Avfuel, EAA and mogas

The January 2014 issue of EAA’s Sport Aviation includes an article titled “Avfuel Takes on Fuel Challenges” by J. Mac McClellan that deals with the never-ending saga of a replacement for leaded avgas.

While Avfuel’s president and CEO, Craig Sincock, deserves great credit for building the company into a leading aviation fuel supplier, his comments and those from the article’s author show that some of the vast information archived on this blog has not yet reached the good people in Oshkosh and in Ann Arbor, Avfuel’s home base.

For instance, quoting from the article:

“What Craig knows is that well-performing unleaded avgas that can be created in test quantities may not be economically practical at useful volumes. About 10 refineries make avgas now.”

While it is nearly impossible to get the fuel industry to admit how many refineries still make avgas, the best we have heard from industry insiders is that about a half dozen refineries are still equipped to make the fuel, and they can produce their entire year’s supply in only a few days, since avgas represents less than 0.2% of the total refined fuel created annually in our country.

We’d love to know from Mr. Sincock who these 10 refineries are. More importantly, we’d like to know where they will obtain their Tetra Ethyl Lead (TEL) when the world’s last producer, England’s Innospec, stops making the additive.

From the article: “Many have speculated that an unleaded avgas would be less costly to ship and store because without lead it could move through the normal distribution system. Craig says that won’t happen. Avgas quantities are too small to ship by pipeline, which would be the only way to make measurable reductions in shipping cost.”

This, of course, is not the case for mogas, which is already distributed long distances and in huge volumes, cheaply, by fuel pipelines. Mogas can be transported from fuel terminals to airports in low-cost, conventional fuel trucks, the same ones used to deliver fuel to 110,000 gas stations in every corner of the country. This provides substantial savings for those selling mogas at airports.

“And Craig isn’t worried that avgas will be outlawed, grounding the piston fleet. Never in the history of environmental regulation has a chemical or activity been banned without a viable replacement.”

Avgas won’t need to be banned to disappear. Its use has been dropping by 3%-4% annually for many years, as former large consumers of the fuel switch to Jet-A powered turbine aircraft, older recreational aircraft disappear and are replaced by aircraft with more efficient, mogas-burning engines (Rotax, Jabiru, ULPower, AeroVee, etc.). Eventually the last few avgas producers will leave the market, or raise their prices so high that the fuel is effectively gone.

This chart from the DOE’s EIA suggests that is precisely what is already happening, as $9 or higher avgas becomes more commonplace and aircraft remain parked in their T-hangars or on ramps across the country. Eventually Innospec too will leave the business, ending supplies of TEL, which would be the death knell for avgas, without a single action on the part of the EPA, Friends of the Earth or other environmental groups.

“Though many, even a majority, of piston airplanes could fly on an unleaded avgas of less than 100 octane, the majority of all avgas is burned by airplanes that require 100 octane.”

As was accurately determined from FAA data and reported in 2012, the exact figure is over 80% of all piston-engined aircraft can safely and legally use lead-free mogas, today, either through type certificates or an STC from Petersen Aviation. Furthermore, the new INPULSE water-injection system from AirPlains has been certified for a number of high-performance aircraft including the Beech Baron that Mr. McClellan flies.

On the second half of this statement from the article, “the majority of all avgas is burned by airplanes that require 100 octane,” this too is one of those urban legends that just refuses to go away. If Mr. Sincock or McClellan have hard evidence to prove this figure, we’d sure like to see it.

Our repeated attempts to determine the factual basis behind this myth from those who like to repeat it has resulted in a weak admission from the FAA that it is based solely on anecdotal information from the past.

Since Europeans were faced to deal with the end of avgas at least a decade ago — mainly for cost reasons — a good indicator of who really uses which fuel should come from there. Based on what we have learned from repeated attendance of the AERO Friedrichshafen, Europe’s largest GA trade show, at least half of all aviation fuel consumed in piston aircraft there is mogas, and the fuel is widely available at airfields.

“And only a single avgas can be supported by the aviation fuel network. It just isn’t economically viable to make, ship, store, and sell two versions of avgas.”

Another urban legend. There are already two, FAA-approved fuels for piston engine aircraft in production, avgas and mogas. Well over 100 airports in the U.S. sell mogas alongside avgas, currently at a price advantage of $1.30 (according to AirNav) yet FBOs who sell both tell us their net margins are the same for the two fuels.

The infrastructure to produce and ship mogas is enormous relative to avgas, the result of fuel suppliers servicing the nation’s 110,000 gas stations. Why is it that a large GA airport in the U.S. claims it is incapable of selling two kinds of avgas, yet small rural airports do it, and most airfields in Europe — modest in comparison to the U.S. — offer mogas, avgas and many also Jet-A? The evidence contradicts the statement from the article.

“What does worry Craig about the future is the decline in activity at so many airports. Fuel sales are the only revenue source for nearly all FBOs now that new and used airplanes sales, maintenance, rental fleets, and flight schools have largely gone away as income streams.”

We share their concern, but wonder about their grasp of basic economics. Income streams from “used airplanes sales, maintenance, rental fleets, and flight schools” have disappeared precisely because of the high cost of avgas and lack of alternatives. Over 80% of all piston aircraft and virtually 100% of all training and recreational airplanes do not need a more expensive, high-octane fuel. Imagine how long a gas station would remain in business if it only offered Super? Most sell two or even three grades of fuel. They continue selling the highest octane, even though it accounts for only 10% of gasoline sold, because the margin on the higher octane fuel makes sense. Consumers like choices — at most airports, pilots get only the most expensive one.

Furthermore, basic economics tells us, that if a business wants to sell more of something, it must provide consumers with an incentive to buy more of it. Price is, of course, the most important incentive, and the largest part of a pilot’s annual operating expenses.

That pilots remain sensitive to price was demonstrated in superb fashion by Redbird’s Dollar-A-Gallon ‘experiment’ last October.

This article from the EAA described how pilots react when aviation fuel prices come down: “The number of pilots and amount of fuel sold wildly exceeded Redbird’s expectations. In the first week of the experiment Redbird Skyport pumped 30 times its normal fuel volume.”

FBOs will only start restoring income streams from used airplanes sales, maintenance, rental fleets, and flight schools when they provide lower cost fuel, it is that simple. Only mogas currently provides this option.

“A question I hear often is why can’t suppliers make auto gas available at FBOs for those airplanes approved to use it, or experimentals that require no approval. The reason is that auto gas is not a specific fuel. It varies in characteristic from season to season, and even by geography.”

This is simply not true. All mogas TCs and STCs require the fuel to meet ASTM D4814 standards, be of a minimum octane (AKI) rating, and -— in most cases — contain no ethanol. All automotive fuel in this country meets ASTM D4814; otherwise fuel makers would have huge problems with the tough legal departments of car manufacturers.

Tests of aircraft engines use fuel with various additives, none of which have negative influence on the behavior, otherwise they would never be certified for mogas use. There have been exactly ZERO reported incidences of problems implied in this article since the first mogas STC was issued by the FAA 32 years ago.

“Fuel suppliers couldn’t get liability insurance to sell a fuel not specifically created for aviation use. Without insurance the risk would be huge but the sales volume tiny.”

Can the authors explain how 100+ airports in the US, and most GA airports in Europe, are able to obtain fuel liability coverage if this statement is true? We discussed this particular myth at some length in this blog posting.

“I can’t believe some executive at big oil is going to see a profitable business in general aviation. You need to fly into the business and love it to figure out how to make it work.”

Last summer, AVweb editor Paul Bertorelli wrote a two-part article on aviation fuel that appeared in Kitplanes. His survey of FBOs on their profit margins confirmed what many pilots suspect — they are high. Bertorelli reported average margins of $0.75 – $1.50 per gallon — that’s 20% or more of the sales price. By comparison, gas stations make only a few pennies per gallon of gas sold -— but of course they sell a lot of it as well as $4 a cup coffee.

Clearly, oil company executives have determined that they can make high profits on the sale of avgas; the question is how long this will remain before pilots stop flying altogether and buy a motorcycle or a boat, two vehicles that — like the vast majority of most piston aircraft — run just fine on mogas.

Since, according to Mr. Sincock, less than 10% of Avfuel’s business is avgas (presumably over 90% is Jet-A), why not lower margins on avgas and also distribute a high-quality, aviation-grade of mogas at even lower margins to put some life back into sport aviation? Who will buy his Jet-A if the once large and vibrant sector of recreational flying disappears? Avfuel, with its independence from branded oil companies and its expertise in fuel storage and distribution, is in the best possible position to bring mogas to our airports. They might even displace a few of their competitors in the process, who knows?

Comments

  1. Hi Sam; And YES; the airport s a very expensive piece of real estate weather is be 50 or 500 acres! It’s already becoming a reality; more and more “hungry” municipal/county airports will and ARE getting into the fuel business. If you were an airport manager and wanted to keep your job, the FBO and their fuel (profit center) is on your target list! ANSWER: Other sources of non-aeronautical income; office building, warehouses or public parking lots to name a few!

  2. TO ALL;
    The “problem” the recreational segment of GA has faced and has always been is simply BOTH low demand and volume. The real issue or objective on the “MOGAS” theme is finding solutions to REDUCE the cost of flying primarily to the occasional “weekend” flyer – right? The question is; CAN it be done?
    Given that objective, and from a purely business approach to solve a problem, her goes!
    When “demand” is lacking, the astute management/sales/marketing person will: 1. Attempt to INCREASE sales 2. DECREASE expenses 3. Or BOTH.
    The approach by many, AOPA, EAA, noble flight schools, etc; has been to increase demand by the non-flyer to “consider” recreational flying as an ALTERNATIVE to other recreational options. The smart” consumer of today, however, is going to ‘”weight” the pro’s and con’s”, generally a “cost/benefit” method of determining WHAT is best for them. Not only is flying more “costly”, it requires “hoops and hurtles” other activities don’t – take an ATV or Ski-Doo, for example!
    That said, lets take a “problem solving” approach.

    REDUCE EXPENSES: (long term)
    ALL aviation activities, however, require an AIRPORT to operate from; the local shopping mall isn’t going to work! I’ll use my state, New Jersey, where we lost 25+ smaller GA (primarily recreational aviation consumer based) airports in the last 45 years! One, here in northern NJ, was Totowa-Wayne, which succumbed to the “developers bulldozer” in 1968 – my first “instructors gig” was there in the summer of 1966!
    This nice little airport which was privately owned and had one single paved runway as I remember of about 2,800 ft. The very short length of the runway and support infrastructure limited it to light piston twins and below. Therefore, the result was low demand and volume users; the owner ultimately did the math; “my property has MORE value as an industrial park”; which it became by the early 70′s!

    Now if I were approached by the “recreational aviation” community/group to create a “model” recreational airport, my first and number one consideration would be the COST of real estate and this is NOT going to be near any upward mobile metro area be it Oregon, Nebraska, Alabama, New Jersey or California.
    So WHAT’s needed? I would think a nice grass field (paved option?) of about 20-25 acres – 2,200 – 2,400 ft runway complete with “clubhouse! AND ideally, no more than a 45-50 minute ride from a metro area of 200K+ population to draw POTENIAL flyers and non-flyers (groupies?) to support the airport/facility OWNED (co-op style) by “X” number of members. No government jackass ownership to have at one’s mercy – but again, this MUST be “friendly” (JAMIE – your hired!) and not seen as a noise or safety concern to the non-flying public. Have a “kids day” once a month – the parents will love you and great PR to boot! Suddenly. the “airport” is viewed like the local park – a great leisure alternative and something to do – watch the planes, picnic lunch, etc! Next thing you know the airport is now seen as a community “ASSET” – not the liability it may have been!

    INCREASE INCOME: Club memberships (short-long term)
    1. Level # 1 – Active flying members (yes, YOU pay!)
    2. ” 2 Inactive ” ” (you pay LESS!)
    3. Junior level # 1 Active flying member -young folks 14-18 age group (parent pay OR they pay from paper route – if newspaper still exist?)
    4. ” ” # 2 Inactive members – 12-18 age group (parents pay OR they pay from proceeds from lemonade (no sugar) stand sales!

    RESULT/PROBLEM SOLVED:
    MOGAS – ALL you can muster – IT’S YOUR AIRPORT – YOU OWN IT – THE DECISONS ARE YOURS; Ultralights, classic Cubs and Champs, new LSA’s, fellowship, barbecues, plus ALL the things the recreational flying community wants and needs! ALL possible and do able – donations please – just an idea!

    • Kent Misegades says:

      You just described many of the nice grass fields in Germany owned by flying clubs. Most have mogas, many also have Avgas. All have a clubhouse, many have a weekend cafe with playground for locals to enjoy the sights and sounds up close – not behind a ten foot chain link fence topped with razor wire. The clubs do their own training and maintenance, have youth programs, social events,often a campground where members can park an RV year-round for weekends spent at the airfield. They offer all kinds of flying, including models for the kids, ultralights, soaring, powered, etc. We are so far from this model that works well, it is hard to see how we convert our many dying publicly-owned airports into private ones that are more likely to survive.

      • Hi Kent;
        What will NEVER happen is “converting” government owned/operated airports – to much “red tape” (FAA funds?) plus donkey board members, etc. Best BUY smaller privately owned fields BEFORE there SOLD for real estate development is the only hope and option. VOLUME memberships sold is a must; otherwise recreational aviation may ultimately go the way of the “Big Bands”! I’ll work up a P/L pro-forma for one of these to include real estate purchase, clubhouse construction, etc and INCOME needed to support this concept/model – stay tuned!

        • Kent Misegades says:

          I agree Rod. Roland Gilliam’s great Gilliam-McConnell airport in Carthage, NC is one good example. It is an airplane magnet on weekends. The nearby Moore County Airport that serves the Pinehurst golf courses is dead by comparison, especially since they closed the nice grass runway. When the Harnett County airport here in NC decided they preferred a rare bizjet over the loyal soaring club that had been there for years, the glider guys discovered a nice private grass field and all kinds of freedom. The move to a private field ended up bring a good thing for them, but a major loss to this rural county airport.

  3. Keep up the work of combating the ignorance about this Kent. Unleaded mogas is indeed an approved and viable fuel for most piston aircraft. It is readily available in most areas of the country just not at the airport. That it is not at airports is, I believe, primarily a result of political (economics) or ignorance/fear. Fuel vendors like AvFuel also provide insurance and that insurance will not cover the sale of mogas, that is used as reason to not provide mogas at many airports. Many owners are afraid of using mogas as the aircraft was not originally approved to use it,never mind that many were not approved on 100LL either. Being a “listed” avgas the owner/pilots “feel” safer with 100LL avgas, regardless of the original intended fuel being closer to mogas than current 100LL avgas. Simply put it is the fear of something different,the resulting insurance issues (due to fear of “what if”). In short LIABILITY something that is not real but made real by the fear.

    • Kent misegades says:

      Agreed, ignorance and risk aversion kills free markets. But risk aversion is a high priority among public agencies and civil servants, so one should not be too surprised. These people are more concerned with CYA, job security and early retirement on a government pension. The problem is, when airports die completely, no politician will vote for one cent of funding to keep the airfield open. In metropolitan areas, there is always the pressure from developers for the land, and from politicians interested in a larger tax base. We really can not blame anyone but our own airport, FBO and alphabet leaders as recreational aviation goes the way of the dodo bird.

  4. Michael Huffman says:

    I have been a member of EAA since the mid-1960s and I am saddened to say that the organization has been sliding toward being a clone of AOPA for several years. And, when Mac McClellan took over as editor of Sport Aviation, another nail was added to the coffin of good representation for grassroots aviation. I used to treasure getting each new Sport Aviation issue in the mail; now it is a ho-hum, scan-it-quickly-and-throw-it-away situation. The article in question was obviously aimed at owners of airplanes that actually need the octane rating of 100LL. Mac McClellan needs to go back to Flying magazine or whereever he came from.

  5. Personally, I think the MOGAS concept makes a lot of cent$ given Kent’s practical and logical premise. But are there bigger forces at work here such as corporate and government politics – probably so?
    That said, however, one might want to investigate the greatest “threat” to the FBO – small and large. That is the airport authority getting and monopolizing the fuel at your county or municipal field. Just wait until they see the POTRNTIAL mark-up (profit) from ANY fuel sale be it Jet-A, 100LL, or MOGAS. More self-serve pumps and “ZIP” other support services on the way? Want a real world example; Fairmont (FRW) MN. The “city” decided that an airport (dedicated) manager was the answer. The area and market demand cannot support a single revenue/profit center such as a small flight school or maintenance shop. However, with a “3-4 prong” profit(s) center, INCLUDING fuel, a small full service FBO may have been do able. Not any more!
    So the “town fathers” now have control of 5,500 ft of payment – drag races on weekends
    coming soon? And the airport manager is getting “certified” on the use of the leaf blower as well as the proper feeding of “of course” Canadian Geese!
    NOTE: An article at our blog of April 12, 2012, “The Future of GA Airports” @ get-aviation.com, may shed some light on GA’s larger issue.

    • Kent Misegades says:

      Well put Rod. A major problem is the ownership of most GA airports – they are a government entity that does not really understand or embrace free-market economics. Many exist to promote corporate aviation and recreational flyers are seen as a nuisance, although they fill most of the T-hangars and keep the local flight schools and maintenance shops alive. At least they used to. Government-owned airports often appear more interested in keeping civil service jobs protected, even when these people have little to do most of the day with the decline in flying. This explains the illogical resistance against self-service fueling, something that pays for itself in a few years through lower personnel costs. Privatize all publicly-owned GA airports and some will close, but those that don’t will remain stronger and focus more on providing value to their customers. I deal with both public and private airports and the difference is night and day.

      • Kent;
        Or a least rope the “ownership” away from inept civil service idiots!
        A good example, although in a higher density market, is in northern metro NJ, Morristown (MMU), which is managed by a private firm, DM Airport Developers, kind a like a Port Authority of NY/NJ – and they’re profitable!
        The problem is Kent, the ‘town fathers” of smaller communities get talked into an airport by, you guessed it, the FAA, in most cases NOT justified or needed to began with. Several years, and 2-3 FBO’s later, they realize they have a “white (not gray?) elephant” on their hands! Then some bunch of anti-airport moguls, as you said, decide the airports fate; “Look guys (town airport meeting) lets not renew the FBO”s lease – take a look a his/her profit from fuel sales – now if WE…………………….” And this is out of financial desperation and GREED?

        • Interesting article on airports and privatization: http://www.downsizinggovernment.org/transportation/airports-atc#top

        • Kent misegades says:

          Good comments here. Have a look at any airport commission and try to find an active pilot who flies the same planes most sport aviators do. If there is even one on the commission, that’s quite good. Look at all the quiet GA airports that call themselves executive jet ports and drive away the people who pay the bills. The most recent case in my state of NC is the Harnett County Airport, now a “regional Jetport” ever since the owner of the local Warren Oil Company elbowed his way into power. He drove away the NC Soaring Association which had used the airport and its long parallel grass runway for many years. Word got around what they’ve done. You could not pay me or my flying buddies to land at that once GA-friendly airport. They deserve to go under completely.

  6. A very good article, except you left out something critical. I was told by a reliable source that Shell Oil will not allow mogas to be sold at airports where they provide AVGAS. This is part of the Shell contract. I believe the logic based on Shell informing the public that it is working on its own unleaded AVGAS. Shell is protecting its financial future. I pray that this will work in our favor.

    • Kent Misegades says:

      Chuck,

      Most – if not all – Shell-branded Avgas in the US is sold through Eastern Aviation in New Bern, NC, my state. If such anti-competition clauses do exist in contracts with FBOs, they are probably illegal and most likely between Eastern Aviation and the FBO, not Shell. Note too that Shell stopped making Avgas more than twenty years ago, according to fellow GAN Blogger Ben Visser, retired Shell Aviation Fuel exec. Most (all?) of Shell’s avgas comes from Flint Hills’ refinery in Rosemount, MN. Since avgas supplier often provide fueling liability coverage, it is understandable that they would not cover a fuel they do not provide. But there are plenty of aviation insurance companies that will, such as Falcon.

      Sadly, short-sightedness and ignorance about mogas is killing recreational aviation, and our alphabets ( except for the smart people at LAMA ) are doing nothing to stop it.

      • Edd Weninger says:

        I have a copy of a Shell contract with an airport manager and FBO, signed within the last year.

        It contains absolutely no references to the implied restrictions you are opining about.

        • Kent misegades says:

          These typically vary from airport to airport and depend on who is delivering the fuel. Exclusive contracts are not at all unusual though, and Shell-branded suppliers are not the only ones doing this.

    • Chuck – If an airport accepted any FAA funding, Shell Oil cannot restrict an airport from selling mogas. We do know that a branded fuel supplier will sometimes threaten an FBO with withdrawal of blanket insurance coverage if they install mogas service. Happens all the time out here west of the Rockies. But another commercial enterprise can add mogas service at any airport without restraint. Unfortunately many airport master plans require fueling to be done by an FBO although in this day of self-service modular fuel delivery systems, that is a laughable requirement. I have no idea why any FBO would want to sell branded aviation fuel because in all likelihood their avgas comes from an independent refinery, as Kent pointed out in his reply. There is no vertical integration in aviation fuel anymore. When an FBO out here in Oregon was threatened by a branded supplier in exactly the way you described, he said OK take down your sign and proceeded to sell exactly the same 100LL, unbranded, along with mogas and bought independent liability insurance. In two years the supplier restored his blanket insurance coverage. Quite frankly, if FBO’s had any nards they would sue any supplier who pulled these shenanigans for federal restraint of trade in interstate commerce because just about all gasoline or the products that make the gasoline cross state lines. The other thing that would help would be for the FAA to make it clear to airport businesses and the gasoline suppliers that mogas is an FAA approved aviation fuel and to start promoting it instead of trying to restrain the market.

  7. Michael Gallagher says:

    Well stated Kent. It as though the defenders of avgas are trying to hold onto beliefs that are not held up by the facts. The Easter Bunny is another example that comes to mind. At the Class C airport where I am based, there is only Jet A and avgas sold, so I self fuel my aircraft with MOGAS that is powered by a rotax engine. In the last year, I flew nearly 300 hours on MOGAS with and without ethanol since ethanol is not a determining factor with a Rotax engine. Of the 60 T hangers at my airport, barely 10 opened their doors at all last year, and of those that did, most flew 25 hours or less. The only other aircraft flying more than that low average was another Rotax powered aircraft. The economics of MOGAS make sense and it is a safe and plentiful fuel.

    • Kent misegades says:

      Michael, what you describe at airports in IL is the same here in NC. High Avgas prices are killing sport aviation, closing maintenance shops and flight schools. The next wave will be a sell off of the thousands of old spam cans out of annual as their owners give up flying for good. Then more shops close for lack of steady work. The Luddites that run airports will crank up Avgas prices higher to make up for lost revenue, and the destruction of most of sport aviation will be complete, except for the lucky few based at airports that sell mogas. The Homebuilt and LSA guys will be sitting pretty, especially if they can find suppliers of ethanol-free mogas. The alphabets will announce yet another grand scheme to introduce flying to non-flyers, maybe kids in Kindergarten this time.

  8. Thanks again Kent for defending the parallel universe that practically uses 91 octane E0 mogas at 2.00 gallon cheaper prices. My supplier to my tank at our private strip goes direct to pipeline terminal, brings tanker load back, puts in his bobtail, and supplies several small E0 retailers around me, so brings me a load on the way. Last time I remember him testing the smell and stating thats why we get it from the terminal (up north of us), fresh smell. He loves that we use his fuel. I guess he was marketing to me when he did that smelling thing. MY GOSH, these guys would love a few FBOs to put a tank in and let them sell to them. WAKE UP!

  9. It is possible that the high margin fuel sales could continue to become more widespread throughout the industry. Maybe it is time they switched to the model that your local gas station uses (as you point out) with a low price of gas, but charging for other services.

    “Because FBOs operate on such thin margins, the days of selling fuel at wholesale are gradually coming to an end,” Jackson explained. “As a result, a new business model is emerging that focuses on maximizing fuel pricing, greater customer service and not giving away customary free services.”

    http://generalaviationnews.com/2014/01/16/fbo-industry-forecast-calls-for-flat-market/

    • Kent misegades says:

      The problem is, they have few other services that pilots really need. They need to see Avgas as a necessary service, just like a runway an UNICOM and AWOS. Sell it at cost, maybe even a loss-leader as Redbird did in order to get people flying again. Stop flushing money into things that do nothing for pilots, like solar farms, gold-plated terminals, high fences with razor wire, fancy security systems and all the other things that the airport consultants like to push on them, then fund with limited tax dollars.

      • Interesting, according to this article car gas is sold at 2.5% profit margin. That is really low compared to avgas or jet A margins! Going back to Rod Beck’s comments, the problem is that the airport manager is having to cover a large portion of airport expenses through fuel sales. An airport is one expensive piece of property to dedicate to aviation just so you can sell a few gallons of fuel a year.

        http://www.sageworks.com/blog/post/2013/02/21/Profit-margins-for-private-gas-stations-below-average.aspx

        • Kent Misegades says:

          Bingo! The gas station sells more fuel in a week than an airport sells in a year, so they can handle the low margins. Most have some kind of convenience store with high-priced articles, the cost of convenience. Pilots frankly have few needs other than fuel, so the convenience store concept will not work in most cases. Entice a restaurant to the airport, add a terrace to watch planes while eating with a playground nearby for the kids, and you’ll draw more non-pilots to the airport than pilots. Cut the cost of self-service avgas and mogas just to cover costs, and make fuel profits from full service Jet-A and Avgas to the corporate pilots who write off fuel costs as a business expense. Automate everything – the technology exists for self-service fuel, vending machines for oil, charts, food, beverage, AWOS of course, etc. SAAB of Sweden has certified a remote tower concept that would allow towered operations at quiet airports all handled from a central location through cameras. It has many advantages over local towers. We must think outside the box to survive in GA. Public airport managers are paid though to avoid risk and CYA, the way most government agencies work.

          • The story of Gilliam-McConnell Airfield is an encouraging one. Reminds me of the Triple Tree Aerodrome and the awesomeness happening there. But there are problems with completely privatizing the airport system.

            Start with the example of your local gas station. They provide fuel, snack shop, car wash, and mechanic services. Your local gas station receives all the profit from their markup on all these goods and services. Now compare that to my local airport. They receive:

            1. fuel flowage fee – which is only a few cents and not the full markup on fuel
            2. rent from restaurant building – not the full profit made from restaurant
            3. they receive no money from the guy washing the airplanes – in fact they pay for the water
            4. hangar rent from the FBO – and none of the profits from the FBO

            And in the meantime the local airport is expected to maintain a full runway, all buildings and facilities, possibly a control tower, legal and insurance costs, and protect the airport from neighbors who don’t want it. The only way for an airport to survive and thrive is to own all the businesses on the airport. Oh and one other thing, the airport has no way to recoup any of the economic benefit that it provides to the local community. For example Santa Monica’s $230 million impact or whatever it is.

            I don’t know what point I am trying to make or why I am arguing this. I guess it is because if you remove the government from airport management, then airports disappear. Don’t get me wrong, I am an extreme believer in the free market and competition. But I believe that the free market would eliminate most airports. Are there exceptions to the rule? You bet! Could I be wrong? Most likely since I am just a young pilot out of college.

          • Hi Sam; As I said in the past; GA faces a “demand” problem – “plane and simple”. Almost ALL of GA’s woes can be traced to very little demand and low volume. With youth comes idealism – with age – comes experience and wisdom. Unfortunately, I fall in the later category! You might find our article/blog of April , 2012; “The Future of GA Airports’……
            of interest to you @ get-aviation.com. Thanks for your comment and feedback!

          • Sam,

            What you don’t understand about the airport, is that funding for most of it comes from the Federal Government…or about 95% of it and that money comes from the fuel taxes. Therefore, for the city that thinks they need to get funding to improve the airport, understand that they are going to have expenses once the airport has taken the money from the FAA.

            Therefore, the one aspect of aviation is how to justify this property Vs. other entities that could use the land. Whether it is a lease on the hanger, a percentage of the fuel sales, etc. Most city governments UNDERESTIMATE the usage and volume of traffic, therefore most of the time, the airport is going to cost the city/county to own/operate it.

            The fix? Get a demographic study or demand study before the pie in the sky “feasibility” study is considered. Most feasibility studies involve environmental impact, type of ground available, engineering for the runways and taxiways…but very little, let me say this again, very little demand study is considered.

            Look at Rooks County KS (KRCP), the very last GA airport built in the US. Declining population, two airports within 25 miles…and they can’t figure out why the ducks, geese, and the owls are the only birds that have landed at the airport the last 30 days.

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