Torqued: The end of the good old days

 - September 13, 2006, 4:00 PM

Everywhere we look in aviation today we can see long overdue signs of an economic recovery and return to the good old days. However, if you look beyond the obvious indicators, you will see clues that in the future our industry will not look the same as it did five years ago.

So much has changed, and there is little likelihood of our ever returning to our old ways. In many areas this is a good thing. For example, we have removed the fluff from much of our operations to keep costs down, and now we pay for exactly what we use, without unnecessary bundling. For most of us, that’s a good thing. We have moved away from the cable tv model, which includes a bunch of stations that we would never pay for with a premium, popular channel to justify the price of premium service.

In the recent past the airlines did much the same thing, including in the ticket price the costs of all the additional services. They did not hide the fact that the business traveler was incurring additional costs to offset heavily discounted tourist ticket pricing. As a result, today we see travel agents who have found a way to provide the business traveler with competitively priced tickets, forcing the airlines to make additional changes. I can remember the warnings of just a few years ago that predicted the demise of the travel agent. So much for those so-called experts.

Changes for Corporate Aviation
In the corporate flight environment we have experienced considerable efforts to reduce costs and increase service, including the use of fractional ownership. Added to the challenges of running a corporate flight department are the changing IRS rules about how to handle cost accounting. These new and still evolving rules have already brought about the shrinking or elimination of some flight departments.

Another segment that is experiencing and will continue to experience pressure to change is the FBO. For a long time our industry has taken for granted the services FBOs provide. Aviation in the U.S. was built on small airports, usually managed or operated by FBOs. This was usually a labor of love and not for financial rewards.

For years these folks were what made aviation special, and many of us who learned to fly realized how much more they have given to their students and to aviation as a whole. I now realize that the flight school I attended provided me with more time than I paid for.

Today we find the large FBOs are performing the more financially rewarding turbine-airplane work and leaving the little FBO out there struggling. As a result, many smaller FBOs are closing. This is truly a loss to aviation, and without some way for the small FBO to compete with the larger organization this trend will continue. Somehow the FBOs must find a way to be profitable in these difficult times of high fuel prices, expensive insurance and low utilization of equipment and facilities.

The larger FBOs receive more favorable rates for their insurance needs, which can result in a substantial advantage. There are price breaks when an FBO sells fuel at certain levels. To compete, the small FBOs must improve their ability to provide some basic needs for the corporate customer to capture some of that business. It is easy
to coordinate with other FBOs so the service is waiting at the location the aircraft is traveling to, but this strategy is often overlooked. A good security plan and a secure ramp are becoming a large concern for corporate operators. Attention to details doesn’t go unnoticed. Recently a flight department manager commented to me about an FBO that had posted a list of doctors and hospitals in the area with contact information. Another area that could be improved is marketing. The FBOs need to find a way to make themselves more visible to a larger aviation audience.

Another problem is the labor shortage facing many companies that need employees who possess technical skills. There is a real shortage of this talent in general, and we in aviation are no different. Last year we produced less than half the certified mechanics we needed. Over time this will cause us more problems. I don’t have a crystal ball, so I can’t predict the future, but I know the issues surrounding the FBOs and the mechanic shortage are not good for our industry.