Preparing for FBO Operations in A Post Iran Conflict Environment
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Image credit: Anton Petrus/getty images
When geopolitical forces create change within the FBO working environment, there is little we can do to control the cause. What we are left with is managing the effect.
For this blog post, we will assume that in a post Iranian conflict environment there will be a correction period that may lead to a “New Normal” for the FBO industry. What this environment will ultimately look like is anyone’s guess.
However, what we do know is that successful FBOs will find a way to adapt and expand their operations playbook to include best practices put into place to endure.
Currently there is a debate as to whether the cost of a barrel of crude oil will plummet quickly or will elevated prices remain sticky for a period of time as the global oil supply chain resets.
Irrespective, what makes this geopolitical event feel different from other historical economic disruptions is that the high cost of Jet A fuel has not appreciably affected FBO Jet A fuel sales over the past few months as reports of lively and steady ramp activity continue.
It is our observation that the effects of the high cost of Jet A fuel on the FBO industry during this period runs contrary to conventional thinking and historic probable outcomes. In fact, the trend line is quite the opposite.
The FBO industry seems to be in lockstep with an economy that keeps making new highs in the stock market indexes and is expanding with increases in jobs reports. In addition, for the time being, it even appears to be resilient to increased inflation reports.
This positive FBO outlook is reinforced in reports published by Argus International which tracks business aircraft flight activity through their TrakPak program. Their May results show overall hours flown by business aircraft in North America have again increased year-over-year with fractional aircraft programs leading with way.
Our advice for FBOs in the months to come is to stay the course and keep industry best practices top-of-mind. Here are few that we penned in our book titled FBO Survival and hold true no matter what shape the economy is in:
Pay your bills according to terms. Use the 30 days windows most creditors allow.
Use the credit card that gives you points or cash back, and then pay on time.
Use a bonded and stable payroll processing firm to pay employees. They know tax issues.
Receive payments promptly. Fuel suppliers should pay within 24 hours.
Get paid immediately by contract fuel suppliers and credit card processors.
Cash is king. Maintain positive cash flow and maximize cash on hand. Do not pay excessive interest rates or fees. Work with your banker to get a line of credit and do cash forecasts.
Have a good insurance story and let your broker be your friend. They have resources to help with safety training and audits.
Do a business analysis prior to making decisions on expenditures.
Train CSRs to ask customers to use the most advantageous card for fuel sales.
And always remember to maintain a healthy fuel margin. You should be competing on providing an excellent customer experience, not on fuel price. If you do this, you will find that customers will remain loyal, are less likely to ask for deep discounts and will recommend you to others.
Please leave any comments you have about this blog post below. If you have any questions, please send us an email: John Enticknap, jenticknap@bellsouth.net, Ron Jackson, ronjacksongroup@gmail.com,
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