November 10, 2015

Breaking Down the 10 Critical Elements of an FBO Airport Lease

November 10, 2015/ Air Charter Journal

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

In our previous blog, we listed the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three of the airport lease elements and provide insight and tips to help you protect your business and add intrinsic value to it.

Term and Option Years

When you approach bankers or investors to help grow your business, one of the first items they will examine is the primary term of your lease and the option years remaining. Whether you're looking to sell your business or make additional capital improvements, the term and option years help form the primary equity foundation of your business. Therefore, rule of thumb is the longer, the better. If you are wanting to sell, investors want to see at least 15 years remaining on your primary lease with at least one five-year option. If you are planning to upgrade or expand your facility, now is the time to negotiate a longer primary lease and tack on one more five-year option. This will give you more time to amortize the cost of capital improvements and put you in a better position to sell down the road.

Operating Rights

Under the Operating Rights section of your lease, you'll find a detail of the services you can provide, the facilities that you are required to have and the required hours of operation. Besides the standard fueling services, most FBOs must also provide ground handling services, hangar services and a terminal facility.

In addition, many leases require an FBO operator to offer aircraft maintenance, flight training and other special services. If you don't want to provide these services, make sure you have the right to subcontract these out. Also,ifyou don't want to be open 24/7, make sure the hours of operation are detailed in the lease.

Assignment Sale Clause

Any business needs flexibility for its future. If your business outlook changes, a family legacy becomes altered or you encounter a major life event, you need the option to be able to sell or transfer your FBO business. The sale and assignment clause allows you to do exactly that.

The clause needs to containreasonable language that says you can sell the business to a qualified party with approval in writing, and suchapproval will not be unreasonably withheld. This process can sometimes take months, but, with patience,it can be completed successfully. Note that some airports have elected to charge a substantial fee to both the buyer and seller to complete a lease assignment.

In our next blog, we’ll examine three more critical elements of your lease with additional tips that can help you build equity in your FBO.

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.

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

November 03, 2015

10 Critical Elements of an FBO Airport Lease

November 03, 2015/ Air Charter Journal

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

As part of a new blog series, we'll take each of the six intangibles that can build equity in your FBO and give you valuable insight as well as insider tips to help you add intrinsic value to your business.

Starting at the top of our intangible list, developing a long-term lease with your airport authority is the lifeblood of your FBO operation and plays a large part in building equity in your enterprise.

The critical elements of a lease to understand, and that are a part of the negotiating process with the airport authority, include the following:

Term and option years
Operating rights
Payments, including rental, gross revenue, flowage fees and out years to include escalators
Building/ramp maintenance responsibilities
Assignment sale clause
Termination from FBO and lessor
Improvements, new buildings and renovations
Insurance, indemnity and hold harmless agreement
Environmental liability

The tenth critical element, an Airport Minimum Standards document, should be part of your lease. We consider this one of the main six intangibles and will treat this as a separate subject in a future blog because it is a very important component with distinct elements.

In our next blog, we will break down these components with some additional tips to help you negotiate the optimum lease.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

October 29, 2015

Poll: What Do You Expect Your Fuel Supplier to Provide to You?

October 29, 2015/ Air Charter Journal

Question
Besides reliable, economical fuel supply, what do you expect your fuel supplier to provide in today’s environment?

Answer Choices
A) Training & quality control guidance
B) Direct sales efforts to attract local or transient customers to my FBO
C) Additional resources/solutions to help improve FBO operations
D) Rewards loyalty progam
E) Business development financing

Vote in the poll.

October 27, 2015

Six Intangibles That Can Build Equity in Your FBO

October 27, 2015/ Air Charter Journal

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

Running a successful FBO operation requires attention to six intangibles. Reaching favorable terms and taking care of these intangibles the right way will help build equity in your business.

If you’ve ever gone to a bank to get a project financed, you know that it takes a savvy banker who understands the FBO business to get the project done. Most lending institutions can’t get over the first hurdle when they discover that an FBO doesn’t own the land where a proposed hangar is to be built.

To be sure, the FBO business is relatively unique. Often airports require FBOs to make major capital improvements as part of their lease, especially at time of renewal or in granting a request for a lease extension. Yet, at the end of the lease, none of the improvements are tangible assets that an FBO operator can liquidate. They are owned by the airport, which also owns the land.

Besides some ground service equipment, a typical FBO doesn’t have much tangible collateral. The real value bankers or investors are interested in is mostly the intangibles that help increase equity in an FBO enterprise. These include:

A long-term lease with extension options.
A favorable fuel supplier agreement.
Advantageous/profitable hangar contracts/agreements.
A sound balance sheet with consistent EBITDA performance.
A strong Airport Minimum Standards document.
A strategic business, operational and marketing plan.

In coming blogs, we’ll discuss each of these and make recommendations on how to improve the equity in your FBO.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

October 12, 2015

Four Tips to Retain Good FBO Employees

October 12, 2015/ Air Charter Journal

Employee recognition and retention: What gets rewarded gets repeated

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

In our last blog, we mentioned that one of the top concerns for FBOs in our Mid-Year Fuel Sales Survey was finding and keeping qualified employees. Needless to say, it's a lot easier to retain a good employee than to go out and find a replacement.

Keeping your valued employees means you have less churn and provides the ability to deliver a more consistent customer service experience.

Retention of good, qualified employees should rank as a top goal for FBO managers and supervisors along with retention of customers. You should work just as hard to accomplish both.

Here are four tips on retaining good employees:

1. Develop a good internal culture. Make your FBO a rewarding and fun place to work. Internal culture starts at the top. Lead by example.

2. Listen to your employees. Make sure your employees have a voice in your organization. Be appreciative of their input. Invite them to help create your mission, vision and customer promise statements. Employees who feel their voice is being heard will “buy into” the process and help create and maintain a healthy company culture.

3. Treat your employees as stakeholders. A stakeholder is anyone who has a stake in the company in terms of determining success or failure. Besides employees, other stakeholders include customers, vendors and suppliers.

4. Reward the routine. Let’s face it. Many of the tasks performed by FBO employees are repeated numerous times day in and day out. That’s why it is important to let employees know they are doing a good job, even for the most mundane routine task.

On this last point, we’d like to expound a little. By reward we are not talking about money. Research indicates that what most employees seek is being appreciated for a job well done. So let them know. Pat them on the back. Shake their hand. Let them know you appreciate their contribution as a true stakeholder. For example:

”That’s a great job of cleaning the lavatory. Way to go.”

”Super job of marshalling that aircraft. You used crisp and precise hand gestures. Keep it up.”

”You handled that last customer complaint beautifully by taking ownership of that oversight and making it right. Nice job.”

In their book Managing Knock Your Socks Off Service, Chip R. Bell and Ron Zemke state that what gets rewarded gets repeated. If you want your employees to grow with you, yes, they need to be compensated fairly. But what’s more powerful is your recognition, not just for their time on the job, but for their accomplishments as well.

How true. Showing employees you appreciate their contribution completes the retention cycle and helps cement a more permanent stakeholder relationship with the FBO.

What do you do to retain employees? Let us hear from you by making a comment below.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

September 15, 2015

The Top 10 FBO Challenges for 2015

September 15, 2015/ Air Charter Journal

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

In our last two blog posts, we reported the results and findings from our Mid-Year FBO Fuel Sales Survey. For this blog post, we look at the answers from a write-in question we asked in our survey:

What has been your biggest challenge so far in 2015?

With a nod to David Letterman’s Late Night Show Top 10 List, we’ve compiled our own list based on our survey results and named it the Top 10 Challenges FBOs are Facing in 2015, and offer a little sage advice.

No. 10: Contract Fueling. Not surprisingly, this topic made the top ten list. This subject has been discussed and debated many times in various forums including the NATA FBO Success Seminar. Our tip to FBOs struggling with this topic is to stay in your comfort zone with your margins, establish your own FBO contract sales price and offer this to your contract customers. Do your homework and track your contract sales. Did you sell more with a great discount?

No. 9: Managing your fuel inventory. Don’t get caught short. Develop daily dashboard reports to keep track of what’s in your tank. Check fuel prices on Thursdays to spot trends and to order fuel for Monday delivery if the prices are going up on Tuesday.

No. 8: Filling empty hangars. This is a constant challenge for many FBOs. Be proactive in identifying potential hangar prospects within a 50-mile radius. Use your flight tracking program to attain aircraft registration info. Put an attractive incentive package together, pick up the phone and call for an appointment. Also, visit neighboring airports and make cold calls. Know the costs of your hangar facilities.

No. 7: Fluctuating Fuel Prices. Welcome to the new normal. Our advice is make sure you keep track of the various price of loads that are in your tank. Be consistent with the margin you want to achieve relative to selling off your old inventory and adding new. Platts-based fuel pricing data changes on Tuesdays for most FBO fuel contracts.

No. 6: Runway closures. This is obviously a problem that’s out of your control. Use down time to maintain ground equipment, train staff and freshen up the lounge area.

No. 5: Weather. This is another problem that’s out of our control. However, interestingly, it’s the number five concern among those surveyed.

No. 4: High AvGas Pricing & Availability. We saw this comment many times, especially among smaller FBO operations in the Central time zone. Here is an anonymous comment submitted in the survey that sums up the situation:

“Uncertain supply issues that continue to plague delivery and pricing of AvGas. Rising prices which are counter to the price of oil and gasoline price at the pump are trends that are harming the industry as a whole, making it difficult, if not impossible to forecast sales and the future of the industry.”

No. 3: Growth and attracting more business to the airport. Although our survey showed very positive signs of growth among FBOs in larger markets, smaller FBOs pumping under 40,000 gallons of Jet A per month are mostly reporting no growth. Historically, the larger markets improve first, followed by the secondary markets. As reported in our most recent blog post, there are positive industry recovery signs in both flight hours being flown and in the United States manufacturing sectors.

No. 2: Finding and keeping qualified employees. This problem is not unique to the FBO industry. Working hand-in-hand with the local Chambers of Commerce and grass roots efforts at job fairs are critical. But perhaps more importantly is giving a potential employee a realistic look at the offered job. This may include on-the-job demonstrations, before hiring, from seasoned employees of the actual job being offered. While determining aptitude is important, assessing attitude is essential. Therefore, involve your team in the process.

No. 1: Marketing and inconsistent/low traffic counts. Attracting and waiting for new transient customers is one thing. Keeping the business you have is another. Make sure you are doing everything you can to keep your current customers. That’s worth more than spending marketing dollars to replace a disgruntled customer. It starts with a consistent customer service experience. Invest wisely by making sure your employees have good customer service skills and then lead them by example. Always ask your current customers if they would recommend you. If they hesitate, then fix the internal problem first.

What is the biggest challenge you face in the FBO business? We’d like to hear from you. Please write your comment below.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

September 08, 2015

More Positive Signs for FBO Industry Beyond Mid-Year Survey

September 08, 2015/ Air Charter Journal

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

As a follow-up to our Mid-Year FBO Fuel Sales Survey results posted in our last blog, we are taking out our crystal ball and gazing ever so cautiously yet optimistically into the next six months with the following observations.

In reviewing the primary survey results, we found 45 percent of respondents experienced an increase in Jet A fuel sales for the first six months of 2015 compared to the same period in 2014. Add to that another 26 percent reporting flat fuel sales during this period, and you have a grand total of 71 percent of the FBOs experiencing at least the same or improved fuel sales.

At first blush, this may not seem like a big deal, especially to the uninitiated. However, for the FBOs that survived and lived through the years of decline since the big economic bubble burst of 2008, this news is music to their ears. Finally, we are starting to see a positive trend.

Gazing back into our crystal ball for a moment, we see some more positive news for the FBO industry.

First let’s look at the data released by ARGUS International, Inc., which tracks the monthly business aircraft flight activity in the United States. For five consecutive months, March through July, ARGUS found that flight activity was positive for most or all aircraft categories compared to the same periods in 2014. This activity, we feel, is a start of a healthy trend: more business aircraft hours flown, more turbine aircraft on FBO ramps, more Jet A sales.

Although the General Aviation Manufacturers Association (GAMA) is reporting an overall decline in aircraft shipments for the first six months of 2015, our experience is that flight hours have to consistently increase before manufacturers see an uptick in their order books. As flight hours increase, the demand for new or replacement aircraft also increases. Historically, the two go hand in hand. From where we sit, it is just a matter of time before this happens.

In other economic news, the Fed recently reported that although the economy is expanding slowly, there is positive news in the U.S. manufacturing sector, especially in the automobile industry. Historically, as U.S. manufacturing increases and expands, business flight hours also increase giving credence to the NBAA and GAMA initiative No Plane No Gain.

As we put our crystal ball away until our next Annual FBO Fuel Sales Survey in January, we can say that overall, we are very bullish on the FBO industry right now.

In our next blog, we take a look at some of the answers received from FBOs on our mid-year survey when asked, “What has been your biggest challenge so far in 2015?”

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

August 25, 2015

Mid-Year FBO Fuel Sales Survey: 71 Percent of Respondents Report Increased or Flat Fuel Sales

August 25, 2015/ Air Charter Journal

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

Following our Annual FBO Fuel Sales Survey, we initiated our first Mid-Year Fuel Sales Survey. Please note this is a top-line survey designed only to gauge trends. The survey database was provided by AC-U-KWIK.

As a quick review, the annual survey results we released in January indicated that 49 percent of FBOs surveyed reported an increase in Jet A fuel sales in 2014 compared to the results of 2013 while 18 percent reported fuel sales to be about the same. This gives a total of 67 percent reporting having at least the same fuel sales or improved fuel sales over 2013. (For complete results of our annual survey, please click here.)

As part of this mid-year survey, we asked:

For the first six months of 2015, compared to the same period in 2014, are your Jet A fuel sales:

Up from a year ago?
Down from a year ago?
About the same?

A total of 45 percent of the FBOs responding to the survey reported sales were up from a year ago with 26 percent indicating sales were about the same. That’s a total of 71 percent reporting having at least the same fuel sales or improved fuel sales from a year ago.

Conversely, 29 percent indicated Jet A fuel sales were down in 2015 compared to the same first six months of 2014.

For this mid-year survey, we also wanted to get a feel for the average posted Jet A retail price so we asked:

What has been your average posted retail price per gallon of Jet A over the past six months? Respondents were given a choice of price ranges with the following responses:

2 percent reported their posted Jet A price was under $3.00 per gallon.
28 percent between $3.00 and $4.00 per gallon.
52 percent between $4.00 and $5.00 per gallon.
12 percent between $5.00 and $6.00 per gallon.
6 percent indicated more than $6.00 per gallon.

As we all know, because of various industry discount programs, the majority of FBOs do not sell Jet A fuel at the posted retail price. However, the results of this survey question can provide insight into what FBOs are posting on average.

Further, it has been our experience in consulting with many FBOs as well as conducting the NATA FBO Success Seminar, that the average margin on Jet A fuel sales runs between $1.30 and $1.60 per gallon. FBOs that are consistently selling Jet A Fuel below a margin $1.10 are having a hard time of making ends meet.

For our next blog post, we’ll draw some conclusions and take a look at the responses we received from our write-in question:

What has been your biggest challenge so far in 2015? Some of the answers may surprise you.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

August 18, 2015

FBO Tip of the Week: Four Steps to Discover Your FBO’s Natural Rhythm!

August 18, 2015/ Air Charter Journal

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

In our previous blog we discussed how every employee and department in an FBO needs to pull together like sections of a well-tuned orchestra in order to create a harmonious customer service environment.

Because every department touches a customer in some way, customers can sense when there is discord. Instead of one sound coming from one orchestra, they begin to hear many drums and many instruments playing haphazardly.

So how can FBOs pull the orchestra together, make many departments and teams move and sound as one and create an operating environment for delivering the ultimate customer service experience?

Here are four steps to creating departmental team harmony and discovering your own FBO’s natural rhythm.

Step 1: Develop and share the big picture. All employees should know the heritage of the company, where it is headed and the defining role they play.
Step 2: Lead by example, and empower management and supervisors to lead with enthusiasm, exhibiting encouraging behavior for employees to follow and do the jobs they've been hired to do with professionalism.
Step 3: Encourage and permit employees at all levels to have a voice in the process and be an instrument in the orchestra. Recongnize everyone contributes to the success of the FBO and is a valued stakeholder in the company.
Step 4: Follow through, and act with integrity. Everyone is watching, including the customers. Employee's actions reflect the company culture. Share company values, and include them in the performance reviews.

By preparing to meet the requirements of each of these steps, the FBO owner, operator or manager can create an operating environment for the team that is fun to work in and becomes a comfortable space for the customer.

About the bloggers:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

August 10, 2015

FBO Tip of the Week: Discover Your FBO’s Natural Rhythm!

August 10, 2015/ Air Charter Journal

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

Listen to the rhythm of your FBO. How does it sound? Do you hear many instruments playing in harmony? Or rather a rag-tag hodgepodge of many different departments, working independently and making an awful racket?

From line service and customer service to accounting and maintenance, every department and every employee touches a customer in some way. One bad towing job, one dirty restroom, one inaccurate invoice or one late maintenance delivery can move customers out of their comfort zone and motivate them to take their business, and their multi-million dollar aircraft, to a competitor.

For the premise of this blog, let's think of and visualize each department as a section of a well-tuned orchestra.

In the typical FBO organization, we have several departments or musical sections that make up the orchestra. They include fueling/line service, customer service, maintenance, avionics, parts, refurb, charter, flight school, aircraft sales, accounting, etc.

In consulting with many FBOs with which we've come in contact, several managers have lamented that departments often don't communicate well with each other and have tended to work more and more in isolation. In other words, they're tapping out a rhythm to their own beat, not in concert with the rest of the orchestra. In a way, they've created their own ensemble and aren't playing the same music.

When the customer spends some time at an FBO, they begin to develop a sixth sense with regard to the working environment. Their antennas are up and they can sense when there is discord. They begin to hear many drums and many instruments playing haphazardly instead of in sync as one sound, one orchestra, one FBO.

So how can FBOs pull the orchestra together, make many departments move and sound as one, and create an operating environment for delivering the ultimate customer service experience?

In the next blog, we'll discuss the four steps to creating inter-departmental harmony and discovering your FBO’s natural rhythm.

About the bloggers:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

July 21, 2015

Situational Awareness: You Can't Manage What You Don't Measure

July 21, 2015/ Air Charter Journal

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

Situational awareness. It’s not just a term for pilots. It should also be a daily mantra for FBO owners and operators who want to run a successful operation.

In the FBO business, situational awareness is all about being aware of what’s happening in your inner and outer circle. It’s a process of understanding how information, events and actions impact business plan goals, both immediately and in the near future.

During our NATA FBO Success Seminars we discuss developing and reviewing statistics or dashboard reports on what is going on with your business. It’s a daily ritual that is all about situational awareness as it pertains to fuel sales, labor productivity, and tracking your actual profit and loss (P&Ls) against your budget and last year’s performance.

However, one area that seems to get neglected is measuring the sales and marketing initiatives by keeping track of what we are doing to sell our FBO services, develop new customers, bid new contracts and other marketing efforts.

CRM (customer relationship management) software is a category of software that covers a broad set of applications and software designed to help businesses manage and measure customer data and customer interaction, access business information, automate sales, marketing and customer support. To assist in your sales efforts through CRM techniques, you may want to utilize software programs such as Salesforce.com, Pipeline or QuoteRoller.

Once you’ve selected your software, we recommend keeping things simple by tracking at least the following three metrics:

Number of cold calls to prospective customers. Yes, cold calling is not dead. Pick up the phone and make contact.
Number of appointments, whether you’re trying to sell MRO service or just informing a potential new customer about your facility.
Number of closed sales or the number of new transient customers.

Once you get into this tracking, there are additional metrics you can add:

Number of referrals received and referrals closed. Referrals means your FBO is delivering a good customer service experience. Referrals should always be followed up on in a timely manner.
Amount of email, direct mail, social media and blog posts. The use of all communications channels will increase sales success.
Upsell attempts and rate of success. Upselling is critical to help make an FBO successful.
Number of business cards handed out. Sounds simple, but promoting the brand is critical.
Number of times you contact a prospect before you close the sale. Keeping in contact with the customer base, no matter what the message, helps create and cement relationships.

You can develop your own metrics to fit your business. Whether it is the number of annuals, 100-hour inspections bid on and closed, or the number of contacts for new hangar rentals, any of these metrics are vitally important to the success of your FBO operation.

And always remember, you can’t manage what you don’t measure.

About the bloggers:

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

July 14, 2015

FBO Tip of the Week: Take Time for a Midyear Checkup

July 14, 2015/ Air Charter Journal

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

Now that we're halfway through 2015, it's time to take stock of how your FBO has performed this far and review your goals and objectives for the year.

This midyear review is an excellent opportunity to take a look at all aspects of your business and review the metrics that give you a relative benchmark of performance.

Fuel Sales: Utilizing your dashboard and YTD budget reports, compare fuel sales for each of the first six months against the results of the first six months for 2014 and your budget forecast. Are you trending up or down or maybe staying about the same? Are you going to hit your sales targets?

Fuel Pricing: Review your posted retail pricing for each month, and complete a market survey, both on the field and in the region.

Fuel Discounts: Figure the average of what you actually sold a gallon of fuel for, taking into account all discounts including contract fuel pricing, etc. You also may want to break out these costs by category to include base customers, transient customers, contract fuel, commercial into-plane and government/DOD.

Review all your expenses: Remember to include wages/salaries, utilities, building maintenance, insurance, supplies, rent/lease, loan payments, etc. Are they in line with your YTD budget?

Recalculate what each gallon of fuel costs to pump into an aircraft.

Figure Your Fuel Margin: Compare these margins YTD with the results of 2014.

MROs: Figure your hourly productivity rate for your shop and each technician for the first six months of this year. Compare these findings against the results of 2014. How are you trending?

Review Your Airport Lease: Now is a good time to think about negotiating a lease extension.

Review Capital Improvements: Are you on target to start or finish your capital improvement projects?

Review Safety Procedures: Now is a good time to conduct an internal audit of your safety procedures.

Insurance Review: Call your insurance agent, and get together to review your insurance story. A good insurance story can save you money.

Review Your Credit Card Transactions: Are your CSRs asking customers for the preferred card? The one that has the lowest interest/processing rates?

Review Your Base Tenant Leases: Have the leases renewed at the same rate or is there opportunity to negotiate better terms?

Review Your Customer Service Training: Take time to observe how your employees communicate and deal with your customers. Are your customers willing to recommend you without hesitation?

Now, tell us how you are doing. We'd like to hear from you to get a sense of how the industry is doing. Have you had more transient traffic these first six months compared to the same period in 2014? Do you have an opinion of whether there is an increase of in-flight hours compared to last year? Are fuels sales better, worse or about the same?

About the bloggers:

July 07, 2015

FBO Tip of the Week: Example of Contagious Company Culture: You've Got to Love Southwest Airlines, Part 3 of 3

July 07, 2015/ Air Charter Journal

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

In this final blog post about developing a contagious company culture, we'd like to share a short case study of a celebrated aviation services company that has put it all together and shines above the rest: Southwest Airlines.

True, they're not in the FBO business, but for the sake of this blog post, let's call them kissin' cousins.

Company: Southwest Airlines
Commenced Operations: 1971
Years in business: 44
Years of Profitability: 41 plus and counting
Market Positioning: Low-cost fares
Market Positioning Symbol: Peanuts
Founder/Figurehead: Herb Kelleher

Many have attributed the contagious company culture instilled at Southwest Airlines to Kelleher, a rather colorful business figure who once accepted the challenge of Kurt Herwald, then the president of the FBO/MRO Stevens Aviation, to an arm wrestling match for the right to use a marketing phrase: Just Plane Smart.

"A company is stronger if it's bound by love rather than fear,” Kelleher has said while describing the internal culture at Southwest Airlines.

Perhaps coincidentally, Southwest started its operations at Love Field (DAL), Dallas, Texas, and still marries the heart symbol/graphic with its brand name.

Not so coincidental is Southwest's consistent profitability and its reputation for extreme customer loyalty. The two harmoniously go together, like peas and carrots. And at the heart of its customer loyalty is an internal culture that thrives on purpose.

In past blog posts we've talked about developing a company vision statement that is forward looking and describes what a company wants to become. Southwest's vision statement is: "Our vision is to become the world's most loved, most flown and most profitable airline."

But Southwest also created a purpose statement that essentially states why a company exists: "We exist to connect people to what's important in their lives through friendly, reliable and low-cost air travel."

Both the vision and purpose statements are meant to inform and inspire the primary employee stakeholder group. And to drive home the basic tenets of the purpose statement, Southwest developed a series of short videos. Although you can find them on YouTube, they are primarily targeted for viewing by employees.

They're slices of life and highlight the efforts of employees who go the extra mile because the internal culture inspires and gives them permission to do so without hesitation. Click here to view the video about the company’s vision and purpose statements.

In summary, a contagious company culture is one that is contingent upon a management style that nurtures instead of controls. It acknowledges and celebrates its employees’ strengths and encourages good employee behavior while recognizing their contributions.

As we teach in our Don't Forget the Cheese! FBO customer service training program, what employees seek most from an employer is not a monetary reward, but simple recognition of a job well done.

What has your FBO done to create an outstanding company culture? Let us know in the comments.

About the bloggers:

June 30, 2015

FBO Tip of the Week: Team Chemistry-A Key Component of Contagious Company Culture, Part 2 of 3

June 30, 2015/ Air Charter Journal

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

In Part 1 of this series, we said a spirited and contagious company culture is essential in delivering a great customer service experience because it sets the tone and feeds the passion of the operation.

A key component of this type of culture is team chemistry. Good, athletic teams with winning cultures will often point to their internal chemistry as a factor for their success.

But where does good team chemistry come from? How does it take hold and why does it flourish in some companies and not in others?

Certainly, having the right combination of team members plays a big part. But perhaps more importantly is having the right management team in place that's been trained or knows intuitively how and when to nudge the ship in the right direction. It’s important to lead by example, set the tone, act and react consistently, and recognize and reinforce good behavior.

FBO management that has a team-oriented mindset will effectively infuse a healthy culture into the organization where it becomes infectious and adopted by the stakeholder employees.

Many companies try to impose repair for their internal culture problems by attempting to manipulate the behavior of their employees. Quick-fix gimmicks like providing monetary rewards or merchandise incentives may alter a behavior pattern in the short term, but the effects are often short lived and it doesn't take long for the same old habits to find their way back into the culture.

The remedy? Change the cultural mindset; cure the problem.

Changing the cultural mindset is a conscious decision and, yes, it can be done. In other words, the manager or management team first has to be able to recognize when there is an internal cultural problem. As mentioned in Part 1 of this series, an independently administered SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis will help determine what's working and what's not.

Then the management team has to be willing to adopt a cathartic or energizing process that involves all the employee stakeholders. When employees feel their opinions count, an adjustment in mindset takes place. They become more open to change.

Remember, it's not the chemistry of each individual team member that counts. What matters most is the team chemistry that thrives collectively and is managed wisely.

In our next blog post, we'll provide an example of an aviation company where team chemistry flows freely and is highly contagious.

About the bloggers:

June 22, 2015

Tip of the Week: FBO Industry Consolidation to Continue

June 22, 2015/ Air Charter Journal

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

Editor’s Note: This is a special blog post by John Enticknap, who attended the 2015 NATA Aviation Business Conference that was held June 15-18, in Washington, D.C.

At the recent 2015 NATA Aviation Business Conference held last week, I had the privilege of sitting on a panel with Tom Hendricks, NATA president, Jim Hopkins, Landmark Aviation, and Clive Lowe, Atlantic Aviation, to discuss the current state of the industry and, in particular, FBO consolidation by the major and smaller chains.

We all agreed that consolidation activity will continue for the foreseeable future and, in fact, has recently picked up a little steam.

One of the questions we are often asked in our consulting business is, "With the chains acquiring all of the good independent FBOs, are there any left to continue consolidation initiatives?"

To prepare for this session and to help answer questions like this, we did a little industry research and came up with the following statistics, thanks in part to help provided by the good folks at AC-U-KWIK.

There are currently 3,650 FBOs in the United States and Canada. But not all of these FBOs are what we define as viable FBOs or FBOs that may be targets for acquisition. So what is a viable FBO? It should include the following criteria:

1. A sustainable business model.

2. Be profitable.

3. Attractive lease terms with long tenure.

In addition to these criteria, we need to define the business model. There are many FBOs in the United States and Canada that are located on small airports with runways that are less than 4,000 ft., with unpaved runways, and are primarily selling avgas with less than 500,000 gallons of aviation fuel sold per year. These businesses are generally not targets for acquisition. If we apply these filters to our 3,650 FBOs, we have approximately 1,600 FBOs left that have business enterprises that sell enough fuel, have hangars, and sell other services that allow the business to be sustainable.

We hear that the chains have purchased all the FBOs. Based upon our statistics, let’s really look at that question. The chain FBOs include the big three, Atlantic, Landmark and Signature, but also other smaller chains such as SheltAir, TacAir, Cutter, Jet Aviation, etc. Altogether, they comprise approximately 285 locations. The number keeps changing from month to month!

Based upon our FBO business model, only 17 percent of the viable U.S. and Canadian FBOs are operated by the chains!

This begs the question, will consolidation continue? The answer is definitely YES! Why? The business model works. By purchasing good FBOs and grouping them together, immediate added value for the buyer is created. Plus, there is the potential to operate the business more efficiently, drive more business to the location, and create or sustain a unique brand.

About the bloggers:

June 08, 2015

FBO Tip of the Week: Develop a Contagious Company Culture, Part 1 of 3

June 08, 2015/ Air Charter Journal

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

A spirited and contagious company culture is one of the most important elements in running a successful FBO operation. It's an essential ingredient in delivering a great customer service experience because it sets the tone and feeds the passion of the operation.

Customers can sense and feel a company culture. It can make them feel warm and fuzzy or be a complete turnoff.

By definition, company culture is the "way of life" within an organization. It's exhibited by the behavior and demeanor of the employee stakeholders and expressed in the way the customer service experience is delivered.

As part of our Don't Forget the Cheese! customer service training, we are often asked by our FBO clients to help them analyze their company culture and then offer leadership training to their managers and supervisors to facilitate change.

One of the tools we use to analyze company culture is to conduct internal and external SWOT (Strength, Weakness, Opportunities and Threats) analysis. Through this process, we can gain valuable insight into what's working and what's not.

If an FBO has an excellent track record of establishing long-term, profitable customer relationships, they are probably doing a lot of things right.

On the other hand, if an FBO is experiencing one or more of the following, then it's in need of a cultural makeover:

Unusual or abnormal customer churn/defection.
Lack of consistent repeat customers.
Few or no customer recommendations.
Employees feeling disenfranchised/not part of the process.

The character or tone of a good company culture needs to be contagious. It starts at the top and, through the process of observation and osmosis, resonates down through the organization where it is absorbed due to continual and consistent exposure.

The reality is that great company culture does not magically appear on its own. It's up to FBO management to set the stage and create the proper environment for a desired culture to take root and flourish.

In part 2 of this series, we'll review the key elements in developing a contagious company culture.

About the bloggers:

May 05, 2015

FBO Tip of the Week: The Key Elements to Pricing Fuel

May 05, 2015/ Air Charter Journal

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

As we have all seen, the cost of Jet A fuel on the world markets started to fall more than 10 months ago and hit the lowest point in January. Since then, the price has been inching up.

By keeping an eye on the fuel market, FBOs can avoid falling short of their profit goals. As we know, the base price for a gallon of Jet A was as low as $1.48 a few months ago. With a Platts price of around $1.90 today, FBOs are paying approximately 42 cents per gallon more, which means an average load of fuel has gone up $3,500.

Because fuel sales drive FBO profitability, it’s imperative we keep a constant vigil on the key elements to pricing our fuel:

A consistent review of posted prices in your market.
Tracking your cost of fuel load-by-load and knowing what's in your tank.
Calculating the true cost to pump that fuel.
A realistic review of your contract fuel.

At our most recent NATA FBO Success Seminar in March, we forecast that the price of oil was poised for a relatively steady recovery following the recent collapse to under $50 per barrel. Based on market intelligence, including a report by the International Energy Agency (IEA), the recovery will not come close to returning to the highs of past years. In the IEA report, the Paris-based organization of 29 major oil importing nations said the fuel price rebound “will be comparatively limited in scope, with prices stabilizing at levels higher than recent lows but substantially below the highs of the last three years.”

With the continued volatility of Jet A fuel markets, FBOs need to conduct fuel surveys. Many online fuel pricing resources, such as those posted by AC-U-KWIK and others, provide relative survey data that is generally very good for benchmarking the marketplace. With these resources you get instant feedback on the range of pricing in your area plus the average price.

With this type of information, you can complete a simple price formula calculation. For example:

Base Price (Platts or Spot Jet A Price): $1.90
Supplier differential: $0.15
Transportation: $0.10
Fed & State Taxes: $0.337
Flowage Fee: $0.09

Total Cost of Fuel: $2.577

Plus Gross Profit Projected: 2.25

Calculated Retail Price: $4.83

Jet A
$3.30-$7.52
average $4.86

In this example, the projected posted price is just about average. For an FBO that has recently invested in new infrastructure and employee enrichment, such as a new hangar and customer service training, a realistic Jet A posted retail price could easily be $4.98. Now you can start your discounts from there.

However, as we counsel our FBO clients, don’t give away all your services. Every customer who comes on your ramp must contribute to your revenue stream in some way, especially the reluctant customer that doesn’t buy fuel.

Therefore, keep your costs in mind. Knowing your costs to pump fuel is key. With this knowledge you can apply your margin/into plane fee to the contract providers price. Then your business will be lean, mean and profitable!

Give us your feedback; we always like to hear your comments and read our eBook; “FBO Survival, Keep Your Operation Lean Mean & Profitable.”

About the bloggers:

April 27, 2015

FBO Tip of the Week: How to Measure Your Customer Service Performance

April 27, 2015/ Air Charter Journal

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

There are many line items you can measure in an FBO operation in order to assess how your business is trending. By setting simple benchmarks for tangibles such as fuel sales, fuel margins and maintenance productivity, you can set up an electronic dashboard for daily monitoring. (See our previous post: FBO Tip of the Week: Keep Your FBO Operations Simple.)

However, how do you measure an intangible like your customer service performance?

The obvious answer is to initiate a customer service survey. But not all surveys will help you benchmark your performance and, perhaps more importantly, ask the right questions.

As part of our Don’t Forget the Cheese customer service training program, we recommend FBOs initiate a measurable customer service survey using the following criteria.

Keep the survey short. Ask the customer to rate no more than five service areas or attributes. It’s our experience that pilots will more likely respond to surveys that appear short and easy to complete.
Rate each service area or attribute from one to 10 with 10 being the highest.
We suggest customers evaluate the following:
- Line Service
- Customer Service
- Passenger Amenities
- Pilot Amenities
- Cleanliness of Facility
Also ask just one really tough question: Would you recommend us? Yes or no?

We advocate you place a value of 50 points on this question alone. Why, you ask? Simply, a customer recommendation should not be taken lightly, and for most customers, this means they are putting their reputation on the line. Also, if a customer says, “No,” to this question, you should find out why. This will help correct a potentially negative situation and assist in repairing a valued customer relationship.

Now, when you receive a completed survey, add up your points. The perfect score is 100.

For convenience, we recommend placing this survey on your Web site. We also suggest you include a printed survey with your fuel invoice and place a completed survey box/receptacle next to the facility door leading to the ramp.

If you want to benchmark your progress, do a monthly tabulation. Also, you may want to establish an historic benchmark by inviting past customers to take the survey.

Besides the obvious benefit of finding out what customers think, a customer service survey also sends a positive message to your employees that customer service is important. Therefore, make sure your employees take part in this program, and always provide them with survey results.

About the bloggers:

April 21, 2015

FBO Tip of the Week: Keep Your FBO Operations Simple

April 21, 2015/ Air Charter Journal

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

No doubt many of you’ve heard of the purported business idea of KISS (Keep it Simple, Stupid). Although it’s not a phrase we like to throw around, here’s what we can glean from it for the FBO industry: Keep your FBO operations simple.

When one waxes philosophically about the FBO business, it’s sometimes easy to get caught up in some of the popular management disciplines such as business process reengineering (BPR), matrix management and consensus management, among others. Again, let’s keep it simple and boil it down to the four key things an FBO manager should really be doing:

Plan.
Organize.
Control.
Measure.

At our NATA FBO Success Seminar, we discuss these elements in detail. However, for this blog post, here’s our take on the four simple ways to manage your FBO without getting caught up in complex ideas and procedures.

1. Simple Plan

Beyond the customary detailed business plan, FBOs can keep their planning process simple by establishing short-term and long-term goals and objectives.

The short-term goals should be built around achieving expected/specified fuel or maintenance sales and determining margins and productivity rates. This would include a simple strategy and identifying the tactics required.

The long-term goals should consist of action items to be achieved over a longer period involving line items such as improving facilities, lowering insurance and credit card rates, negotiating a better fuel contract, and obtaining a longer term lease. Think in terms of writing each goal starting with an action word, such as build, promote, create, establish, lower and obtain.

2. Simple Organization

Create a simplified organization of qualified managers and supervisors. Set clear operating procedures, guidelines and, above all, communicate both your short-term and long-term goals and objectives.

Even better, get your managers and supervisors involved in the planning process. This promotes employee buy-in and raises morale.

3. Simple Control

Use data to run your business. Get and use daily reports to know what your business is doing. You can print reports or develop electronic dashboard reports from your accounting system. Industry software, like TotalFBO, has these built into their programs.

4. Simple Measure

Measuring results is critical to your planning process. Therefore, it goes full circle. Also, managers and supervisors should be informed of measurable results on a frequent basis. It becomes both an incentive and a driving factor for your business.

Perhaps the simplest way to measure results is to establish benchmarks for each of your business goals, particularly in the areas of revenue streams such as fuel and maintenance sales. You can also set a benchmark for achieving better customer service through the use of customer satisfaction surveys. (This will be discussed in a future blog.)

Remember, in measuring revenue for fuel sales, keep your margins in mind. If you sell a lot of fuel (volume) but your margins were lower than your plan, you need to adjust your findings accordingly.

The same goes for maintenance sales. Be sure to measure your productivity rate as well as your revenue (dollar volume). You may be generating more sales, but your productivity rate might be putting you in the red.

One More Tip

FBO operators who become slaves to complexity are at risk of running a reactive business and thus reactive with their time. Therefore, here’s another simple tip.

Try working “unplugged” for one hour every morning during the time set aside to plan, organize, control and measure. This means no internet/surfing connection and absolutely no phone calls, texts, etc. This will give you a sense of accomplishment that simplifies the daily routine.

About the bloggers:

April 13, 2015

Tip of the Week: Our Top 10 Tips eBook

April 13, 2015/ Air Charter Journal

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

For the last few years, we have written FBO Survival Tips that focus on the various strategies and tactics needed to survive the daily rigors of running a successful fixed base operation. After some great feedback, we decided to compile the 10 most popular tips into a comprehensive ebook resource for the FBO industry.

We are very proud to introduce FBO Survival: 10 Tips to Keep Your Operation Lean, Mean and Profitable. This book was made possible by the good folks at AC-U-KWIK and Penton.

Acknowledging that market and economic conditions often dictate the size and scope of an operation, this book will help the FBO owner, operator and manager prepare for both the best of times and the worst of times and keep them focused on running a successful FBO.

In this book you’ll find 10 of our most popular tips as well as a bonus section, 3 Keys to FBO Success. Also included are some dashboard report templates you can use to keep track of your operation on a daily basis.

The book is available as a digital download at Amazon.com. Here is a thumbnail overview of each of the 10 tips:

FBO Survival Tip #1: Keep Your Customers Close and Your Margins Closer

In order to survive in any economic climate, FBOs should focus on the two most important revenue generators: valued customers & fuel margins.

FBO Survival Tip #2: Avoid the “Ready, Fire, Aim” FBO/MRO Syndrome

To generate profitable transactions, FBOs must communicate across the enterprise, figure costs accurately and not overpromise.

FBO Survival Tip #3: Don’t Give it Away!

As fuel margins get squeezed by aircraft operators and fuel broker discount programs, FBOs need to charge for “free services” instead of giving them away.

FBO Survival Tip #4: Develop an Early Warning System

A crucial FBO survival strategy involves developing early warning reporting metrics designed to keep your fingers on the pulse of FBO operations.

FBO Survival Tip #5: Prepare to Operate in Your New Normal

After every major economic downturn, FBOs must establish a new operating benchmark that becomes their new normal moving forward.

FBO Survival Tip #6: Take Off the Blinders

FBO operators and managers can’t effectively run their facility without getting involved by walking around to gain a customer’s perspective.

FBO Survival Tip #7: Ask the Tough Questions!

If you don’t know what your customers think of your FBO operation, then you’re not asking the really tough questions.

FBO Survival Tip #8: Be a Savvy Business Operator

The FBO owner and manager should know and understand all aspects of the operation and what drives business profitability.

FBO Survival Tip #9: Avoid the Status Quo

About the time an FBO operator thinks things are running smoothly, that’s the time complacency sets in and things begin to slide.

FBO Survival Tip #10: Sharpen Your Negotiation Skills

Building successful stakeholder relationships in the FBO business often includes skillful negotiations. Sharpening these skills and thinking win-win are critical elements to getting what you want.

FBO Survival Bonus: 3 Keys to Success

As an FBO Survival book bonus, the authors have detailed 3 fundamental keys to FBO operational success.

About the bloggers:

AC-U-KWIK FBO Connection

Employee recognition and retention: What gets rewarded gets repeated

AIR CHARTER JOURNAL