Jackson Hole & its Eye of the Needle 2nd FBO case

jackson hole airport second fbo case
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Jackson Hole Airport Second FBO Case

FAA Chapter 8 Exclusive Rights

Jackson Hole Airport Greenlights Second FBO, AOPA June 1, 2016

Jackson Hole Airport To Delay RFP for Second FBO, AINonline August 17, 2017

jackson hole airport fboOne of two[1] airports totally surrounded by National Park Service land, Jackson Hole, WY (JAC) has a headache. The airport has received complaints from GA tenants and visitors plus support from AOPA, EAA and GAMA about the high fuel prices charged at its sole FBO Jackson Hole Aviation, LLC. AOPA has a national campaign against excessive fees and that portends to be a battle. The Frederick, MD based aviation powerhouse said:

“AOPA has received numerous complaints about the airport as part of an effort to collect data from members and the public. According to one complainant, the current FBO, Jackson Hole Aviation, has the highest prices, compared to five other airports within 50 miles. Avgas is currently listed as $6.69; Jet A at $6.66. Another pilot reported being charged a $260 fee, just for a quick turn without ‘hardly any service.’”

jackson hole aviation second fbo

It appeared as though the solution overtook the problem when Wyoming Jet Center applied to open a second FBO at the airport. The proposal was well received by the flying community and AOPA pointed out that JAC was home to another FBO previously and the airport map shows space available for general aviation development (just above the table on the above map). The Wyoming request mentioned the available land and stated:

“…FAA rules intended to protect fair competition at federally funded airports. These rules prohibit the granting of special privilege or monopoly to anyone providing aeronautical services. Wyoming Jet Center notes that reinstating a second FBO at Jackson will aid the Airport Board in meeting these as well as the ‘fair and reasonable’ requirements of the U.S. Department of the Interior Use Agreement which is the foundation for the airport’s existence within Grand Teton National Park.”

jackson hole airport second fboOn May 17, the Airport Board unanimously passed a resolution to issue an RFP for another FBO. It is likely that other bids would be submitted for this site.

Now on August 16, the Board decided to investigate an option of buying the incumbent facility. Here is a direct quote from JAC’s website:

In May of this year, the Jackson Hole Airport Board determined that under applicable FAA guidelines, when its new fuel facility became operational in mid-2018, it would be required to accommodate a second Fixed Base Operator (“FBO”) at the Airport. It therefore directed staff to develop a Request for Proposals (“RFP”) for that second FBO.

Thereafter, the Airport’s current FBO, Jackson Hole Aviation LLC (“JHA LLC”), approached the Airport’s Executive Director and suggested that the inefficiencies associated with two FBOs operating on the same ramp could be avoided, if the Board purchased and operated the single FBO on the Airport. 

Though a second FBO must be accommodated under FAA’s general rule, the law provides an exception in situations where the airport operator itself chooses to exclusively own and operate the FBO. This has been done at several airports in the United States.

The Board’s Executive Director, attorney and General Aviation Committee have begun to investigate and study such a possible purchase. This review is ongoing, and the General Aviation Committee is not yet prepared to make a recommendation to the Board.

The Board believes a careful investigation regarding purchase of the FBO is in the public interest, because such a purchase might (a) allow for better efficiency and safety of operations on the general aviation ramp and at the fuel facility, (b) avoid the cost of constructing duplicate FBO facilities, (c) conserve scarce Airport land; and (d) permit the Board to achieve a good return on its investment – helping to assure the Airport can fund needed capital improvements and remain financially self-sufficient.

faa airport compliance manual

FAA Airport Compliance Manual, Order 5190.6B, the bible on the requirements imposed on airports describes the “proprietary exclusive right” from Chapter 8, as follows:

8.4d

… The exclusive rights prohibition does not apply to services provided by the sponsor itself.  The airport sponsor may elect to provide any or all of the aeronautical services at its airport, and to be the exclusive provider of those services.  A sponsor may exercise – but may not grant – the exclusive right to provide any aeronautical service.  This exception is known as the airport’s “proprietary exclusive” right. (See paragraph 8.9.a of this chapter.)

The sponsor may exercise a proprietary exclusive right provided the sponsor engages in the aeronautical activity as a principal using its own employees and resourcesThe sponsor may not designate an independent commercial enterprise as its agent.  In other words, the sponsor may not rely on a third party or a management company to provide the services under its proprietary exclusive right. These airport sponsors must engage in such activities using their own employees.

8.6. Airports Having a Single Aeronautical Service Provider.

Where the sponsor has not entered into an express agreement, commitment, understanding, or an apparent intent to exclude other reasonably qualified enterprises, the FAA does not consider the presence of only one provider engaged in an aeronautical activity as a violation of the exclusive rights prohibition.  The FAA will consider the sponsor’s willingness to make the airport available to additional reasonably qualified providers. (See paragraph 8.9.b of this chapter.)

8.8. Exclusive Rights Violations.

a.   Restrictions Based on Safety and Efficiency. An airport sponsor can deny an individual or prospective aeronautical service provider the right to engage in an on-airport aeronautical activity for reasons of safety and efficiency if the kind of activity (e.g., skydiving, sailplanes, ultralights) would adversely impact the safety and efficiency of another aeronautical activity at the airport, … Any safety concerns with an operator would need to be brought to the attention of the FAA.  However, the airport sponsor may find that an aeronautical activity as a whole is inconsistent with the safety and efficiency of the airport and may, therefore, not permit that activity at all, subject to concurrence by the FAA.  The airport sponsor may also prohibit access by an individual or individual service provider that has not complied with the airport’s minimum standards or operations rules for safe use of airport property.

8.9. Exceptions to the General Rule.

a.   Aeronautical Activities Provided by the Airport Sponsor (Proprietary Exclusive Right). The owner of a public use airport may elect to provide any or all of the aeronautical services needed by the public at the airport. The airport sponsor may exercise, but not grant, an exclusive right to provide aeronautical services to the public.  If the airport sponsor opts to provide an aeronautical service exclusively, it must use its own employees and resources.  Thus, an airport owner or sponsor cannot exercise a proprietary exclusive right through a management contract.  Note that while the policy technically extends to private owners of public use airports, private owners may not have the same immunity from antitrust laws as public agencies.  A proprietary exclusive can be exercised only for fuel sales and support services, not for use of the landing area itself.

As a practical matter, most airport sponsors recognize that aeronautical services are best provided by profit-motivated, private enterprises.  However, there may be situations that the airport sponsor believes would justify providing aeronautical services itself.  For example, in a situation where the revenue potential is insufficient to attract private enterprise, it may be necessary for the airport sponsor to provide the aeronautical service.  The reverse may also be true.  The revenue potential might be so significant that the airport sponsor chooses to perform the aeronautical activity itself in order to become more financially self-sustaining. Aircraft fueling is a prime example of an aeronautical service an airport sponsor may choose to provide itself. While the airport sponsor may exercise its proprietary exclusive to provide fueling services, aircraft owners may still assert the right to obtain their own fuel and bring it onto the airport to service their own aircraft, but only with their own employees and equipment and in conformance with reasonable airport rules, regulations, and minimum standards.

b.   Single Activity. The fact that a single business or enterprise may provide most or all of the on-airport aeronautical services is not, in itself, evidence of an exclusive rights violation. An exclusive rights violation is the denial by the airport sponsor to afford other qualified parties an opportunity to be an on-airport aeronautical service provider. The airport sponsor may issue a competitive offering for all qualified parties to compete for the right to be an on-airport service provider.  The airport sponsor is not required to accept all qualified service providers without limitation.  The fact that only one qualified party pursued an opportunity in a competitive.

These examples of airport actions which comply and those which do not have been developed over time. Interpretations of specific cases tend to vary based on the precise facts present. As a general rule of law exceptions to restrictions are narrowly construed.

The sequence of this situation is not helpful to JAC:

  1. Wyoming Aviation applied to be a second FBO on land which appears to be available.
  1. The Board votes unanimously to issue an RFP for a new facility.
  1. The Incumbent FBO “suggested that the inefficiencies associated with two FBOs operating on the same ramp could be avoided, if the Board purchased and operated the single FBOon the Airport.
  1. The Board then commissioned a study to consider what JAC should exercise its proprietary exclusive right, based on whether that option might

(a) allow for better efficiency and safety of operations on the general aviation ramp and at the fuel facility,

(b) avoid the cost of constructing duplicate FBOfacilities,

(c) conserve scarce Airport land, and

(d) permit the Board to achieve a good return on its investment – helping to assure the Airport can fund needed capital improvements and remain financially self-sufficient.

If earlier in 2017, JAC started the proprietor’s exclusive right study, the FAA would have an easy job drafting a response. With the notion that JAC should buy out the FBO, the review will very closely scrutinize the history here. JAC will have to pass through the eye of the FAA Chapter 8 Exclusive Rights’ needle.

faa chapter 8 exclusive rights

 


[1] DCA’s Western border is the George Washington Parkway which is NPS land.

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