Your FBO’s Airport Lease: Payments, Maintenance and Termination

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Multi-Part Series: The 7 Immutable Elements for Building Equity in Your FBO Enterprise ©
Third Installment on Airport Leases

For this blog post, we’ll continue our series called the 7 Immutable Elements of Building Equity in Your FBO Enterprise© as we dive deeper into the topic: Obtaining a long-term airport lease.

In our last post, we covered: Term and Option Years, Operating Rights and Assignment Sale Clause. Now we are ready to discuss the next three lease elements: Payments, Maintenance Responsibilities and Termination.

Payments, including rental, gross revenue, flowage fees and out years to include escalators.

For this section of the lease, it’s important to check the exact wording so that you can protect yourself from any future disagreements or disputes. Payments may include investments in refurbishment of your terminal building and/or hangars to keep them up to date. Payments may include capital investments for a new hangar or building to exercise lease extensions. These rent payments and additional investments are all financial obligations that contribute to the success or potential failure of your FBO. Please note that each one of these elements is negotiable; therefore, do your homework by getting other comparable FBO leases in your area and region. If you have a competitor at your airport, ask to see its lease. Because it is considered a public record, you can obtain a copy under the Freedom of Information Act (FOIA). Remember, knowledge is the key to negotiating your best rates.

Building/ramp maintenance responsibilities.

Pay particular attention to the specific language for this section of the lease. Your FBO can end up on the short end if there is any ambiguity which can lead to unwanted finger pointing. If you are leasing buildings owned by the airport, most leases provide for the lessee (FBO) to pay for building upkeep, utilities and taxes. Spell out who’s responsible for various types of ramp and common area maintenance. For instance, if you operate in the snow belt, who is responsible for snow plowing ramps, approach taxiways or other areas?

 A Note About Taxes

Be very clear on taxes. In many cases you don’t have to pay property taxes on buildings owned by a city or municipality. In some states you may have to pay school taxes or other fees. Therefore, be clear on defining these responsibilities.

Termination by the FBO or lessor.

In case of dispute, natural disaster, fire or other unforeseen events, it is important to spell out explicitly how the lease can be terminated by either party. What is most important is that the parties to the agreement have sufficient time to correct and negotiate any disputes or other occurrences. The “cure” clause should be at least 30 to 60 days to fix problems. This length of time is generally not used if the issues are late payment of rents or fees.

In our next blog, we will breakdown the final three components of an airport lease to include:

•  Improvements, new buildings and renovations.

• Insurance, indemnity and hold harmless.

• Environmental liability.

Please leave any comments you have about this blog post below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.

ABOUT THE BLOGGERS: John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group (ABSG) 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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© 2022 ABSG

Is IS-BAH Right for Your FBO Operation?

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

We often receive inquiries from FBOs and business aircraft handlers wondering whether IS-BAH (International Standards for Business Aircraft Handling) is right for them.

To answer this question properly, we have to take a look at each FBO and service provider individually to determine the merit an IS-BAH registration brings to the enterprise.

At face value, an IS-BAH registration has importance for many FBOs seeking to demonstrate to customers a commitment to a high level of international safety standards. Of course, safety is both a practical and necessary core value for a successful FBO operation. The IS-BAH registration process is a qualitative measure through which to demonstrate this commitment.

The benefits of an IS-BAH registration can include:

• Enhancing the image of the company by demonstrating to current and potential customers that it operates and conforms internationally to a very high standard of safety.
• Creation of an internal culture that has a heightened awareness for achieving greater operational and safety levels throughout the enterprise.
• Potential discerning customers will look for the IS-BAH registration designation as a way to differentiate one service provider from another.

Promotional information for the IS-BAH registration process states that:

IS-BAH was established as a way to identify and promote the use of industry best practices by means of a progressive Safety Management System (SMS) for both Fixed Base Operations and Business Aircraft Handling Agencies (BAHA). IS-BAH follows the structure of the International Standard for Business Aircraft Operations (IS-BAO) Program and incorporates the NATA Safety 1st Ground Audit Program. The standard is based on the International Civil Aviation Organization (ICAO) standards as well as recommended practices in the preparation of handling business aircraft.

Although conforming to IS-BAH established standards is voluntary at this time, recognition for implementing and conforming to the standards can be confirmed through an auditing process which results in an International Business Aviation Council certificate of registration.

Central to the IS-BAH registration is the SMS that most charter operators have adopted over the past several years. Some of the FBOs that have already established IS-BAH registration have operated a charter department and have an SMS in place. Many of the FBOs seeking IS-BAH registration will probably not have an SMS in place, so they must develop one.

When we do an evaluation for a client seeking a potential IS-BAH registration, we look for whether or not the FBO or business aircraft handling company has truly invested in creating an internal culture that is safety oriented. We also want to see whether the organization has in place any of the required manuals and procedures that are described in the following evaluation checklist. If not, we can assist in writing and developing company-specific manuals along with training and implementing these plans.

The following is an abbreviated version of our IS-BAH registration checklist:

SMS Processes in Place and Being Utilized

Having a written SMS document is one thing. Utilizing it and making it part of your safety culture is quite another. As mentioned, the SMS is central to the IS-BAH registration process. In order to attain an IS-BAH registration designation, there has to be demonstrable proof that the SMS is being utilized and that safety issues are being reported and acted upon.

Employee Safety Training Program and Record Keeping in Place

Safety training programs, such as NATA's Safety 1st, help create a standardized teaching tool to ensure consistent levels of training. When IS-BAH auditors are engaged, they want to see that safety training records are kept on each individual employee involved in the aircraft handling process. They also want to see a history that the records are kept current and updated as needed. Therefore, a commitment to implementing and honoring these types of training programs needs to be demonstrated.

Designated Person of Accountability, Safety Manager and Training Manager in Place

Part of the evaluation is determining whether the FBO or ground handling company has the proper staffing in order to ensure there is a commitment to both safety training and safety accountability. Usually, the owner/operator or FBO manager is the designated person of accountability. As President Harry S. Truman said, the buck stops here.

Standard Operating Procedures (SOP) Manual in Place and Functioning

Adhering to current industry standards of effective best practices and detailing these practices in an SOP manual that is taught and utilized within the FBO enterprise are major parts of the IS-BAH audit review.

Emergency Response Plan (ERP) Detailed and Simulated

An ERP is a valuable resource that should be kept in a convenient and accessible location. It details emergency procedures and should include records of simulated emergencies that are being conducted and managed. An ERP is written to include protocols for interacting with specific emergency agencies on a local, regional and national level.

Environmental Management System (EMS)

FBOs need to develop an EMS plan that incorporates their environmental responsibilities for dealing with hazardous materials and environmental issues including, but not limited to, sump fuel, batteries, waste oil, international garbage and aircraft noise abatement. As part of an EMS, FBOs must also include management of their SPCC (Spill Prevention, Control and Countermeasure) plan and coordinate with the airport staff on the proper procedures for the SWPPP (Storm Water Pollution Prevention Plan).

For the FBO that is not currently utilizing an SMS or is missing one or more of the items on the checklist, the IS-BAH registration process will take a little longer.

So is IS-BAH right for your operation? Hopefully we've provided enough information that you can get a sense of what you want to achieve. We encourage FBOs and ground handlers to consult with an IS-BAH specialist and, as required, attend the Fundamentals of IS-BAH Workshop. Also, you can give us a call or send us an email with any questions you have (404-867-5518; email: jenticknap@bellsouth.com).

ABOUT THE BLOGGERS:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. 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

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.

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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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