FBO Industry Forecasts Slow To Moderate Growth In 2019

Results of Aviation Business Strategies Group's (ABSG) Annual FBO Fuel Sales Survey indicates that 75% of FBOs in the U.S. experienced positive fuel sales in 2018 compared to 2017. According to ABSGs Principals John Enticknap and Ron Jackson, the survey results were upbeat including reports of increased transient ramp traffic recorded by 43% of responding FBOs.

"For the third consecutive year, we've seen an increase in fuel sales by more than half of FBOs responding to our survey," Enticknap said. "This includes some stand out fuel sales increases of more than 8% year-over-date by nearly 20% of FBOs reporting.  This is consistent with informal inquiries we made of numerous FBO operators at the NBAA in October."

Jackson added that fuel sales were mostly in sync with aviation business flight activity as reported by ARGUS TRAQPak which tracks hours flown by the business aircraft fleet. "For most of 2018, monthly business aircraft flight activity increased incrementally year-over-date compared to 2017 with a slight softening in the last quarter. For the year, flight activity rose slightly registering a 0.9% grain over 2017 while flight hours rose 0.7% for the same period," Jackson said. "Although still in positive territory, both flight activity and hours flown seemed to peak towards the end of the year."

 "Another area we like to explore with FBO operators is trying to understand the greatest challenges facing the FBO industry," Enticknap explained. "An open-ended question resulted in these top five concerns: employee retention, fuel pricing, erosion of fuel margins due to contract fuel suppliers, lack of flight instructors and the cost of flying."

An additional section of the survey deals with gauging confidence in the economy by FBO operators. "We saw a little softening in this area by respondents with 61% agreeing that the economy is headed in the right direction," Jackson said. "This is a slight decrease from the 73% recorded last year."

Based on the their Annual FBO Fuel Sales Survey, interviews with FBO owners and aircraft operators, and analysis of the oil markets and the aviation fuel industry, Enticknap and Jackson have put together the following forecast for the FBO industry in 2019:

Operators are bullish on fuel sales in 2019. As part of the survey, ABSG asked FBO operators to predict fuel sales for 2019 vs. 2018:

• 36% said they expect to have at least the same fuel sales as in 2017  
• 53% said they forecast fuel sales increases of 1% to 8%
• 5% expect to have fuels sales exceed 8%
• Only 6% expect fuel sales to decline

On average, ABSG expects a moderate 1.5% to 2.0% growth in FBO business aviation activities to include base customer aircraft movements, transient traffic arrivals and gallons pumped. This will closely follow the predictions for the U.S. GDP growth rate for 2019. With slower growth expected in business aircraft flight activity and hours flown, FBO operators should look at every facet of their operation to minimize costs and work more efficiently.

The larger FBO chains have not made substantial moves to expand their FBO networks and there is little sign of megamergers on the horizon. However, some smaller and emerging chains continue to add FBOs sporadically through the acquisition process.

In the oil field, expect WTI prices to stay relatively low through the first quarter of 2019, hovering between $52 and $58 per barrel. Greater seasonal demand in the second and third quarters should see oil prices rise and leveling in the $60 to $65 per barrel range.

Regarding Jet A fuel costs, Gulf Coast Platts current price is $1.84 per gallon and will follow the price of oil, as in the past. With seasonal adjustments heading into summer, we would anticipate Gulf Coast prices to increase to approximately $2.21 per gallon. FBOs will need to be mindful of what is in their inventory and adjust their fuel margins regularly.

Aircraft operators, particularly those flying internationally, will become more selective in choosing FBO service providers in favor of those with a minimum of at least a safety management system (SMS) and/or an IS-BAH registration designation.

(Source: ABSG news release. Images from file)

FMI: www.ABSGgroup.com