lease.

Further, you should have an idea of the temperament of the airport authority. You should have a sense for whether it will negotiate a new lease, whether the airport is willing to have a Request for Proposals (RFP) process and what the “hot buttons” or issues are for the airport.

Get Help!

  • You might want to engage your attorney, who is no doubt a major part of the local business and political community. Engage some experienced consultants in the industries who have dealt with these complex issues before.
  • Contact NATA. This organization is very involved in this issue. It has already engaged government officials on several levels to support private FBO businesses.
  • Contact your senators and congressperson to support the Freedom from Government Competition Act, H.R. 1474/S.785. This bill removes the unfair advantage government has by subjecting commercial activities performed by government entities to market competition to benefit the taxpayer.

We have to be actively involved in our businesses and not only on the day-to-day operational issues. You must also be involved in the local business and political community. These are not easy issues to deal with. Remember, airports are businesses also. They are always seeking more traffic count and federal funding and dealing with many environmental and political issues themselves. Be part of the solution for their issues.

Remember, don’t be the FBO owner who wonders what happened. Be the owner that makes things happen!

What do what you think of this issue, or what you have done to protect your FBO as a going concern? Let us know in the comments, and email me at jenticknap@bellsouth.net.

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.