The FBO fuel sales model is broken and anti-competitive

In almost every article about the future of leaded avgas, this statement appears, “… only one fuel will be stocked by the FBO system.” This particular quote comes from a reply by Mac McClellen to Todd Petersen in Mac’s latest Left Seat blog on the EAA’s website. You will also find it in almost every article and editorial from any aviation alphabet organization about the modern state of 100LL avgas.

My question is why are FBO’s the sole determinant of fuel sales on an airport? The answer is because of an obsolete view of what an FBO should do.

I know that my local airport here in central Oregon requires any commercial entity that sells fuel on the airport to also be an FBO. It is in the airport master plan regulations. It stems form the outdated notion that fuel sales need a human intermediary at an airport, to operate the pump and collect the payment.

Now that may have been true decades ago when most refueling at small airports was done from a truck and the only method of payment was cash or oil company credit card. It used to be the same at your local service station. But that is a completely outdated model.

As with your local service station, the modern refueling systems are completely modular, above ground, self contained and self service. Most service stations want you to pump your own fuel so they don’t have to have personnel on hand. Ironically we don’t allow that here in Oregon — only an attendant can pump your gasoline unless you use a commercial card lock system or you are a pilot at an airport self service fueling station.

It is time to remove the restriction that aviation fueling operations must be under the commercial umbrella of the FBO structure. Ironically an ever-increasing number of avgas refueling systems are already self-serve and you have no idea if an FBO really owns it or not.

Another major impediment to expanding mogas availability and competition on our airports stemming from the FBO model is that the FBO’s current fuel brander may economically threaten an FBO that wants to add mogas. I have talked with a number of FBO owners out here west of the Rockies who have related the threats to me.

Any commercial entity with the economic wherewithal to install a modern self-serve fueling station should be allowed to enter the fueling business on any airport within the engineering and safety parameters as set down by the state that all other fueling operations must follow. With this ability to compete, I guarantee you that the statement that “… only one fuel will be stocked by the FBO system” will become as meaningless as it already is at at least 100 airports in the U.S. and growing every month. I know personally that this obsolete model is stifling competition here in Central Oregon to the detriment of GA. Pilots in my area support mogas at the airport.

Contributed by Dean Billing

The GAfuels Blog is written by two private pilots concerned about the future availability of fuels for piston-engine aircraft: Dean Billing, Sisters, Ore., a pilot, homebuilder and expert on autogas and ethanol, and Kent Misegades, Cary, N.C., an aerospace engineer, aviation sales rep for U-Fuel, and president of EAA1114.

 

People who read this article also read articles on airparks, airshow, airshows, avgas, aviation fuel, aviation news, aircraft owner, avionics, buy a plane, FAA, fly-in, flying, general aviation, learn to fly, pilots, Light-Sport Aircraft, LSA, and Sport Pilot.

Comments

  1. says

    First the sale of auto fuel. The present auto fuel available is not suitable for any form of long term storage. The chemicals added to it leed to deposits and loss of volatity in the storage tanks and when the aircraft sits for a period of time. To beat the 100 LL dilemma we will need a new reformulated fuel. I used auto gas for years in my flight school in continentals 0-200/300 and the Lyc 0-320. The continentals has severe carbon buildup on the intake valves that caused a loss of total rpm due to intake restrictions. Also the fuel was sold to the public but I did not have my self service island then. Most of the sales were under 20 gallons and were performed full service. The time factor, liability and hassle of dealing with all these small sales was daunting and unprofitable. Most pilots would complain the price was higher that the pump, question the quality, want the courtesy car for free, want a funnel for the oil they brought with them, window cleaner and paper towels, and if the car was gone someone to drop them off and pick them up at the motel at 7:00 am. The FBO (I am an FBO owner) depends on the sale of fuel for a major profit item. Take it away and you decrease the profitability index in an already challenging environment.
    We need an operator at our small airports to help the general public with all the little problems associated with operating and getting to a destination upon arrival. Take away the operator and you have a vacant airport which will decrease flying in general.

  2. says

    Zachary, the quality issue is one of many myths surrounding autogas.  There is very little difference in the quality of avgas and autogas these days; after all, fuel producers have a far greater liability servicing 110,000 gas stations with autogas than they do supplying 3600 airport FBOs with avgas.  Federal regulations too dictate that autogas be of high standards.  The primary quality issues arise when fuel storage system are antiquated and poorly maintained, which is the case for many old avgas systems around our nation’s airports.  There are many aviation insurance companies who will provide fuel liability coverage for autogas at a low annual premium; lack of insurance for autogas is another one of the myths out there.  The main problem with many FBOs, as I see it, is the involvement of the bureaucrats and politicians from the town/county that owns the airport.  Some will drive down the price of their fuel to retain business, selling it at cost or even at a loss since they have the power of taxation to spread the loss over a large budget.  A private airport or private FBO does not have this luxury, which is what drives many small private FBO owners out of business.   Just like gas stations, each case is unique.  Some have the business to offer all kinds of services, products, a restaurant, etc.   Others are better off selling fuel from a self-service system and all other items from vending machines.  Look at marinas, most of which are privately owned, for an example of how GA airports could be run if governments were not involved.  The marina industry is doing quite well, and with no federal or state ‘AIP’ or other grant programs.  Privatization of our airports would be good for all, but we’d likely have to accept fewer airports.  Yours in Winchester, TN looks terrific.

  3. says

    The only “flaw” (if you want to call it that) is that someone has to be ultimately responsible for the quality of the fuel being dispensed.  I am an airport/fbo manager at an airport in Tennessee right now

  4. Rod Beck says

    Hi Kent, Couldn’t AGREE with you more – to many —holes in local/state government who don’t have a clue on airport economics. I recently did a “demand study” for a GA airport in Oregon – prepared a senerio 3 year P/L for the “ideal” FBO and what incentives the “city” would have to make,i.e rent abatement the first year, etc and recommended FIVE likely experienced area (OR and WA based) FBO candidates who may be good prospects in opening up a second location – no inexperienced “dreamers” – highly qualified well managed operators who can “hit the ground” running!

    Guess what – NOTHING has changed. The Airport Board is going to do it “their way” – and going no where – again, to may “experts”!

    And on the auto gas VS 100 LL; if I were a “profit” minded FBO, I would have no problem with offering H2O for that matter, provided I would arrive at the same NET profit regardless of WHAT I pumped.

    Here’s, however, what the ‘investment” and wise minded (rare!) FBO is going to look at: 1. How many Utlralights (auto gas fuel puchases) would it take to EQUAL 4-5 Cirrus, C-210’s or Bonanza’s? Now, IF that is the same NET income – why not – problem is – more than likely – it ISNT!

    One more thing, to many FBO’s? The FBO is only going to succeed when there is SUFFICIENT demand – adding more FBO’s to an all ready 3-4 starved operators on the same airport only DIVIDES the market share – it does NOT increase demand – all you have is “one more cat eating out of the same dish” – not enough milk to go around – which cat gets smart first and leaves to find another dish with NO other cats feeding there – more over Meow Cat Mix!

  5. Kent Misegades says

    Rod – my first job in aviation at age 15 was pumping three grades of avgas into airplanes at Ky Flying Service in Louisville, KY, back in 1973.  Times have changed.  Too many airports are run by bureaucrats who have no experience in aviation, or free markets for that matter.   Just as in any other market, more options are always better, and a rising tide raises all ships.  Why not have a full-service FBO and a small self-service fuel-only business at the same airport?  They exist along our highways, so why not at airports?  The lack of competition is killing GA, and crony capitalism runs wild in the airport procurement/improvement industry. Having run engineering businesses for 20+ years, I know that more competition is generally a good thing for my business – a rising tide raises all ships.   European GA thrives due to the widespread existence of private airfields owned by pilot groups, a great contrast to the government-owned airports of the US.

  6. Rpm says

    Hi, Rod – hey I like the idea of a movie room or area where something like that is playing constantly…i thought of The Great Waldo Pepper, too.

    The good news is that this can be done.  Government can and will be pushed back into the genie bottle of what it is supposed to do, and let business take care of business.

    Stay close to that situation in Jersey…glad to hear another success story.

    We are thinking very similarly.

  7. Rod Beck says

    In reply to RPM:  Yes, the “airpark” concept is going to be the savior of recreational avaition – bottom line; most smaller communties CAN”T justify the airport let alone the “FBO”.Here in New Jersey, Sky Manor, (N40) was recently purchased by a group, a co-op concept, and apparently is working out OK. 
     
    The bigger qustion is this, are there adequate “shareholders” who are willing to put up the money to do this.I thought the “Flight Center”concept had merit and several years ago had a simular idea. A small grass strip, 30 or so acres, a “club house”, with a mini-movie theather to show vintage films like “Thirty Seconds Over Tokyo”, Tora, Tora, Tora, etc, on those “IFR” weekends, a pool and ping pong table and a refreshment cafe, professionally managed and a CFI on staff.

    As more “government” owned/managed FBO’s appear, less services will be provided by private enterprise and the GA industry will suffer.
     
     

  8. Rpm says

    I like the question “Why require an FBO at all”.  Indeed.  In our bold new world of changes we wish to implement via the Aviation Access Project, we don’t even use the word FBO.  Why should we, when the public doesn’t know what it means?  And when we tell them, they still ask, what does THAT mean?
    Yes, the bain of the successful “airport operation” is the government entity that controls it.  Remember – most every regulation is born from some need to protect someone’s favor, livelihood, or ego.  

    The best scenario, and one we are willing to work toward, is to adopt a network of privately owned airports/airparks, run by Flight Centers.  Mogas.  100LL till it goes away RIP.  Adapt to the market, not be hamstrung by government employees following a checklist to the detriment of all.

    There is a more excellent way.

  9. Rod Beck says

    Since the author also seems to be an “expect” on “General Aviation Economics”, he best do a little more homework on what makes FBO’s profitable. A principal income for a “profit” motivated FBO is in the retail sale of fuel;100 LL and Jet-A. The biggest THREAT to the FBO’s income/profit center is government owned/operated airports entering into the fuel business – you can check/confirm this with NATA.

    Your qustion:”Why require an FBO at all”, has SOME merit. Smaller communities where the airport or the FBO isn’t jusified certainly could provide self serve pumps fearturing auto fuel for the 457 Ultalight based users and 100LL for the remainder of  “out of annual” Cessna’s, Piper’s, etc that may once again fly!

    And finanally, keep this in mind; a corporate Jet operator  REQUIRES the line services of a professional FBO – no matter WHAT the fuel cost - your Ultralight and SAA (Social Aviators Association) crowd can do just fine with minimal (self-serve) pumps.

  10. Kent Misegades says

    Why require an FBO at all?   Isn’t this for a free market to decide?   Don’t we already have the technology to provide the basic services most pilots need, eg self-service fuel, Internet-based weather, briefings, flight plans; attendant-less restrooms, vending machines with food, drinks, engine oil, etc.?  Why spend money on expensive fixed-cost items when an attendant-less airport can run just fine.  There are thousands of gas stations across the country that work just fine with little more than a daily visit to check systems and empty the garbage. 

  11. Burned in the biddness says

    The hard part is the FBO business … so to make the hard part easier (read have a higher probability of a profit), they attach the easy part – fuel – to it.  Not the other way around.

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