The FBO business model has been generally the same over the last 30 years, but due to increases in fuel prices FBOs have been forced to update their business models to make up for operational business expenses. Historically, we could mark up fuel cost to cover all the operational business expenses, but this is no longer the case.
Fuel pricing isn’t the only factor affecting the FBO business model. We also have to take into account the fact that many of the corporate aircraft operators have become much more sophisticated in their flight planning. They are now using fuel tankering models, better ATC routing for weather and flight planning to minimize fuel costs, pre-established fueling stops, and the purchase of more fuel-efficient aircraft. Some of the aircraft that come to your FBO don’t even purchase fuel, but you still have the associated business costs. So what can you do to increase profit to allow for growth, sustainability and the continuation of your business?
- Employ a Qualified Team and Blow Your Customers Away with Service: When you have an exceptional team member, be creative and keep them happy! A knowledgeable staff can manage most of the issues that may come their way. Empowerment is VERY important. Give your team the tools and authority to help your customers and solve any problem they may have.
- Be Flexible: Determine the fuel discount program that works best for you and your customers. Make sure the program is easy to understand, not only for the customer, but also for the FBO. Set it up in your billing system (used by your customer service) so that it is automated and errors are avoided. Being consistent establishes a higher level of trust.
- Re-evaluate your service/pricing model: Value the true cost of your real estate as well as the cost to keep your doors open. Adjust your fees accordingly. You cannot stay in business for long by giving everything away for free – i.e. lowest fuel price and no additional fees. Determine what you need to make on average and ensure your fees reflect that. Note: adjust according to aircraft category – it’s not recommended to charge a GV the same rates as a King Air.
- Create Other Streams of Income: This corresponds to #3. If a customer does not buy fuel, ensure necessary fees on other services are charged to cover your fixed costs to serve your customers. Not everyone who comes in will need fuel. You cannot manage your FBO business effectively by thinking that they will.
- Identify Your Core Standards: Where is your focus going to be? Lowest price competitor, highest value competitor, best service competitor, the “Ritz Carlton” on the field, etc. To believe you can be the lowest price competitor and the “Ritz” competitor will most likely result in failure. To have/maintain premier facilities with a qualified team takes capital. Your business practices and fees should correspond accordingly.
How have you revised your FBO business model over the last few years? Leave your thoughts in the comments area below.