Conglomerate’s FBOs retain their individuality

 - December 31, 2008, 6:15 AM

Jeffrey Ross is at the helm of an unusual conglomeration of FBOs, a quasi-chain of 12 facilities that retain their original brand names instead of adopting a common brand for the entire group. Not having a single brand for this many FBOs is unusual, especially in a time when the big three chains–Atlantic Aviation, Landmark Aviation and Signature Flight Support– have made such strong efforts to convince consumers of the benefits of working with FBO chains with dozens of facilities.

Ross believes that the local flavor is what makes FBOs successful and he doesn’t like to impose headquarters-focused mandates on facilities that are already successful and liked by customers. Even when Ross Aviation purchased a majority interest in the five-FBO Bradley Pacific chain in Hawaii, that chain retained its identity. “We do not think that national branding is a particular benefit,” Ross said, “and we think these FBOs have good local identities.”

Ross Aviation was founded in 2004 and is a partnership among Jeffrey Ross, his son Greg and private-equity firm Centre Partners Management. Before getting involved with the aviation business, Ross was president of the Cairn Companies, a real estate acquisition and investment operation, and president of Southeastern Capital. For the past two decades, Ross has been involved in acquiring and operating a number of FBOs, including Vail/Beaver Creek Jet Center, Million Air La Quinta, Million Air Palm Springs and Newport Jet Center. In addition to the 12 Ross Aviation FBOs, Ross is an investor in Premier Jet at McClellan-Palomar Airport in Carlsbad, Calif.

In some cases, Ross Aviation doesn’t buy the entire FBO but just a majority portion. In the acquisition of Miami Executive Aviation at Opa-Locka Executive Airport in Florida, for example, former owner Fabio Alexander retained a “significant ownership piece,” Ross said. “If you’ve got a guy like Fabio who’s put his life into Miami Executive, let him keep running it. It would be a little presumptuous for us to change it.”

There are advantages to owning multiple FBOs, even if they aren’t branded together. Some functions can be centralized, such as the marketing budget. “Instead of having 14 small budgets,” Ross said, “we have one large budget, and that’s working well.” Another area for savings is insurance. “As you buy more FBOs,” he said, “insurance premiums per location decline markedly.”

Ross Aviation is experiencing the fallout from the economic recession, although the effects vary depending on the location. “We have a diversified portfolio,” Ross said. But many customers aren’t flying as much and have parked their airplanes and there are many more airplanes for sale.

The recent drop in oil prices has resulted in much lower fuel costs, but that reduction came a little too late. Until September, Ross Aviation fuel volumes were holding steady, and fuel prices then were still high. But since September, Ross said, fuel sales volumes have dropped 20 to 40 percent at Ross Aviation facilities. The hangar rental market has slowed down a bit, with some customers keeping their airplanes parked indoors and not flying while others are trying to sell their aircraft in a down market.
Although the FBO business is slow right now, Ross Aviation remains on the lookout for new FBO acquisition opportunities. “Our backers have been wonderful,” he said. “They recognize that we’ve run these FBOs well and there’s not too much we can do to offset the decline in volume.”

The recession does make it difficult to set a correct price for an FBO, Ross said. With fuel volumes down and unstable, there is no way to know what the future holds for a particular FBO, making it hard for buyer and seller to agree on a price. No seller wants to sell at the bottom of the market, when it seems like the future is dismal. “Typically,” Ross said, “sellers say, ‘I think things are going to get better and I’m going to hold on until it does.’ They want to make sure they’re getting a fair price and maybe not sell until there’s better stability.”

Ross Aviation’s advantage is that its business model offers a way for sellers to retain an interest so that there is an upside when the economy improves. By selling a majority portion of an FBO, Ross said, a seller can erase any debt but still earn a salary and hold a significant interest in the business and plan the moment of exit for a more opportune time.

In addition to the Hawaii FBOs and the partial stake in Premier Jet, Ross Aviation owns FBOs in Anchorage, Ala.; Miami; Denver; Laredo, Texas; Santa Fe, N.M.; Fresno, Calif.; and Scottsdale, Ariz. At Premier Jet, the FBO continues to gain market share on McClellan-Palomar airport, Ross said. Corporate Aircraft in Fresno, Calif., has done well pulling in maintenance business, which accounts for about two-thirds of the FBO’s revenues. The Fresno location is an authorized Cessna turboprop, twin- and single-engine maintenance center. “It’s our only FBO that emphasizes maintenance,” Ross said.