FBO Profile: Morristown Municipal Airport (MMU)

 - October 24, 2006, 9:44 AM

“It’s still a work in progress,” said Win Perkins, referring to the business plan of his “private terminal” at Morristown (N.J.) Municipal Airport (MMU). “But it seems to be working.”

The private terminal concept is essentially a non-FBO or “the anti-FBO,” as Perkins is wont to call it. The Harvard-educated airport-business developer/consultant launched his idea a few years ago as part of the Aviation Professional and Flight Training Center he co-developed at MMU under contract to the airport authority. The path has included a few twists since then, but the core principle–charge customers for using the real estate and give them fuel at cost plus 27 cents per gallon–has been more than validated.

Here’s how it works. First of all, if you’re a transient customer, you don’t visit the private terminal. Signature Flight Support is the sole “real” FBO at MMU. But if you make regular trips to the New York area and you buy into the private terminal consortium, you essentially lease access to a facility that has most of what you’d find at a premium FBO, but with less traffic and the availability of fuel at a fixed price above cost. Another big advantage: private terminal stakeholders are allowed to drive cars directly onto the ramp.

The “rent” is about $250 per visit, negotiated in blocks of one-year packages consisting of five or more visits per month. “It’s certainly not for everyone,” said Perkins. “There are no crew cars and no golf club memberships for pilots. And depending on an operator’s schedule, it may be more economical to pay the ramp fee at Signature. But if you’re filling up an Embraer Legacy with 1,700 gallons, and the difference in price is $1.75 per gallon, you can save a lot of money.”

One part of the “work in progress” aspect is flexible planning based on seasonality. For example, suppose an operator wanted to work a deal involving only five visits per month during the summer, but up to 20 visits per month over the rest of the year. “It hasn’t come up yet, but that’s an interesting question,” said Perkins. “My initial reaction is that we probably could be flexible on something like that.”

Customers at the private terminal so far include Swift Aviation with its fleet of Legacys (often used in the role of corporate shuttle) and fractional provider Flight Options. Perkins describes the concept as a real-estate relationship with his customers–different in that the typical FBO model relies on selling fuel as the primary revenue source. “Predictability of cash flow is the key,” he said.

A Cultural Shift

In a way, it’s similar to a maintenance service plan in that it smoothes out the customer’s budget over the long term– increasing fixed costs but significantly lowering the direct variable cost of fuel. “It’s a cultural change that can be difficult to make for a lot of operators,” he said. For those who have made the leap, however, the current spike in jet-A prices has magnified the value of the relationship.

Perkins said, “We started off thinking that a delta of 50 cents a gallon between us and the going rate for fuel would be enough to make our idea attractive. With price differentials today at $1.75 [at press time, $3.30 per gallon compared with Katrina-inflated prices of $5.51 at Signature MMU], Swift and Flight Options are telling their pilots to come in here and, go ahead, drink up. Take on as much fuel as you can carry.”

The private terminal is somewhat off the beaten path, but easily accessible for Swift’s Legacys. Since there is no transient traffic, Perkins knows well in advance when aircraft are coming and can schedule fuelers and staff to meet demand, and also ensure that the ramp is clear. That could change with greater utilization, but it’s a problem Perkins would like to have. Security is also a minimal factor, since the staff knows all the customers, who have been vetted in advance.

How have passengers reacted? Perkins said the private terminal has all the amenities of an FBO, without the public presence. The passenger lounge is tastefully decorated, and the convenience and ease of ramp access are hard to beat.

The location of the airport itself is another factor. Perkins hopes to tempt operators that have been wedded to other Big Apple airports such as Teterboro (N.J.) and Westchester County (N.Y.).