The FBO fuel sales model is broken and anticompetitive

March 18, 2012 by Kent Misegades 11 Comments

In almost every article about the future of leaded avgas, this statement appears, only
one fuel will be stocked by the FBO system. This particularquote comes from a reply by
Mac McClellen to Todd Petersen in Macs latest Left Seat blog on the EAAs website. You
will also find it in almost every article and editorial from any aviation alphabet
organization about the modern state of 100LL avgas.
My question is why are FBOs the sole determinant of fuel sales on an airport? The
answer is because of an obsolete view of what an FBO should do.
I know that my local airport here in central Oregon requires any commercial entity that
sells fuel on the airport to also be an FBO. It is in the airport master plan regulations. It
stems form the outdated notion that fuel sales need a human intermediary at an airport,
to operate the pump and collect the payment.
Now that may have been true decades ago when most refueling at small airports was
done from a truck and the only method of payment was cash or oilcompany credit card.
It used to be the same at your local service station. But that is a completely outdated
model.
As with your local service station, the modern refueling systems are completely
modular, above ground, self contained and self service. Most service stations want you
to pump your own fuel so they dont have to have personnel on hand. Ironically we dont
allow that here in Oregon only an attendant can pump your gasoline unless you use a
commercial card lock system or you are a pilot at an airport self service fueling station.
It is time to remove the restriction that aviation fueling operations must be under
the commercial umbrella of the FBO structure. Ironically an ever-increasing number of
avgas refueling systems are already self-serve and you have no idea if an FBO really
owns it or not.
Another major impediment to expanding mogas availability and competition on our
airports stemming from the FBO model is that the FBOs current fuel brander may
economically threaten an FBO that wants to add mogas. I have talked with a number of
FBO owners out here west of the Rockies who have related the threats to me.
Any commercial entity with the economic wherewithal to install a modern self-serve
fueling station should be allowed to enter the fueling business on any airport within the
engineering and safety parameters as set down by the state that all other fueling
operations must follow. With this ability to compete, I guarantee you that the statement
that only one fuel will be stocked by the FBO system will become as meaningless as
it already is at at least 100 airports in the U.S. and growing every month. I know
personally that this obsolete model is stifling competition here in Central Oregon to the
detriment of GA. Pilots in my area support mogas at the airport.
Contributed by Dean Billing

The GAfuels Blog is written by two private pilots concerned about the future
availability of fuels for piston-engine aircraft: Dean Billing, Sisters, Ore., a pilot,
homebuilder and expert on autogas and ethanol, and Kent Misegades, Cary, N.C., an
aerospace engineer, aviation sales rep for U-Fuel, and president of EAA1114.

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Filed Under: GAfuels Tagged With: avgas, Aviation Fuel, Aviation News, FBO, General Aviation

Kent Misegades
Kent Misegades, Cary, N.C., an aerospace engineer, aviation sales rep for U-Fuel, a
Director of theAviation Fuel Club and homebuilder.

Comments

1.

arnie borreson says:

October 12, 2013 at 6:13 am

First the sale of auto fuel. The present auto fuel available is not suitable for any form of long term
storage. The chemicals added to it leed to deposits and loss of volatity in the storage tanks and when
the aircraft sits for a period of time. To beat the 100 LL dilemma we will need a new reformulated
fuel. I used auto gas for years in my flight school in continentals 0-200/300 and the Lyc 0-320. The
continentals has severe carbon buildup on the intake valves that caused a loss of total rpm due to
intake restrictions. Also the fuel was sold to the public but I did not have my self service island then.
Most of the sales were under 20 gallons and were performed full service. The time factor, liability
and hassle of dealing with all these small sales was daunting and unprofitable. Most pilots would
complain the price was higher that the pump, question the quality, want the courtesy car for free,
want a funnel for the oil they brought with them, window cleaner and paper towels, and if the car
was gone someone to drop them off and pick them up at the motel at 7:00 am. The FBO (I am an
FBO owner) depends on the sale of fuel for a major profit item. Take it away and you decrease the
profitability index in an already challenging environment.
We need an operator at our small airports to help the general public with all the little problems
associated with operating and getting to a destination upon arrival. Take away the operator and you
have a vacant airport which will decrease flying in general.
Reply

2.

Kent Paul Misegades says:

April 5, 2012 at 5:43 am

Zachary, the quality issue is one of many myths surrounding autogas. There is very little difference
in the quality of avgas and autogas these days; after all, fuel producers have a far greater liability
servicing 110,000 gas stations with autogas than they do supplying 3600 airport FBOs with avgas.
Federal regulations too dictate that autogas be of high standards. The primary quality issues arise
when fuel storage system are antiquated and poorly maintained, which is the case for many old avgas
systems around our nations airports. There are many aviation insurance companies who will
provide fuel liability coverage for autogas at a low annual premium; lack of insurance for autogas is
another one of the myths out there. The main problem with many FBOs, as I see it, is the
involvement of the bureaucrats and politicians from the town/county that owns the airport. Some
will drive down the price of their fuel to retain business, selling it at cost or even at a loss since they
have the power of taxation to spread the loss over a large budget. A private airport or private FBO
does not have this luxury, which is what drives many small private FBO owners out of business.
Just like gas stations, each case is unique. Some have the business to offer all kinds of services,
products, a restaurant, etc. Others are better off selling fuel from a self-service system and all
other items from vending machines. Look at marinas, most of which are privately owned, for an
example of how GA airports could be run if governments were not involved. The marina industry is
doing quite well, and with no federal or state AIP or other grant programs. Privatization of our
airports would be good for all, but wed likely have to accept fewer airports. Yours in Winchester,
TN looks terrific.
Reply

3.

Zachary Colescott says:

March 28, 2012 at 8:15 am

The only flaw (if you want to call it that) is that someone has to be ultimately responsible for the
quality of the fuel being dispensed. I am an airport/fbo manager at an airport in Tennessee right
now
Reply

4.

Rod Beck says:

March 21, 2012 at 3:08 pm

Hi Kent, Couldnt AGREE with you more to many holes in local/state government who dont
have a clue on airport economics. I recently did a demand study for a GA airport in Oregon
prepared a senerio 3 year P/L for the ideal FBO and what incentives the city would have to
make,i.e rent abatement the first year, etc and recommended FIVE likely experienced area (OR and
WA based) FBO candidates who may be good prospects in opening up a second location no
inexperienced dreamers highly qualified well managed operators who can hit the ground
running!
Guess what NOTHING has changed. The Airport Board is going to do it their way and going no
where again, to may experts!
And on the auto gas VS 100 LL; if I were a profit minded FBO, I would have no problem with
offering H2O for that matter, provided I would arrive at the same NET profit regardless of WHAT I
pumped.
Heres, however, what the investment and wise minded (rare!) FBO is going to look at: 1. How
many Utlralights (auto gas fuel puchases) would it take to EQUAL 4-5 Cirrus, C-210s or Bonanzas?
Now, IF that is the same NET income why not problem is more than likely it ISNT!
One more thing, to many FBOs? The FBO is only going to succeed when there is SUFFICIENT
demand adding more FBOs to an all ready 3-4 starved operators on the same
airport only DIVIDES the market share it does NOT increase demand all you have is one
more cat eating out of the same dish not enough milk to go around which cat gets smart first
and leaves to find another dish with NO other cats feeding there more over Meow Cat Mix!
Reply

5.

Kent Misegades says:

March 21, 2012 at 8:38 am

Rod my first job in aviation at age 15 was pumping three grades of avgas into airplanes at Ky Flying
Service in Louisville, KY, back in 1973. Times have changed. Too many airports are run by
bureaucrats who have no experience in aviation, or free markets for that matter. Just as in any
other market, more options are always better, and a rising tide raises all ships. Why not have a fullservice FBO and a small self-service fuel-only business at the same airport? They exist along our
highways, so why not at airports? The lack of competition is killing GA, and crony capitalism runs
wild in the airport procurement/improvement industry. Having run engineering businesses for 20+
years, I know that more competition is generally a good thing for my business a rising tide raises
all ships. European GA thrives due to the widespread existence of private airfields owned by pilot
groups, a great contrast to the government-owned airports of the US.
Reply

6.

Rpm says:

March 20, 2012 at 12:29 pm

Hi, Rod hey I like the idea of a movie room or area where something like that is playing
constantlyi thought of The Great Waldo Pepper, too.
The good news is that this can be done. Government can and will be pushed back into the genie
bottle of what it is supposed to do, and let business take care of business.
Stay close to that situation in Jerseyglad to hear another success story.
We are thinking very similarly.
Reply

7.

Rod Beck says:

March 20, 2012 at 10:05 am

In reply to RPM: Yes, the airpark concept is going to be the savior of recreational avaition
bottom line; most smaller communties CANT justify the airport let alone the FBO.Here in New
Jersey, Sky Manor, (N40) was recently purchased by a group, a co-op concept, and apparently is
working out OK.

The bigger qustion is this, are there adequate shareholders who are willing to put up the money to
do this.I thought the Flight Centerconcept had merit and several years ago had a simular idea. A
small grass strip, 30 or so acres, a club house, with a mini-movie theather to show vintage films
like Thirty Seconds Over Tokyo, Tora, Tora, Tora, etc, on those IFR weekends, a pool and ping
pong table and a refreshment cafe, professionally managed and a CFI on staff.
As more government owned/managed FBOs appear, less services will be provided by private
enterprise and the GA industry will suffer.

Reply

8.

Rpm says:

March 19, 2012 at 7:35 pm

I like the question Why require an FBO at all. Indeed. In our bold new world of changes we
wish to implement via the Aviation Access Project, we dont even use the word FBO. Why should
we, when the public doesnt know what it means? And when we tell them, they still ask, what
does THAT mean?
Yes, the bain of the successful airport operation is the government entity that controls it.
Remember most every regulation is born from some need to protect someones
favor, livelihood, or ego.
The best scenario, and one we are willing to work toward, is to adopt a network of privately owned
airports/airparks, run by Flight Centers. Mogas. 100LL till it goes away RIP. Adapt to the
market, not be hamstrung by government employees following a checklist to the detriment of all.
There is a more excellent way.
Reply

9.

Rod Beck says:

March 19, 2012 at 9:15 am

Since the author also seems to be an expect on General AviationEconomics, he best do a little
more homework on what makes FBOs profitable. A principal income for a profit motivated FBO is
in the retail sale of fuel;100 LL and Jet-A. The biggest THREAT to the FBOs income/profit center is
government owned/operated airports entering into the fuel business you can check/confirm this
with NATA.
Your qustion:Why require an FBO at all, has SOME merit. Smaller communities where the airport
or the FBO isnt jusified certainly could provide self serve pumps fearturing auto fuel for the 457
Ultalight based users and 100LL for the remainder of out of annual Cessnas, Pipers, etc that
may once again fly!
And finanally, keep this in mind; a corporate Jet operator REQUIRES the line services of a
professional FBO no matter WHAT the fuel cost - your Ultralight and SAA (Social Aviators
Association) crowd can do just fine with minimal (self-serve) pumps.
Reply

10.

Kent Misegades says:

March 19, 2012 at 5:33 am

Why require an FBO at all? Isnt this for a free market to decide? Dont we already have the
technology to provide the basic services most pilots need, eg self-service fuel, Internet-based
weather, briefings, flight plans; attendant-less restrooms, vending machines with food, drinks,
engine oil, etc.? Why spend money on expensive fixed-cost items when an attendant-less airport
can run just fine. There are thousands of gas stations across the country that work just fine with
little more than a daily visit to check systems and empty the garbage.
Reply

11.

Burned in the biddness says:

March 19, 2012 at 4:30 am

The hard part is the FBO business so to make the hard part easier (read have a higher probability
of a profit), they attach the easy part fuel to it. Not the other way around.