Happy Y2K12: FBOs Expect Business To Be Flat in 2012

 - January 3, 2012, 4:05 AM

For the FBO industry, just how good a year 2012 will be depends solely upon how much flight activity there is in the corporate and private aviation sectors. After all, parked aircraft do not use fuel nor require the services of FBO staff.

Overall for 2011, the industry saw a slight improvement over 2010. Based on TraqPak data from research provider Argus, after a sharp spike in the number of flight hours in the beginning of the year (the industry saw approximately 40,000 more business aircraft flights in March’s yearly peak of 265,000 than there were in February), activity remained consistent (at approximately 250,000 flights a month) for the remainder of last year.

As we enter what appears to be a contentious election year, most in the industry believe that 2012 will be at best more of the same. With the business community still facing uncertainly on a variety of topics, such as unemployment, payroll taxes and healthcare, the coming elections will provide little incentive for politicians to hammer out quick solutions and consequently, there is little hope for major policy initiatives, according to industry experts.

“We’re now heavily into the political ‘silly season,’ as I like to call it,” said John Enticknap, president of the industry consultancy Aviation Business Strategies Group. “That’s going to keep going all through 2012.” Therefore, he predicts few substantive changes will come out of Washington during the year.

“I think at this point most of our members see next year as kind of a continuation of 2011,” said James Coyne, president of the National Air Transport Association and a former member of Congress. “We have the phenomenon of an election year ahead of us, and so I think it’s predictable what kind of rhetoric we will be hearing. I think the White House, from everything we can gather, is going to be speaking scornfully of the top ‘one percent’ and the top ‘one percent’ play a pretty important role in our industry.”

While all the election travel by candidates could boost business for some FBOs, it will likely be offset by TFRs set throughout the campaign to protect President Obama and Vice President Biden as they stump for votes.

From across the Pond, the European debt crisis could hamstring significant economic progress in two of the traditional top business aviation regions, North America and Europe, as the Euro-zone nations attempt to institute policies to safeguard their currency.

“Clearly there’s a lot of concern about Europe right now,” Coyne told AIN. “European companies bring a lot of business to American airports and FBOs. If the economy weakens in Europe, corporations that frequent the U.S. may be coming less frequently, so that’s something that is worrisome to us.”

Another major issue facing the FBO industry this year is currently playing out in California, where a public advocacy group has filed a lawsuit seeking the immediate end of the sale of leaded aviation gasoline, as well as punitive damages from FBOs and fuel distributors, for the distribution of what the group describes as an environmental health hazard. As the matter winds through California courts, NATA and the industry are concerned not only about the ramifications in the Golden State in the event of a negative ruling, but also of the spread of similar cases to other states. This could cripple the piston-aircraft industry, which is the backbone of most pilot-training programs.

All of this continuing uncertainty leads to a cautious forecast by industry insiders. “I see some pickup but nothing significant,” Enticknap said. “If FBOs see five-percent increases, I think they will be happy with that.”