Win Perkins doesn’t have much patience for the traditional FBO business plan. He calls his facility at Morristown Municipal Airport (MMU), N.J., “the anti-FBO,” and the way he does business could be a harbinger of change in the airport service industry. Perkins proposes to generate the lion’s share of his profits through rent payments, while making little or no profit on fuel sales. It really is the reverse approach to the accepted norm.
Most business aviation FBOs rely primarily on profits from fuel sales to make their “small fortune.” All too often it’s the lack of such profits that whittles away at the “large fortune” the FBO may have started with. Perkins maintains that some FBOs will practically give away prime hangar real estate to tenants they believe will be lucrative sources of fuel profits. He disagrees with that strategy, at least when it comes to airports in high-density population centers where land is valuable.
The basic business model of covering most expenses through fuel sales has existed for decades, and therein lies the problem. In the early 1960s, wholesale jet fuel was really cheap–as low as 11 cents a gallon. A business jet filling station could mark that up by 300 percent, make a bundle and still be a hero simply by slapping the pilot on the back and remembering his name.
On the demand side of the economic equation, early turbine business aircraft guzzled jet-A like pledges downing alcohol at a frat party and needed to top off at virtually every stop. Sharp-eyed, air-minded business executives saw a great opportunity to cash in. As the FBO business became more competitive, all manner of amenities and incentives were dangled in front of pilots to lure them to the pumps. Compared with the gusher of black ink on the FBOs’ ledgers (at least during boom times), fancy facilities and pilot incentive programs were a cheap investment.
Fast forward to the present. Fuel profit margins continue to be pared closer to the bone (30 percent gross is now considered pretty good). Modern engines sip rather than slurp, and pilots troll for fuel discounts as though their jobs depended on it, which in many cases they do. With the tankering capability of modern jets, it’s a buyer’s market for fuel, and aircraft operators behave accordingly. Also, the cyberspace generation relentlessly ferrets out fuel discounts–using keypad and mouse to squeeze every pound from every penny. Other FBO expenses such as rent, payroll and benefits, training, insurance, municipal fees and so on continue to rise–sometimes even spike. (Insurance is the latest example of skyrocketing expenses.) Still, almost all FBOs keep trying to adjust the numbers of the same old model, hoping to make it work.
In contrast, Perkins comes from a real-estate background. Harvard educated, he cut his teeth in the dog-eat-dog world of Manhattan commercial real estate, but a lifelong love of aviation turned his head, leading him to buy and restore a 1947 Luscombe. Seeking out what he considered the best location for a T-hangar development, he chose the wilds of Morristown (27 miles west of Manhattan) in 1982. He said, “No matter where I looked in the greater New York area, I couldn’t find any hangar lease deal that made sense to me, so I made my own. I’ve been at it ever since.”
Recognizing that the vagaries of airport real estate were hopelessly misunderstood by most, he also began performing airport real-estate appraisals while launching the 40-unit T-hangar development at Morristown. In his capacity as an appraiser, he travels throughout the country (often flying his Bonanza) performing airport-business and -property evaluations for lenders. Despite his ivy-league background, Perkins is a bona fide aviation addict. Besides having restored the Luscombe, he hangs a wing rib from his Ryan M-2 mail plane replica project above his desk. In his spare time, he is also building a full-scale replica of a Mercury space capsule.
Perkins has cultivated his relationship with DM Developers, which took control of Morristown Airport in 1982. It’s taken a while for the airport to mature under its stewardship, but as of this summer a hodgepodge of World War II-vintage hangars has been razed and the Signature FBO on the field recently dedicated its all-new facility. Private hangar complexes accommodate the Gulfstream and Global Express set, including many of the major pharmaceutical names headquartered in central New Jersey. The flight departments for AT&T and Honeywell are also based at MMU.
But with its 6,000-foot, ILS-equipped runway, Morristown also had a thriving flight-school and private-owner population that the airport authority was loath to evict. When the decision was made to bring down the vintage timber hangars, the field’s three flight schools and some other small general aviation businesses lost their homes. In a move to fill in the gap and support the piston/owner-pilot side of the airport’s mandate, DM contracted Perkins to develop what became known first as the Flight Training Center, later amended to the Aviation Professional and Flight Training Center. In the airport’s west tiedown area, he has constructed a new Class-A building–part maintenance hangar, part office complex–with the airport’s flight schools and other businesses as his tenants. To build the center, Perkins partnered with one of his hangar customers, Dirk Vander Sterre, whose family has been in the construction business for decades. (In the late 1960s Vander Sterre’s father built a single-story building in Midland Park, N.J., that would become the AIN editorial offices in 1995.)
It made traditional sense to rely primarily on rent when it came to providing a home for flight schools, but Perkins took the idea a step further with the condo corporate hangars that were also part of the development of the airport’s west side. Lease payments on the hangars were significantly higher than what some tenants had been paying in the old buildings, but there is a twist. First, the “Class A” custom condo hangars represent a distinct step up from the nostalgic but relatively primitive “Class B” accommodations in the old buildings. But the main attraction for the individual aircraft operator tenants and small corporate flight departments, said Perkins, was that he would provide fuel at wholesale prices, saving as much as $1.60 per gallon compared with buying retail fuel from Signature. If they flew enough hours per year (on fuel uplifted from home base, of course), aircraft operators would effectively be hangaring their aircraft or occupying their office space for “free.”
A third facet of the project, the “multi-tenant terminal” or “fractional terminal,” is a further extension of that strategy and the most unusual aspect of Perkins’s development. Somewhat controversially, the largest flight school at Morristown opted not to rent space in the complex and moved to another airport, not without some unkind words about the high rent it had been asked to pay. “[The flight school owner] chose not to participate. That left us with a lot of prime airside floor space and ramp area that needed to generate revenue for us,” said Perkins.
His new idea was to set up a comfortable, secure passenger lobby and charge a monthly rent (best current guess is about $2,000) to fractional or charter operators for access to the facility for picking up and dropping off passengers. They would park in the secure lot, meet their flight crew (or call from a vestibule phone to be buzzed in) and, from there, either walk or drive under escort to the aircraft on the adjacent ramp. The fractional arrangement would also entitle aircraft operators to the same wholesale fuel deal that hangar owners and tenants enjoy.
Perkins said if 10 operators sign on as “fractional” users of the terminal, it will be a financial success (an operator is eligible to sign on with multiple aircraft, “within reason,” said Perkins). In fact, in real-estate terms, the return on investment would be handsome. The trick is to arrive at the correct balance. If too many aircraft use the facility, the ramp will become too congested. How’s it going so far? Perkins said, “The toughest customer to sell is the first one. Most people in aviation are conservative. They need to see with their own eyes that something works before they’ll commit, no matter how much sense something makes on paper.”
But Perkins is convinced that the rent-for-real-estate approach is, by far, the most logical way to be successful in such a general aviation, airport-service endeavor. “Fuel is a penny business, and I don’t want to spend my life arguing with pilots over pennies,” he said. Of course, the fact that he has no mandate to service transient aircraft (they must go to Signature) makes his plan much more viable and easier to control.
Watching how the fractional terminal develops, in particular, will be very interesting. Perkins admits that there are unknowns. But he is nothing if not philosophical about the project. An avid fan of the early history of space flight, he said, “I once asked Buzz Aldrin the old pilot question, ‘Is it better to be lucky or good?’ His answer has been one that has given me perspective whenever I consider launching a new venture in my life. He told me, ‘To get lucky on a mission, first you have to go on the mission.’”