NBAA Convention News

Signature chain charts its course for the coming decade

 - October 14, 2009, 10:30 AM

A regime change at BBA Aviation’s Signature Flight Support early this year saw Michael Scheeringa hired as president of the world’s largest FBO chain. Scheeringa most recently was CEO at fractional-share operator Flight Options, where he had worked since 2004. A private pilot, Scheeringa joined US Airways in 1991, eventually working his way up to vice president, before switching to business aviation and Flight Options.

Signature Flight Support operates 102 FBOs worldwide, 81 of which are wholly owned, and the rest as joint-venture/licensing-agreement partnerships. Signature’s financial results for the first six months of this year show the chain performing better than the overall marketplace. Revenues at Signature were down 14 percent compared with the first half of last year, but BBA says that this compares favorably with an average 26-percent revenue decline in the U.S. business aviation ground-handling sector, as well as a 20-percent drop in Europe.

For Scheeringa, the new job has been “the single best role I’ve been able to enjoy in my 21 professional years. It is a joy to come in every day.”

How does your role at Signature differ from your work in the fractional industry?
Signature is a large company, a profitable organization with significant opportunities and a quality management team. It’s not that running the organization doesn’t have its own type of stresses, but it’s a different type of stress. We’re focusing on the next 10 years instead of tomorrow.

The fact that we do have financial stability–I’m not saying we have not been impacted–but we have a robust business model that includes one of best platforms from a facilities standpoint worldwide. That’s one reason why we’re able to
sustain less of a hurt in this decline than some of our competitors.

What have you been working on since joining BBA/Signature?
I’ve been focused on learning this side of the business, having been a customer of FBOs, and taking a step back and saying, What is the potential for this business? What should that look like 10 years from now? Let’s make a bridge from now to
there in the next 10 years. The context for every decision we’re making is within the backdrop of the strategic plan. There are a series of initiatives we’ve embarked upon, including realigning our management team from inside the company and promoting people from inside. David Best is COO with global revenue responsibility. Steve Lee is now worldwide COO. Mark Johnstone is CFO. And Connie Alden,
formerly in charge of human resources for North America, is now worldwide vice president of human resources. We need a the organization to focus internationally. Most customers have needs beyond where they live; they’re not confined by national borders.

Have you been dealing with how Signature is viewed by FBO users?
There is a negative perception of Signature in the marketplace. In the early 1990s, the company defined what an FBO would be, and over the next decade the industry and bankers and many people tried to replicate [what Signature accomplished]. Over the last half decade Signature did quite well financially but without a huge amount of investment in those assets, not focusing on customer wants, needs and
satisfaction. Coming into 2009, there was company recognition that its historic pricing throughout the network was alienating a significant number of casual customers or existing customers. This time last year the company made a decision to permanently be competitive in the marketplace. Now the new executive team had the task of saying what the industry is going to look like in 2020 and what should be our relevancy to our key stakeholders, customers, employees and vendors. We came to a fast conclusion that we will be a customer-centric organization. We’re going to spend considerable effort for those customers we have alienated, bringing them back to enjoy the Signature network and to value the
Signature experience. That includes price, but it’s not limited to price.

How is the value pricing program working?
We are very pleased with the response we have seen from our customers over the last 12 months. We have outperformed the industry, given the downturn year-over-year in the second quarter. Since we made the decision to become competitive on a permanent basis, we have seen continued momentum behind the company and an increasing number [of customers] returning to Signature. This volume allowed Signature to weather the downturn a little better.

Signature has a reputation of micromanaging from headquarters.
Are you addressing this?
My philosophy and what the general managers were told is that they are to think of themselves as the president of Signature within their zone of responsibility. The manager of West Palm Beach is to think of himself as president of Signature for any tenant or transient touching Palm Beach. And they are held very responsible for profitability of their individual bases.

Is Signature going to continue expanding?
We have a desire to have a network that is relevant to the business jet market in 2020. The financial crisis today does not necessarily change what that looks like in 2015 or 2020. Growth is going to look similar to where there is prosperity. We have shareholders who have expectations and we have internal thresholds. I’m not so certain there is a meeting of the minds of what people think their assets are worth versus what we would pay for what long-term value is. In the middle of the decade Signature did not participate in that many acquisitions, and those we did make were strategic, that fit our footprint and fit it well. Now we are looking for a network fit, where we see customers wanting to fly. There has been nothing compelling that we have seen. I don’t see a reason to be urgent. There is a reason to be pragmatic, making decisions for 10 to 20 years from now and not earnings one and two years out so we can flip our business. We’re in business for the long term of managing FBOs.

Are airport authorities more accommodating during the recession
to help airport businesses succeed?

From our perspective, the company has done a fantastic job at implementing our strategy conducive to local cultures. If we look at the business model in Asia, it’s joint ventures. Latin America is joint ventures, but in terms of assets it’s
different in Greece than France than London than the U.S. I think the company continues to be respectful of local culture and local airport authorities. Our structure is that we have left intact a regional management organization so our FBOs are being managed by eight regions around world, to understand the local nuances, whether financial, political or cultural.
So Signature is seen as a good partner.

Will the BBA-owned Executive Beechcraft facilities remain independently branded?
Executive Beechcraft has a large local presence; it’s institutional in the aviation community’s memories. The view is that in the move from Executive Beechcraft to Signature, you could lose some of that local recognition on both the maintenance and FBO front. From that perspective, we have chosen to leave that branding intact, and as we make further acquisitions, depending on their relevance in the
market, we might choose to brand them as Signatures or choose a localized brand.

Why did Signature switch employees to part-time status?
As we monitored what was happening in the marketplace, we held off making
substantial changes in the employee base until we saw stability. Before that we had frozen positions; we weren’t going through massive layoffs. [Recently] we implemented demand staffing. The majority of our talent were full-time employees.
We saw that the industry travel patterns are much more peak-and-trough throughout the business day. That’s when jets fly. Like most service industries, a part-time complement of employees helps you improve service levels, where if we had full-time employees they wouldn’t be utilized but for a few hours
during the day. By moving to demand-based staffing, we were able to increase staffing at peak hours and increase service at peak hours, and that was funded through moving employees from full-time to part-time. So in this economic time, we were able to self-fund an improvement in customer service. The idea is if you want more people to greet customers at 9 a.m. but you only need them for only two hours, then it’s difficult to justify that incremental person for eight hours. Now they work in four-hour chunks.