Even with consolidation happening, it appears there is still space for small and large FBOs.
OPERATIONS
It is not just operators, charter brokers and aircraft sales teams that are feeling the uptick in demand that the business aviation sector has been seeing in Europe in the wake of the COVID-19 pandemic. People on those flights—be they long-term bizav clients or new customers--have brought their business to FBOs. The companies running FBOs, like their colleagues in other parts of the business aviation ecosystem, are waiting to see how durable a trend this is, but, as the one part of the industry that deals extensively with the end user of the private aviation product, they are confident that they will be able to retain much, if not all, of this new influx of business.
"There's a switch, there's a move from commercial, into business and general aviation for those who can afford it," says John-Angus Smith, Signature Flight Support’s managing director for Europe, the Middle East and Africa. "And of course, once you've switched and you get used to the environment [of business/general aviation], it's hard to go back." The optimism is widespread but should be tempered with some caution. So far, usage patterns appear to indicate the majority of private aviation travel is for personal rather than business reasons. Richard Koe, managing director of the analyst WingX Advance, points to statistics his company has compiled comparing 2021 with 2019 by operator type. In the second half of 2021, as the post-COVID recovery gained momentum, flights by managed fleets were up by double-digit percentages over the corresponding pre-COVID months, but sectors flown by corporate flight departments were in the low single digits in the months where there was some increase seen, and below 2019 levels in August, September and October (see chart). Furthermore, Koe says data compiled thus far for 2022 shows stronger growth on weekends than weekdays. Although it may not be a hard and fast rule, he considers weekend flights a useful indicator of non-business travel.
According to data compiled by WingX Advance, the bulk of the post-COVID recovery in private aviation has been the result of personal rather than business travel, as shown in these two charts. Credit: WingX
"We see business aviation demand staying at record-breaking levels through the summer of 2022, reflecting pent-up travel demand from the lockdowns, first-time users switching from airlines to fly private, and a big marketing push from the largest fleet operators," Koe says. However, "We perceive increasingly severe headwinds to this demand from mid-year, as inflation and geopolitical uncertainty feed into the general economy,” adds. If executive travel, which has not yet fully recovered, picks up, that could offset those headwinds. On the flip side, once international airline capacity and connectivity return, first-time business aviation users could shift back to scheduled service. Beyond providing an environment in which passengers feel safer and more secure than in a commercial terminal, there is little a company running an FBO can do to influence these trends. But once a customer has decided to fly privately, they may well have a choice of airports serving their destination, and in some cases may have more than one FBO they could use at their chosen airport. Knowing what that customer is going to want from their FBO, and delivering it with repeatable precision, is therefore key to providing successful service and maintaining a competitive edge. Small vs. Big Perhaps counterintuitively, for a business in which the customer is demanding and requires a bespoke, tailored, individual experience, business aviation has seen increasing consolidation--and this is as true of FBOs as any other part of the sector. Signature operates more than 200 facilities, and Smith argues that its global network offers considerable benefits both to users and the company.
Inflite's Stansted FBO is uniquely equipped to handle large private jets. Credit: Inflite The Jet Centre
At the other end of the scale there are companies that run only one site, such as the family owned Inflite The Jet Centre, which operates an FBO at London Stansted Airport capable of handling flights with up to 200 passengers. "Where would you rather shop: a supermarket or the corner shop that will say to you, 'Oh, lovely to see you today. I'm glad you popped in. That ham that you really love, it's come in today?'" says Inflite CEO Penny-Annette Stephens. "We're humans--we like to be felt to be special. And most of our customers end up being more than customers--they're actually friends. And we do a whole lot more for our friends than we would somebody who's a stranger." While the size of the operations may differ, the philosophies underpinning both Inflite's one-site service and Signature's global laydown are very similar. Inflite's FBO, designed to Stephens' brief, shares with many of Signature's sites the look and feel of a luxury hotel. Yet the buildings are arguably the least important part of the offering. At its heart, running an FBO is about people. "Providing a consistent experience is the bedrock of the service, and we've got to deliver that to a world-class standard," says Smith. "We ask our staff, through our own systems, to understand who our customers are, so we give them that personalization of experience. We engage them as individuals, very respectfully; we provide them with that world-class engagement one-to-one within a service standard that's consistent across our network and reflects the Signature brand." Recruiting and retaining the right team members is therefore critical. Smith says Signature looks less for transferrable experience than what he terms "attributes"—personality or character traits that can't be taught or trained, but which are necessary to providing the kind of customer service the business delivers. Sometimes, these traits will appear in people with backgrounds that lie outside what might be expected. "Clearly we recruit from ground handlers, we recruit from hospitality, but we actively recruit from diverse industries," he says. "The general manager at our base at Sion in Switzerland is an ex-professional ballet dancer—and he is an absolutely brilliant GM. He was recruited by a business that we purchased--he came with TAG Aviation when we bought the business--but he was a leader who embraced the Signature culture and has taken his team with him. He's positive; he's brilliant with customers; he's got stacks of energy; and he's a leader who, very quickly in a new environment, earned our trust. That's the sort of person we look to recruit." Stephens says that, for Inflite, perhaps the most significant impact of COVID has been its effect on staff. "The damage that COVID has done in the business is not insomuch as flying or not flying," she says. "We're finding we're having an awful lot of people leave. They have decided to retire; they've decided that they don't want to work five days anymore; they quite like working from home, so they'll change jobs. HR have never been so busy." As the head of what is still a family business—Stephens' late husband founded the firm; her daughter manages the FBO; and her son runs the group's engineering division—losing a member of staff hurts. She mentions one team member who left for a job with regular hours but didn't enjoy the new role and returned to Inflite after a month. "We keep them close because we like them," she says. "They're more to us than employees." Smith notes that Signature looks to recruit locally where possible—at London Luton Airport, a commitment to do so forms part of the agreement the company has with the local council. Inflite has had considerable success recruiting from Stansted Airport College, which was established near the company's FBO in 2018. Inflite donated a fully functioning Bombardier Challenger 600 to the college, which uses it as a hands-on resource for students. Stephens points to two senior team members—a customer service head and an FBO support manager—who were recruited on graduation.
Signature Flight Support's Sion, Switzerland, FBO is one of the company's locations where senior staff have been recruited from outside the aviation and hospitality sectors. Credit: Signature Flight Support
Consolidation is set to continue. Signature has not just bought businesses such as TAG, it was itself acquired last year by a consortium of private-equity partners. This gives the firm some additional options, Smith says, although their plans are still dependent on whether the influx of new customers stays with the sector. "Clearly the challenge is how sustainable this trend will be," he says. "We have a set of long-term projections. Our investment position has improved and become more flexible [since being acquired]. I think that will provide more opportunity in the future for strategic investment." One business they will not be able to acquire, it would appear, is Inflite. Stephens says she has received "lots" of offers to buy the group, but, despite an increasingly complicated regulatory environment that makes cost-effective day-to-day operations challenging, she has never been tempted to sell. "I feel that there will always be a niche for this sort of family business, as long as you work it and you give it your all," she says. "I look at some of my customers who I am more than fond of, and I think, 'If so-and-so bought us, would I really think they'd look after you? Well, no. Can't do it to you.' And how would I say, 'It's been great, you being a loyal customer for X amount of time, but we're selling the business?' That's terribly un-businesslike. I just can't do it." SAF Education With the influx of new customers—many of whom will work for companies with carbon-reduction commitments, besides any strong personal feelings about environmental responsibility—one area in which FBOs might be able to carve out a competitive advantage could be provision of sustainable aviation fuel (SAF). As yet, however, while demand for lower-carbon fuel is increasing, there is little evidence to suggest that customers are choosing to fly specifically to locations where SAF is available. Signature Flight Support offers SAF—from Neste and Air BP—in a 30/70 blend with Jet A at 12 locations globally, three of them in Europe, all of which are in the U.K.: Luton, Glasgow and Edinburgh. The bulk of the company's European SAF sales have been at Luton, which has required an average of two 32,000-litre loads per month over the past year, although in April this supply had to be doubled as demand increased around the European Easter vacation period.
Demand for sustainable aviation fuel is increasing but is not yet at a level where provision gives an FBO a competitive advantage. Credit: Signature Flight Support
Book-and-claim programs—in which a customer pays the extra required to pump SAF at a location where the fuel is not available, and the lower-carbon fuel is put into another jet at an airport that has a supply—is one way in which the sector is trying to maximize uptake of SAF while availability is geographically constrained. This is working well in the U.S. Signature offers book-and-claim to all its customers wishing to purchase SAF where the transaction takes place in the U.S.—but differences in tax regulations and rates are making the practice more difficult to implement in Europe. Education remains key. Despite extensive and long-term efforts by pan-industry bodies and trade associations, and increasing interest from end users, it is the pilots and flight departments that still need to be convinced of the viability and safety of drop-in biofuels. "The education process is absolutely necessary," says Brian Batty, Signature's U.S.-based director of fuel operations. "When it comes to making the decision to purchase SAF, that decision is being made in the C-suite or by the sustainability manager. They're the ones who are encouraging the use of it. [But] the pilot has to be the one who says, 'Let me make sure that I understand the product and what the impact is on the aircraft.' "In the last year, we've had numerous conversations where the pilots will ask, 'I get that I can use it safely, but is it going to change the maintenance on my aircraft?'" he adds. "Sometimes a pilot is getting a request or a mandate from the C-suite saying, 'Look into SAF. Go carbon neutral.' But now the pilot's like, 'Well, where do I get it? Which ones are good? What should I be doing?' So, there's still an education process, and we have spent just as much time educating customers as we have in obtaining the product and getting it available to market,” says Batty.
—A freelance journalist based in the UK, Angus Batey has been a frequent contributor to the Aviation Week group since 2009.
