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Aviation History
2000
2000 - 1551.PDF
BUSINESS AVIATION nucopia of facilities, including aircraft charter, management, sales and servicing. "Companies try to be one step ahead of each other by identi fying and exploiting market trends," says the Aviation Group's Hayes. The advent of the new generation of ultra- long-range business jets - the Airbus A319 Corporate Jet, the Boeing Business Jet (BBJ) and BBJ2 - poses a costly challenge for FBOs, with many having to increase hangar height, strengthen ramp areas and acquire large han dling equipment, such as tugs and ground power units. Signature claims the BBJ is "an integral part of its strategy", while Rifton Aviation Services, based at New York's Stuart International Airport, spotted the niche in the late 1990s and announced plans ahead of its counterparts to build a facility suited to for air liner-size aircraft. A 930nv (10,000ft-) hangar, designed to house four "BBJ-size" aircraft simultaneously, along with maintenance shops and executive terminal, will open next month. "We are one of only a handful of FBO's equipped to handle large business jets. The aircraft can only be han dled marginally at the smaller general aviation airports as it is restricted to an 8,000ft [2,440m) runway for maximum take-off," says Rifton vice- president Kim Boiler. MARKET COMPARISONS The bulk of US FBOs' profits, particularly for chains like Signature, stem from fuel sales. Handling is usually free of charge. Rising fuel prices in some regions, particularly in the norm east, are squeezing profit margins, however, and many facilities are seeking alternative revenue sources to boost their income. "The regional swing in price can vary by as much as 20%, from less than $2 to $3 a gallon, which encourages many operators to fuel up in the cheapest areas to avoid paying the higher tariff," says Allen. Highlife/AC-U-KWIK's George claims that a national debate has been under way in the USA for several years. She says: "Many FBOs want to adjust fuel prices to 'unbundle' those services which have generally been offered for free, thereby recovering these costs separately." She points to increasingly stringent environ mental regulations which strain FBOs' over heads. Coupled with the imposition of airport authority service fees "which are squeezing margins further...the US corporate operator will almost certainly have to pay more for the level ofservice to be preserved". By contrast, Furope's 173 FBOs make their profits from handling charges, as the fuel is usu ally supplied by the airport authority or directly by the fuel company "at prices considerably lower than those offered in the USA". George adds: "In the past, business aircraft in Europe paid more for a lower level ofservice - now with competition clearly increasing there are signs that the level ofservice is improving". A typical European FBO will provide charter, manage ment, handling and fuel services. Jet Aviation owns one of the region's oldest and foremost FBO chains. Developed around the Swiss company's charter and management business in 1967, Jet Aviation has a growing inventory of 11 European FBOs and small han dling facilities (in addition to 19 in the USA and the rest of the world). Its largest FBOs are in Geneva and Zurich. Robert Whitehead, Jet Aviation's station manager at Zurich Airport, believes that the European market is a key growth area for FBO investment. "Business aviation in Europe is really taking off," he says. "Our Swiss bases, which were non-existent 20 years ago, now han- their brand across the Atlantic, Whitehead says. Roberto Quarta, chief executive of BBA group, which acquired UK training and FBO company Oxford Aviation for $52 million last year, to add to its base at Zurich Airport, admits the mini-conglomerate seeks to expand its net work globally. He says: "We intend to be a total nose to tail provider offering everything our customers need under one roof. Our success to date has been in the USA, but there is a whole world out there and we intend to roll out our [Signature] model globally." BBA forecasts an increase in annual turnover from $1 billion in 1999 to $3 billion in 2002. "We will remain focused on the high-transit, high-volume areas worldwide, notably in the UK, Germany andltaly through the acquisition of existing companies," adds Quarta. The Leading FBOs like Jet Aviation, offer many services, including aircraft management and charter die 6,000 business aircraft annually". Whitehead concedes that the industry still faces obstacles over airport and airspace access and a lack of satisfactory reliever airports, which may previously have discouraged investment. But surges in business aircraft sales have led to increasing activity in the FBO market, notably the recent purchase of London Luton Airport- based Magec Aviation by the Lynton Group of die USA. He says: "Fractional ownership [while still a fledgling enterprise in Europe], econom ic prosperity, an increase in global travel and the eradication of border controls throughout mainland Europe have helped produced a bur geoning business aviation market over here". The continent is providing rich pickings for US chains that are "snapping at the heels of established companies" in an attempt to expand London, UK-based company is eager to expand its Asia-Pacific ties beyond its base at Hong Kong's Chek Lap Kok Airport and plans to introduce its service throughout South-East Asia and China. Quarta says: "China has huge potential, if we set up bases in commercial cen tres like Shanghai and Beijing, but we shall approach this region with caution until we have developed a greater understanding." Expansion is the buzzword across die indus try. Jet Aviation, Rifton and Million Air all claim to be eyeing new markets, while the small inde pendents seek to expand dieir existing facilities to fend off the acquisition hungry chains. The Aviation Group's Hayes says: "From the USA to die UK, FBOs will continue to change hands and the wave of consolidation looks set to continue well into this century." • I "FBO companies have begun to realise that fuel and handling are not the only services their customers require" - Sue Sommers, vice-president, Million Air 36 FLIGHT INTERNATIONAL 16 - 22 May 2000
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