Taughannock Aviation copes with bad times

 - May 7, 2008, 10:40 AM

At Taughannock Aviation, an FBO and charter operation tucked away in a corner of Tompkins County Airport near the bucolic, university dominated central New York town of Ithaca, bankruptcy is a topic of daily conversation. But there’s no sense of panic. Company president Bob Thomas hastens to explain that he is referring to “other people, not us.” And he isn’t joking.

In the last year, three of the company’s clients have filed for Chapter 11 bankruptcy protection, a fourth filed Chapter 7 and went out of business, a fifth simply shut its doors and a sixth has defaulted. In unpaid bills, the six have left Taughannock’s revenue stream about $200,000 short.

Polaroid, a long-time charter client, filed Chapter 11. But not before its president and CEO made a charter trip on a Taughannock business jet just the day before filing, an irony not lost on Thomas.

A smaller Florida-based company defaulted, and a client from nearby Binghamton also filed for bankruptcy protection under Chapter 11. The owner of Victory Aviation Service, an aircraft broker and Taughannock charter client with offices in La Jolla, Calif., recently notified Thomas that the company is closing its doors. There was nothing in the notification with regard to the $26,000 Thomas said Victory owes Taughannock. Worse, APB Air Group, the parent company of Charter Fleet International, an on-demand charter operator out of Sanford, Maine, defaulted on its debts and filed Chapter 7.

Then in early August, US Airways filed Chapter 11, putting a substantial dent in Taughannock’s fuel sales figures. “We were pumping 30,000 gallons a month for them,” said Thomas. “We’ll get paid for the gas we’re pumping now, but we’re not sure when we’ll see the pre-filing bills paid.”

Thomas said the company was fortunate with regard to the Chapter 7 bankruptcy of online charter broker Flight Time, which had purchased charter availability from Taughannock. “They used us a lot, and fortunately they paid their last bill just before going under in June.”

The Effect of September 11

Like most of the business aviation industry, Taughannock felt the effect of September 11 almost immediately. But for Taughannock, the initial result was positive as the telephone began ringing and business travelers from grounded commercial carriers or Part 91 aircraft scrambled to find alternative means of air transport.

A group of 12 business travelers stranded at New Jersey’s Newark International contacted Taughannock and when the airport was opened briefly the day after the attacks, Thomas’ partner and company v-p Roger Dennis immediately got the Gulfstream II in the air. Thirty minutes later he was on the ground at  Signature Newark to load the passengers. But before they could leave, the airport was shut down again, leaving Dennis to arrange overnight accommodations and meals. When the airport was reopened briefly the next day, Taughannock’s GII departed with its load of grateful, if disgruntled, passengers. In the days that immediately followed September 11, when the Part 91 operators were grounded, Taughannock did a lot of flying, said Thomas.

Dennis noted that too many companies have used, and continue to use, September 11 as an excuse. The truth is, he said, the economy is having a much more devastating effect on the business, “and that started well before September 11.”

At its lowest point, Thomas estimated that business at Taughannock was down about 25 percent. But despite the economy, and subsequent loss of clients to bankruptcy, Taughannock has seen steady, if not spectacular, growth since the first of the year.

While demand for the managed GII and GIIB are off slightly, demand for the midsize and smaller aircraft appear to be increasing. And Thomas noted that there has been an increase in the number of private groups chartering business aircraft for vacations and long weekend holidays, rather than put up with the flight delays and cancellations typical of the scheduled carriers. He is also seeing an increase in the number of charters by private individuals.

Asked how Taughannock is managing to survive, Thomas laughed, raised both hands over his head, grasped an imaginary bar and responded, “Hanging in there.”

Actually, Taughannock Aviation is “hanging” quite well, all things considered. The company was founded in 1980 by Thomas and partners Roger Dennis and Steve Selover. That was the year that Taughannock leased facilities at the airport from Thompson County, acquired a Part 135 certificate and launched operations with a Seneca II owned by Dennis. And Thomas expresses optimism for the future.

Managing Assets Wisely

A key, said Thomas, is in the careful management of the company’s assets, which include–in addition to aircraft management and on-demand charter–a thriving FBO and light airframe and engine maintenance.

Thomas and Selover are particularly proud of the company’s latest acquisition–a rumbling mobile de-icing machine acquired at the fire-sale price of $4,000. “It was on the condition that we would pay to ship it here and pay to ship it back if we didn’t want it.” In the Finger Lakes highlands of central New York, where winters arrive early and depart reluctantly, Thomas expects the new de-icer will more than pay for itself.

Through Dennis, Taughannock has a majority interest in Interface Devices Inc. The Milford, Conn. company builds intensifier (booster) pumps for aircraft and was recently selected by MD Helicopters to provide the ground support “mule” for its new MD 900. Taughannock is the distributor for the pumps, mule and other aviation-related products built by IDI.

Taughannock, an Avfuel-branded dealer, is the sole source of aviation fuel at Tompkins County Airport. Its fuel farm includes tanks capable of holding 30,000 gal of jet-A, 12,000 gal of aviation gas and 8,000 gal of de-icing fluid. The arrangement is to Taughannock’s advantage, allowing the company to keep its own fuel costs down to about half that the retail price at other airports.

At the same time, said Thomas, Taughannock intentionally keeps its own retail pricing structure at what it considers reasonable–$2.65 a gallon for jet fuel and $2.90 a gallon for avgas (as of early last month). Jet fuel prices in other parts of the country, typically at airports where there is a single-source supplier, are now well in excess of $3 a gallon.

A Charter Fleet from Large to Small

The available on-demand charter fleet is a mixed bag, ranging from heavy to light business jets–a Gulfstream II and a GIIB; a Challenger 601; a Falcon 20B; two Hawker 700s and a Hawker 800; a Westwind; a Cessna Conquest II; and a Piper Navajo used to ferry pilots and parts. Taughannock owns the Falcon, Westwind and Navajo. The other aircraft are on Taughannock’s Part 135 certificate, available for charter and managed by the company on behalf of the owners. The GIIB is based at New York’s Westchester County Airport, where it is housed at the Skyport FBO.

While Taughannock’s charter operation continues to recover, the company maintains an uncomfortable alliance with Tompkins County, which owns the airport. Thomas noted that in the past 20 years, other tenants at the airport have produced a declining revenue share, while Taughannock’s share has increased. At the same time, he said, virtually none of the airport improvement projects in recent years directly benefit general aviation.

The reason, said Thomas, is simple. The airport can’t get matching federal funds for general aviation improvements. So while the airport has an ILS/VOR/DME in support of scheduled carrier traffic, the tower is shut down at 10:30 p.m. and doesn’t reopen until 6:30 a.m., and there is no AWOS or ASOS.

But if Taughannock has worries, they haven’t halted its growth. Seven years ago the company, with its usual eye for a bargain, had attended the NBAA show in search of a hangar. After examining the products of several exhibitors, someone pointed out that Fisher Scientific had erected a pre-fab hangar at Manchester (N.H.) Airport.

When Fisher moved further south to the former Pease AFB, it carefully dismantled and stored the 225,000-sq-ft hangar. After some investigation, Dennis and Selover found the kit and arranged a deal that brought it to Ithaca, where it was reassembled. The total cost? A little more than $1 million. “That’s about a million less than a new hangar would have cost,” said Dennis.

Now the company is planning a two-story, 9,000-sq-ft addition to the hangar that will house offices, a new FBO facility and shops. “We’re hoping to begin construction in the second quarter of next year and have it open for business next summer.” While he declined to discuss the exact cost, Thomas did describe the expense of the new addition as “relatively modest and a good deal considering the low interest rates.”

For now, Thomas said business this past August was better than August last year. Actually, he added, “Based on revenue receipts, transient traffic was up significantly,” even taking into consideration the usual peak of activity generated by
the resumption of classes at Cornell University.
And so far, the company has not laid off any of its workforce of 50, of which there are 15 pilots (including Dennis and Thomas) and one full-time flight attendant.

As for the future, “We’re expecting next year to be a good year,” said Thomas. And if it isn’t? “You just have to be willing and able to adjust to the shifts in the economy. There is no silver-bullet solution. Success is a never-ending process.”