Story ID: 
Aviation International News: FBO Reader Survey 2009
By: Charles Alcock
Caption: Twelve months ago, the introduction to 
AIN’s
 2008 international FBO special report remarked that there had probably never been a better time to be i
Word Count: 1000
Twelve months ago, the introduction to AIN’s 2008 international FBO special report remarked that there had probably never been a better time to be in the FBO business. At the time, business aircraft traffic growth was in full flow in markets outside North America and there was no obvious sign that this trend would diminish to any great extent.Now the shockwaves from a financial crisis that began in the U.S. are cascading around world economies, and business aviation is clearly one of the casualties. Most European FBOs have seen a relatively steep downturn in traffic that started in September or October. The smallest decline in traffic over the past six months reported to AIN has been around 3 percent, but quite a few bases have seen month-on-month declines of just above 20 percent.The optimists among the FBO managers AIN surveyed seem to believe that this dip in fortunes is symptomatic of an extreme, knee-jerk reaction to the exceptional uncertainty in business circles. However, the more pessimistic took the view that worse may yet come and that it could take at least until the middle of this year to ascertain where the bottom of the downturn lies.At the same time, many FBO managers believe that commercial aircraft operators and charter brokers have become much more sensitive to the cost of handling services and are more ready to shop around among FBOs to get reduced prices. Several also reported significant problems with slow payments from customers and indicated that the credit-worthiness of some clients has become a much bigger consideration against the backdrop of several bankruptcies among operators.That said, there is ample sign of stoicism and a survival instinct among FBO executives. Many pointed out that the drop in traffic has to be viewed against a backdrop of unprecedented strong growth in markets such as Europe, the Middle East and Asia over recent years. It remains to be seen whether the downturn in these fortunes will dampen the appetite of companies to invest in ambitious expansion plans that have been laid for these emerging business aviation markets.With handling operations in Europe, the Middle East, Africa, Asia and Australia, ExecuJet Aviation is of the opinion that the FBO market is by no means uniform geographically. Group executive director Graeme Duckworth told AIN that in Europe and South Africa traffic started to dip in the three months beginning in September 2008 but that it has since picked up to varying degrees. By contrast, the company’s Dubai FBO didn’t see a drop in business so early but then experienced quite a sharp fall in December and January as charter operations tumbled in a location that now appears to be caught in the grips of a global financial crisis to which until very recently it had seemed immune.Duckworth is among many in the FBO sector who have seen a more pronounced decline in handling work for charter operators, which seem to be slowing operations at a greater rate than those flying private owners. That said, charter activity still appears to be healthy in South Africa, where ExecuJet recently opened a new FBO at Cape Town. “We are still cautiously optimistic but have to assume there could be a decline in traffic volumes this year,” he commented. “But new aircraft are still being delivered in most of the regions, which should mitigate this trend, and emerging markets [such as Asia] normally lag behind the U.S. and Europe.” As of February, ExecuJet was still 4 percent above budgeted figures for the number of movements it expects to handle in the financial year that began at the end of July 2008.As an operator of some 151 business aircraft around the world, ExecuJet is also well qualified to comment on the standard of FBO service. “We still find a lot of inconsistency,” said Duckworth. “Some of this is due to cultural differences and some of it due to FBOs having to deal with factors such as poorly conceived security arrangements that can stand in the way of good service.” ExecuJet, which started operating international FBOs in 1997, is increasing the training that it provides to handling staff and is bringing more services in-house to ensure acceptable standards and to help keep costs under control.According to Duckworth, generally customers are becoming more sensitive to handling prices, which he said have continued to rise in many locations. “We are trying to increase our revenues by providing more services, but at the same time we are aiming to provide better value,” he maintained.Looking to the future of the FBO sector, Duckworth predicted that companies will have to offer more services, such as maintenance, to remain competitive and that equipping ramps to handle large aircraft will result in more investment. At the same time, a new wave of regulations will force more spending on training. He also predicted that FBOs will have to become less reliant on third-party service providers. “Only the best managed FBOs will survive, and many of these will be part of bigger groups that have the resources to maintain standards,” Duckworth commented. The strained current market conditions have prompted ExecuJet to be more cautious in pursuing expansion plans that it has harbored for some time in Europe, the Middle East and Asia. However, he indicated that this could be just a brief respite. “This is a good time for us to be looking at traffic volumes and to assess opportunities more carefully,” Duckworth explained. “We will come out of this [depressed] market one day and this is a good time to get in position [for further growth]. There may even be unforeseen opportunities to expand, such as corporate flight departments that no longer want to do their own maintenance.”ExecuJet recently opened its refurbished FBO at Berlin’s Schoenefeld Airport. This airport will eventually receive all business aviation traffic heading for the German capital when Tegel Airport is shut down.

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