L-R: Ron Jackson and John Enticknap
Who responded to the Annual FBO Industry Survey and how representative are they of the FBO industry?
We have about 500 respondents who are based in the USA only. We have a database that we have accumulated over the years from our FBO success seminar and our consulting work, as well as trade shows. The respondents are a good representation of the US FBO industry. They are well distributed all over the country, with some in large metropolitan areas and others in more remote locations, but the majority have at least a 4,000ft runway, a hard surface and do turbine and piston business, so we think it is very representative.
What was the reason for conducting the survey?
The spirit of the report was to get a prediction and look ahead into what we call the glass ball. We have done the same survey over the past few years and have looked at the results from 2014 and 2013, and they were fairly accurate in terms of predictions. The main thing we’re looking for is how US FBOs feel about the state of the industry, and we asked that question with regard to the whole economy and their feelings about the economy going forward. We get a good feel of whether they are upbeat or not. The confidence level seems to be growing, although fuel sales have been pretty static over the past couple of years and a lot of FBOs had mostly a decrease last year. So this is the first time we’re seeing an upbeat response and it was very positive in terms of predictions for fuel sales in 2015. Over 60% said they would predict an increase, the majority of whom said 1-4% and another half of those said in excess of 5%, so this alone tells us they are thinking positive for 2015.
Do you think this positive trend will continue?
Given what we know today I would say that it will continue in 2016. The price of a barrel of oil has dropped considerably in the past six months. A year ago I don’t think anyone would have predicted this, so given the volatility of the price of oil – which I think will continue – then 2016 will continue an upward trend. It won’t be dramatic, but it will continue.
Which areas of the market will see most growth in terms of fuel sales?
When we got the results from the survey we did not differentiate between avgas and jet fuel, we just talked about gallons sold and the FBOs’ predictions. At the end of the survey there was an area where people could comment and we got a number of comments that were very positive for the recreational avgas market. The recreational markets are flying more on the weekends because that segment is price sensitive, so with the drop in avgas prices there is more activity being generated.
We keep our eye out for other industry surveys throughout the year and during the latter part of 2014 Business Jet Traveller magazine did some surveys of people who charter aircraft and their predictions for the coming year. We found that charter customers in large part gave almost the same statistics that we saw in our report – around 50% thought their charter flight hours were going to go up slightly, so it validated what we saw in our survey that there is a slight uptick but that still the market is rather stagnant. Other surveys suggest that large jet aircraft are selling well but that sales of smaller jets are still fairly stagnant.
How can FBOs increase their revenues?
We really advocate that FBOs look at every aircraft that comes on their facility and in some form or other they must contribute to its revenue base. A lot of aircraft come in and drop passengers off before flying out again fairly quickly, but they should still contribute to the revenue. We teach FBOs how to up-sell – when the aircraft is sitting there and they’re pumping fuel in, we teach them how to sell more fuel. Once the fuel truck is hooked up to the aircraft, pumping an extra few hundred gallons is easy and costs the FBO almost nothing. Of course you need permission from the crew to pump the extra fuel, but a good sales pitch based on a value added volume discount is what we teach.
We also teach all about the value of good customer service and not trying to compete on price. Make sure you have fair competitive prices in your marketplace to maintain your margins, because margins are being squeezed through contract fuel suppliers. The cost of buying fuel is one of the largest variable costs of operating an aircraft. Compete and differentiate your business on customer service – that’s how you retain your customers. They will pay you for that value-added service. Corporate aircraft operators and passengers don’t stay at cheap motels; they stay at very upscale hotels and expect a quality service provider. Great customer service – that’s where the FBOs need to differentiate themselves.
How can FBOs improve their customer service?
We have a program called ‘Don’t forget the cheese’. We challenge all the FBOs that we consult with to add one more thing to the customer service experience. That one thing will be individual, whether they give the customer a nice smile, a very big welcome, a big thank you and tell them you appreciate their business, etc. We feel the best way to determine whether they’ve been successful in delivering a great customer service experience is to ask the customer on leaving, “Would you recommend us?”
We then talk about reading the customer on their response,, and if they don’t respond favorably or they hesitate, we ask the FBO to dig deeper and find out if there was something wrong with the service before the customer leaves. Once they go, a bad comment can get out there virally through all the social media sources. We want FBOs to keep a track of each and every customer experience to make sure it is a good one.
How is social media impacting the FBO business?
It’s a double-edged sword. It’s more convenient for an FBO if they are able to use it properly and send out the right information, but it can also work against them because those same social media outlets are available to customers, and if they haven’t had a good customer experience the message can go viral very quickly. I think that the fact that FBOs know social media is out there has made them more aware of their business and that they must make sure every deliverable is up to par and very professional.
Will the drop in oil prices have a big impact on the industry?
We have been talking a lot to schedulers and dispatchers about the drop in oil prices, and just because the price of fuel will start coming down doesn’t mean that the Part 91 operators are going to start flying more. They have their own capacity and they have their trips scheduled for the near future, so we don’t see the drop in oil price as being a stimulus for the business sector to start flying more. The general economy has to do a lot more to expand in order for business owners who fly aircraft to expand their businesses. It goes hand in hand.
The main message that our survey shows is that there is guarded optimism, so we’re probably going to see FBOs increase their fuel sales more in the latter part of 2015, when hopefully the general business economy continues to improve.
February 12, 2015