Benjamin Franklin on the FBO Pricing and Transparency Revolt

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Aviation needs to hang together or hang separately

Reduced Rhetoric

Resolve Issues on Micro Basis

Having just signed the Declaration of Independence, the senior Delegate from Pennsylvania turned to his colleagues and spoke this famous line: “We must all hang together, or assuredly, we shall all hang separately.” The King of England, a potentate by all measures, had made it clear that supporting revolution was treason and to back his allegations, George sent shiploads of his soldiers to find and hang these traitors. Franklin used the same theme when he published this illustrative cartoon:

Aviation for many years followed Franklin’s aphorisms. All segments joined together to address an FAA Reauthorization pending before Congress.

The aeropolitical community of Washington is no longer one voice and some of the conflicts bear lethal consequences to segments of this otherwise integrated industry. The statesmen of the day– Paul Ignatius, John Winant, John Baker, Don Fuqua, Chip Barclay, David Plavin, and Hank Duffy– recognized the need and value for a unified position on such issues. One of the salient traits of their predecessors was that they took time to understand the other segments’ business models, their legislative priorities and the policy ground in between. They knew if the alphabet groups did not resolve their conflicts, the “solution” designed by the executive or legislative branches would most likely be unrealistic, expensive and impractical. Better to do it within the knowledgeable groups.

The Challenges Ahead

Sadly, today, “hanging separately” seems to be the state of the industry. Battles over privatization, PFCs, access, noise, environmental issues, the 1,500-hour rule, UASs/autonomous air vehicles, regulatory reform (whatever happened to the two-for-one rule?) and devolution, to name but a few, have fractionalized the single view.

While this division has been precipitated by endogenous forces, all aspects of flying are being challenged by exogenous factors. Green forces seem to demand that airplanes provide extraordinary reductions of noise and CO2.  Congress wants NextGen to be develop with a dearth of General Revenue Funds. A legislative rule based on lobbying by well-intentioned advocates was enacted, which has resulted in a shortage of pilots. Mechanics, the professionals who daily assure aircraft safety, are not interested in hangar or ramp work.

The FBO Pricing “Issue”

A review of the trade press over the last year identifies a substantial level of chatter on fixed-base operator pricing and transparency. In this age of social media, the initial complaints were raised by individuals about specific prices charged at named airports. Trade associations on both sides of the issue made public expressions in support of their members. One of the primary reasons for these organizations is to aggressively represent those who pay their dues; the stronger the statement, the more the annual tithing is viewed as less onerous.

AOPA, the largest of these organizations, believed that it had enough complaints to bring this issue to the FAA, filing three informal Part 13 complaints.

As an initial response, the FAA issued a document clarifying existing policy: FBO Industry Consolidation and Pricing Practices. This was a good start, but I am not so sure that the target audience saw these words of wisdom as settling everything; in fact, organizations like NATA and AOPA continued to parse the document in their own way, turning every ambiguity towards their respective positions.

The FAA cannot fully resolve local disputes for several reasons. First, the agency’s primary mission is safety. There are some economists and accountants on staff, but the expertise–to assess the costs or to judge the reasonableness of overhead or to determine what a market rate may be—are not a heavy component of that professional cadre. Second, carefully reading the FAA’s guidance, the underlying regulatory focus seems to be on the airport sponsor that receives the grant and signs the assurances, and which has a direct obligation to the FAA. Through that nexus, the FAA looks to the airport to deal with its tenants and in the absence of something egregious, to defer to local judgment. That instinct to defer to the airport or the local government makes involving the FAA unlikely to achieve success.

In the midst of this debate, the trade outlet Flying, known to support general aviation, reported:

“We checked the prices charged by FBOs at the two airports in AOPA’s complaint and found a startlingly different picture than what’s portrayed on the association’s website. The price to land in a Cessna 182 at the sole FBO at Key West or Ashville includes a $29 “facility fee” and a $5 “infrastructure fee.” The $29 fee is waived if you purchase seven gallons of fuel. The price of 100LL at Key West and Asheville is $5.13 per gallon for self-serve, in line with regional average prices, so that’s an effective net charge of $5 to visit these FBOs in a Cessna Skylane. Overnight aircraft parking is an extra $13. (The cost to park your car for a day at the Asheville Regional Airport, meanwhile, is $20.)”

Flying also commented that there was an increase in rhetoric and deplored the pressure being exerted as likely to cause more schisms.

Of the three Part-13 complaints, two complaints were dismissed, and one  (Waukegan) was resolved after the airport, FBO and community worked together to find a solution. The FAA asserted that the rates were not above a fair market value.

Potential Solutions

Perhaps trying to establish a universal policy for the nearly 3,500 FBOs–large/small, airports with 1 FBO/multiple FBOs, facilities for which heavy capital invested/green field, regions with low/high AvGas prices, unusual expenses due to weather/local noise rules/labor rates/ fees, etc.—is neither possible nor wise. After all, each FBO has to compete against other companies in rigorous RFP processes, ensuring that the FBO most likely to bring revenue and business to the airport will win the day. By moving the focus to a micro basis, like in the Waukegan case, and conversing between principals, the win/win solutions which

An important aspect of balancing the needs of GA pilots with the needs of FBOs is the need to improve The Minimum Standards to include consideration of low service/low price options. These documents establish the long-term commercial standards and structures at all airports. Some of the conflict evident between AOPA and NBAA is that some of these documents may require substantial investment. The RFP requiring the bidder to build large hangar and terminal[1], imposes a long-term expense against which future revenue may be assessed. The larger the facility, the more employees, which equates to overhead and eventually the “into-plane” fueling fee increases pushed by those costs.

An economic case for a lower cost fueling option needs to be fully developed by AOPA, NATA, NBAA, AAAE, and ACI NA to be distributed to the sponsors and inserted in RFPs.

If we are willing to have a dialogue, we may find solutions. Though most AOPA members have been quiet throughout this process, the results will speak volumes to them. An agreement recognizing both parties’ interests is likely to assure the long-term viability of GA flying and FBO health.

Litigation, either before the FAA or in Federal Courts, is astronomically expensive, likely to delay resolution as the FAA considers the merits, will consume massive time blocks for the association and the FBOs and may result in patchwork decisions. This avenue is neither the most expeditious nor the best path for a long-term policy decision.

The above “blue sky” vision is likely to create synergies among the participants. Sponsors may be enticed to attract more GA flights to their airports; FBOs might see an opportunity to attract new pilots; AOPA may extend its commercial alliance offering to some of the airports/FBOs. The backwards view is ugly; there is little or no benefit to attacking other segments in an industry which is so integrated.

Having viewed the aviation trade association leadership of the ‘60s, ‘70s, ‘80s and beyond, perhaps this cooperative effort could restore the old “hang together’ atmosphere; for it does appear that we are “hanging separately.”

[1] It is an oft heard joke at various aviation meetings that Mr./Ms. Director of Airport XYZ has an “edifice complex”. As with humor generally, there is some truth to that aphorism.



 

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2 Comments on "Benjamin Franklin on the FBO Pricing and Transparency Revolt"

  1. Steve Van Beek | August 20, 2018 at 9:14 am | Reply

    Well said, could not agree more. On issue after issue, some are more concerned about proving member service by raising (mostly false) alarms and then “saving the day.” Meanwhile the true interests of their members is cast aside. We desperately need a unified industry not on everything but on the crucial 85% of issues that we have in common.

  2. Robert Poole on Resolving the FBO Controversy–https://reason.org/airport-policy/airport-policy-news-125/?utm_medium=email

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