Week one:
Reading Assignment: Prather: Pages 1 - 34
Review:
98% of Fortune magazine's top 50 most respected companies use business aviation.
S&P 500 companies that use business aviation outperform those that don't by 70%.
95% of Fortune magazine's "Change the World Top 20" companies use business aviation
This section - pages 1 - 34 - covers a very good and very interesting overview of the history and development of general aviation from the Wright brothers to the present.
Week two:
Reading Assignment: Prather: Pages 35 - 58
Review:
General Aviation (GA) refers to all civil aviation activity but excludes the airlines and the military.
The GA fleet is comprised of some 211,000 aircraft and 20,000 airports. Note that the airlines serve only 600 of those airports - or about 3% of the nation's airports.
The 211,000 GA aircraft fly approximately 25.5 million hours a year.
About 3% - about 450 - of the 15,000 business aircraft that are registered in the US are operated by Fortune 500 companies.
Business Aviation is the use of an aircraft to further a business and can use either paid or unpaid pilots.
About 8.5% of the active GA fleet is used for flight training which accounts for approximately 25% of the total GA flight hours.
Public Use aircraft are aircraft that are owned or leased by federal, state, or local government agencies.
Essential Air Service is airline service that is subsidized by the government to provide air service to small airports that could not economically justify it otherwise.
At the end of 2021, the FAA reported that there were 720,605 pilots in the US. This number included 250,197 student pilots and 161,459 private pilots.
This means that there were 308,949 pilots with ratings above private pilot.
Week three:
Reading Assignment: Prather: Pages 59 - 77
Review:
- During the late 1970s there were close to 10,000 FBOs operating in the US.
- By the early 1990s there were just under 4,000.
- The National Air Transportation Association (NATA) is the organization that represents FBOs.
- NATA says that in 2020 there were 3,384 FBOs in the US.
- 75% of the public use airports with runways 3,000 feet or longer have only one FBO.
- In 2022 there were 5,069 public use landing facilities in the US
- 517 of these (10.2%) were approved under FAR Part 39 for airline use.
- There are primarily four types of business organizations that an FBO can be operated under: Sole Proprietorship, Partnership, Corporation, or a Limited Liability Company (LLC).
- 1978 was the best year for GA aircraft sales with a total of 17,811 GA aircraft sold.
- By comparison there were a total of 2,851 GA aircraft sold in 2020 - or 16% of the aircraft sales in 1978.
Discussion question one
Week four:
Reading Assignment: Prather: Pages 79 - 106
Review:
Line service is the most visible and important facet of FBO operations.
The line service specialist is the first person that the flight crew meets. Their competence and professionalism is critical to the image of the FBO.
Safety is one of the primary responsibilities of the line service specialist.
The aviation industry mostly operates on a 24-hour clock.
The aviation industry also operates on Coordinated Universal Time (UTC) - also called Greenwich Mean Time - or Zulu time. The table at the bottom of page 82 shows the UTC conversion for the four time zones in the US.
The aviation industry uses the International Radiotelephony Spelling Alphabet - also known as the phonetic alphabet. The table on page 83 shows the phonetic alphabet. Sometimes this alphabet is "adjusted" a bit. I once managed the FBO that hangered the plane for a large commercial baking company. The plane had the N number N1SB. It should have been N 1 Sierra Bravo, but they used N1 Sugar Baker instead.
US registered aircraft use the prefix "N" in the registration number. Each country uses a unique prefix. For example, Canada is "C" or "CF" and Mexico is "XA" or "XB".
Fire is one of the most dangerous situations that can occur aboard an aircraft in flight - or aboard an aircraft on the ground for that matter.
There are four classes of fires - A, B, C, and D.
- Class A fire involve ordinary combustibles such as wood and paper. Water has a cooling effect and is used only on Class A fires. Foam can also be used on Class A fires.
- Class B fires involve flammable liquids such as fuel and oil. Carbon dioxide and dry chemicals - such as specially treated sodium bicarbonate - smother the fire by displacing the oxygen and are used on Class B and Class C fires. Foam and Halon can also be used on Class B fires.
- Class C fires involve energized electrical equipment. Carbon dioxide and dry chemicals - such as specially treated sodium bicarbonate - smother the fire by displacing the oxygen and are used on Class B and Class C fires. Halon can also be used on Class C fires.
- Class D fires involve combustible metals such as magnesium and sodium. Only specialized powders are effective on these fires.
Flash point is the temperature at which a liquid forms vapors that can be ignited.
Bonding grounds the aircraft and eliminates sparks from static electricity. Fueling stations and fuel trucks have cables with clips that are attached to the aircraft prior to fueling for this purpose.
Avgas100LL (blue) and Jet A (straw colored) are the two most commonly found aircraft fuels used today.
Other types of avgas include 80/87 (red) and 100/130 (green).
Aircraft can be fueled by one of two methods: over-the-wing or single-point. Over-the-wing fueling uses fuel filler openings on top of the wings and / or the fuselage. Single-point uses a fuel connector that fills all of the fuel cells simultaneously from a single point located on the bottom of the wing or the fuselage.
Towing is a very valuable skill and is used a lot at FBOs. Some use a dedicated tow vehicle. Sometimes a small tractor is used for smaller aircraft types. There are also powered towbars available.
- Many FBOs have Ground Power Units (GPUs) to provide power for aircraft parked on the ground. GPUs are available that can deliver 14, 28, or 115 volts. GPUs can be used for engine starting and / or running electronic equipment, air conditioners, galleys, etc.
- FBOs can also offer services such as deicing, lavatory servicing, potable water, and aircraft cleaning.
- Line service personnel, must be proficient at marshalling (guiding) aircraft that are taxiing into the FBO for parking, fueling, hangar services, etc.
- Line service personnel must be aware of foreign objects (FOD) on the ramp and parking areas. FOD can cause engine, propeller, and other aircraft damage and can require very expensive repairs.
Quiz one
Week five:
Reading Assignment: Prather: Pages 107 - 139
Review:
The owner or operator of an aircraft is responsible for maintaining that aircraft in an airworthy condition.
FAR § 91.403 General.
(a) The owner or operator of an aircraft is primarily responsible for maintaining that aircraft in an airworthy condition, including compliance with
part 39 of this chapter.
The pilot in command is responsible to determine that the aircraft is in an airworthy condition for that specific flight.
FAR § 91.7 Civil aircraft airworthiness.
(a) No person may operate a civil aircraft unless it is in an airworthy condition.
(b) The pilot in command of a civil aircraft is responsible for determining whether that aircraft is in condition for safe flight. The pilot in command shall discontinue the flight when unairworthy mechanical, electrical, or structural conditions occur.
The holder of an airframe and powerplant mechanic license (A&P) under FAR Part 65 - the A&P is actually two licenses - airframe mechanic and powerplant mechanic - can perform some types of maintenance and inspections and sign off the records to return that aircraft to service.
There are three types of inspections that can be conducted on piston powered general aviation aircraft below 12,500 pounds: a 100-hour inspection, an annual inspection, and a progressive inspection.
Note: GA turboprop and jet aircraft under 12,500 pounds are maintained according to an FAA approved maintenance and inspection program that is FAA approved for that specific aircraft.
The holder of an A&P license - must hold both an A and a P - can perform a 100-hour inspection and return that aircraft to service.
An annual inspection must be conducted and signed off by either the holder of an inspection authorization or by a certified repair station (FAR Part 145).
A progressive inspection is an annual inspection - not a 100-hour inspection - done in phases - and must be signed off by either the holder of an inspection authorization of by a certified repair station.
There is also a maintenance rating "below" an A&P - a repairman certificate. A repairman certificate is granted for specific maintenance operations and carries the same authority for that specific maintenance as the holder of an A&P license has.
Flight training is conducted under either FAR Part 61 or FAR Part 141.
Most flight training is done under Part 61 by individual CFIs small flight schools and FBOs.
Part 141 is an FAA Approved Flight School. It required a formal application, an FAA approved operations manual, FAA approved facilities, FAA approved aircraft, FAA approved chief flight instructor(s), an FAA approved records system, and regular FAA inspections.
Note: the reduced ATP requirements can only be met by graduating from an FAR Part 141 school operated by a college or a university.
Air charters are operated under FAR Part 135.
Customer Service
Excellent customer service is the goal of any business. It attracts, satisfies, and retains customers.
Customers can be internal or external.
Internal customers are the fellow employees of the business. Satisfying internal customers is critical for employee retention, employee morale, employee satisfaction, employee productivity, and attracting new employees.
External customers are the ones who pay the business for its products and / or services.
Not all FBO services create income directly. Examples include things such as customer service, clean restrooms, pilot lounges, preflight planning rooms, recreational facilities, and courtesy cars.
Discussion question two.
Week six:
Reading Assignment: Prather: Pages 141 - 159
Review:
Marketing is one of the most critical functions for any business. Many otherwise good businesses fail because they fail to successfully market their product or service.
The three components of a modern marketing concept are: a customer orientation, a total company effort, and profit - not just sales - as an objective.
A business must create utility and / or value (for its customers.
Utility is the want-satisfying ability of a good or a service. There are three types of utility: time, place, and possession.
Time utility is making the good or service available when the customer wants it.
Place utility is making the good or service available where the customer wants it.
Possession utility is the transferring of the good or the service to the customer.
Marketing management includes three components: planning, implementing that planning, and controlling that planning.
The four "Ps" of marketing are: product (or service), price, place, and promotion. Some people add passion to that list.
There are two types of demand: elastic and inelastic.
Elastic demand means that a relatively small change in price has a large effect on demand.
Inelastic demand means that a change in price has a relatively small effect on demand.
There are three types of competition: direct, indirect, and replacement.
Direct competition is where another company offers a very similar product or service.
Indirect competition is where another company offers a product or service that can be substituted for yours.
Replacement competition occurs with customers that have limited financial resources.
The economy has a huge effect on marketing. As the economy declines - like it is now - marketing changes from just advertising to educating the customer on why your product or service is better than another product or service for your specific targeted customer(s).
A weak economy makes marketing much more difficult - and much more expensive. You not only have to convince your specific targeted customer(s) that your product or service is the best choice for them, but you have to convince them that they need to purchase the product or service at all.
Quiz two
Week seven:
Reading Assignment: Prather: Pages 161 - 192
Review:
There are primarily four types of promotional activities: advertising, sales promotions, publicity, and personal selling.
Advertising is any paid form of non-personal communication. Common examples include online and email ads, TV and radio ads, highway billboards, magazine and newspaper ads, painted or magnetic signs on vehicles, painted or electric signs on businesses, banner towing, and direct mail.
Sales promotions involve actual marketing activities such as trade shows, a booth at a county fair or other public or private gathering, contests, and free samples.
Publicity is an unpaid form of marketing such as a news story or an editorial in the local paper and the announcement of a new product or service.
Personal selling includes actual contact and communication between someone at the company and a current or potential customer.
Marketing Research
Marketing research has been difficult for a small business but with the advent of the internet it has gotten much easier. It is amazing what kind of information is available from various private and government databases relating to market potential, sales potential, population numbers and mixes, other businesses in the marketing area, the economics of the marketing area, government publications, industry associations, periodicals, books, online databases, and commercial sources.
Surveys are a common method of determining interest and demand for a product or service. These can be done either physically or via the internet.
Databases of local populations with defined characteristics are readily available for purchase. An example would be an FBO surveying the local population to determine the interest in flight training, air charter, aircraft rental, or aircraft sales.
Discussion three
Week eight:
Reading Assignment: Prather: Pages 193 - 216
Review:
Business-to-business marketing is the activity of one business buying and / or selling products and / or services to another business. An example would be the manufacturer selling an aircraft to one of its dealers or the fuel distributor selling avgas and oil to the FBO.
Direct channels. Businesses - especially larger ones - often purchase directly from the manufacturer rather than from a distributor like consumers do.
Derived demand. Businesses buy products that they then use to manufacture products of their own. An example would be Cessna purchasing engines from the manufacturer that they then install on their Cessna airplanes.
Inelastic demand. This means that the demand for the product is not sensitive to the price. In the above example, Cessna purchases engines from the manufacturer that they then install on their Cessna airplanes. If the price of the engine goes up, Cessna will still but them, since they have no real alternative - especially in the short term.
Types of business-use aircraft. Business aircraft are chosen based on the intended mission. A fishing lodge in Alaska will not choose a jet and a corporate flight department that flies between New York city and Chicago will not choose a piston powered single engine float plane.
Factors included in the aircraft selection process include trip distance, number of passengers, use of the aircraft, users of the aircraft, environmental factors over the routes and the destinations, trip frequency, performance considerations, and financial considerations.
The cost of aircraft use includes both fixed costs and variable costs.
Fixed costs are not dependent on the number of hours flown. These costs include crew salaries and benefits, crew training, hangar rental, insurance fees.
Variable costs are directly affected by the number of hours flown. These costs include fuel and maintenance.
Cash flow analysis. Many businesses go out of business because they don't manage their cash. You can spend cash but you cannot spend profit. If a business mismanages its cash, it can be owed a lot of money in accounts receivable and have insufficient cash on hand to pay current bills.
FBOs and corporate flight departments - and some private aircraft owners - usually do a cash flow analysis to determine exactly what it costs to operate their aircraft. This is important for both internal budget and for tax reasons.
Break even analysis. Businesses do a break even analysis to determine how many flight hours it takes to make a profit on an aircraft. If the fixed costs and the variable costs are known, the break even point can be determined. The break even point can be adjusted by either reducing expenses or increasing the income.
Week nine:
Reading Assignment: Prather: Pages 217 - 250
Review:
Acquiring a business aircraft is a major and a complex decision and one not to be taken lightly.
The three principal advantages of a corporate aircraft are optimum utility, convenience, and safety.
Usually a single corporate aircraft can satisfy around 75% of the aviation needs within a company. Additional needs can be served by charter or lease arrangements.
A time share agreement involves the lease of an aircraft - with flight crew - to another party. Charges are made as listed on page 219.
An interchange agreement involves the lease of an aircraft to another company in exchange for equal time on the other company's aircraft. The only charge made is for any difference in the operating costs between the two aircraft.
An aircraft management company will take over all of the management responsibilities for operating a company aircraft and share the liability for that operation.
An in-house corporate aircraft can be jointly owned between two or more owners - under certain conditions. One of the owners hires and pays the crew and each of the joint owners pay their share of the expenses as specified in the joint ownership agreement. All of the joint owners must be named on the aircraft registration certificate.
New versus Used Aircraft. The decision to purchase a new or a used aircraft can be quite complicated. Cost is a major issue. Aircraft depreciate just like any other product and the depreciation on a new aircraft - especially in the first few years - is significant. There can also be tax issues - such as an investment tax credit - with a new aircraft that does not exist with a used one. Sometimes the availability of a new aircraft can be a major factor. I have seen the delivery date on some corporate aircraft models to be as far out as several years. Financing and insurance are also issues that must be considered in the new versus used decision. A used aircraft can be a good option if the aircraft is well researched and has been operated and maintained correctly. Approximately 85% of the corporate aircraft that are purchased in the US are bought used.
Maintenance is a major concern with buying a used aircraft. Many maintenance items - especially on turbine aircraft - are time and / or cycle related. Other maintenance is as required. Maintenance records are critical for both legal and aircraft value purposes. The status and quality of the maintenance records can greatly affect the value of a used aircraft.
A good pre-purchase inspection is critical to determine the exact status and condition of the aircraft. It should be done by a reputable shop with considerable experience with that specific aircraft. The results should be documented and are usually given to both the buyer and the seller. The discrepancy items - if any - can then be negotiated prior to the purchase.
Upon the completion of a sale, the aircraft must be properly registered to the new owner(s).
An aircraft bill of sale is also required and must accompany the application for a new registration.
Leasing is another way of acquiring an aircraft.
A wet lease is an agreement where the lessor (owner) provides everything required to operate the aircraft including at least one flight crew, fuel, oil, maintenance, insurance, and hangar.
A dry lease is an agreement where the lessor supplies only the aircraft and the lessee supplies everything else.
Fractional ownership is a program where a fleet of aircraft - often made of up different makes and models - is owned by the fractional aircraft group and everyone owns shares in the company. The expenses to each shareholder are based on their usage of the aircraft.
Air charter operators operate under FAR Part 135 and offer air taxi services on demand - much like a taxi service or an Uber. The customer pays the charter company to fly their personnel and / or cargo to predetermined location(s) on a predetermined schedule. Charter can be relatively expensive by the hour but cheap over the long term because there are no expenses prior to the charter or continuing after the charter is completed. You pay only for the service(s) used.
The table on pages 244 - 246 compares the different forms of aircraft ownership.
Quiz three
Week ten:
Reading Assignment: Prather: Pages 251 - 269
Review:
A modern FBO is a very complex management proposition. Between the economic issues, financial issues, political issues, and numerous regulatory issues, it can be a very significant challenge to keep everything correct - let alone profitable.
Planning is probably the most important aspect of growing a successful business of any type.
Planning includes speculating on the future, establishing objectives, making decisions, and evaluating and revising those decisions as required.
Strategic plans - also referred to as long term plans - presents the firms big picture for the future.
Tactical plans - or shorter term plans - indicate how the firm will implement the strategic plans.
Operational plans - or very short term plans - address the daily plans for implementing the tactical plans.
Contingency plans - also called business continuity plans - are designed to plan for various situations and events that might interrupt the above planning process.
Single use plans - very limited scope plans for dealing with very special short term issues or events.
Budgets - plans that have been translated into dollar and cents projections.
Goals - whether personal or business - should be SMART: specific, measurable, achievable, relevant, and timely.
Note: it needs to be understood that employees have two types of goals: personal and professional. An employee will always seek to satisfy his or her personal goals first before he or she tries to satisfy the goals of the business.
Departmentalization - a business of any size will have its structure arranged by departments for easier operations and well as more effective and efficient management. Examples are the personnel department, the accounting department, the engineering department, the maintenance department, the flight department, the shipping and receiving department, etc.
Line personnel - these are the front line people who actually accomplish what the business does. Examples include pilots, mechanics, welders, carpenters, plumbers, electricians, fabricators, machinists, etc.
Staff personnel - these are the people who support the line personnel Examples include managers, attorneys, accountants, HR professionals, etc.
Organizational structure refers to how the business is organized - ie - the organizational chart. A flat business has fewer layers of management and tends to be very efficient and very flexible and quick to react. A tall organization tends to have more layers of management and tends to be very inefficient and very inflexible and slower to react.
Unity of command is the idea that no employee should have to report to more than one supervisor.
Span of control refers to how many subordinates one supervisor can work with effectively and efficiently. As that number increases, effectiveness, efficiency, and quality are reduced. The more complex and safety-critical the function is, the fewer subordinates a manager should be supervising.
Leadership is a very complex subject. Leadership has three dimensions: the leader, those who are led, and the situation. No two leaders and their situation are the same and what works well for one may not work at all for another. Page 260 discusses some of the traits that are commonly attributed to effective leaders.
As we discussed earlier, it needs to be understood that employees have two types of goals - now read that as needs: personal and professional. An employee will always seek to satisfy his or her personal needs first before he or she tries to satisfy the needs of the business. Pages 261 and 262 have a brief discussion of several theories of personal needs and how they rank in importance.
Employee empowerment means to release an individual's power to succeed by removing the barriers that prevent that success. Managers must create environments where employees can succeed. Employee barriers to success include a lack of knowledge and / or skills, a lack of leadership / direction, too little responsibility and / or authority, and effective positive feedback.
Coaching is one effective method of empowering employees, giving feedback, teaching, motivating, and challenging employees.
360 degree feedback is one methodology for providing feedback, This system provides feedback from all sides - including supervisors, coworkers, subordinates, managers, and fellow employees.
Decision making is a critical skill for virtually all individuals regardless of the specific position that they may be in. There are two basic types of decision making: data driven decision making and intuition based decision making.
Data driven decision making involves the collection of factual data upon which an informed decision can be made. Many financial and technical decisions such as engineering decisions are made this way.
Intuitive decision making involves making a decision based on a "gut feeling" or "experience." Many decisions are very similar and are repetitive, so once one situation has been successfully resolved, future similar decisions become easier to deal with based on that previous experience.
The basic decision making process includes these steps: evaluate the situation / problem, collect relevant information / data, generate alternative solutions, evaluate those alternatives, select the best option, take action to implement that alternative, and continuously reevaluate that decision and make corrections as required.
Many business functions include an element of control. Examples include inventory control, quality control, and production control. The steps in the control process include analysis, establishing standards, monitoring, securing feedback, and taking corrective action.
Effective communication is critical to any activity regardless of how simple or complex the activity is.
Discussion four
Week eleven:
Reading Assignment: Prather: Pages 271 - 284
Review:
Risk management is critical to any activity regardless of how simple or how complex that activity is. FBOs incur risks on a number of fronts and generally cover those risks thru various types of insurance. Pages 272 to 274 discuss the most common types of insurance that an FBO carries.
COVID-19 has had a major impact on virtually all aspects of the aviation industry. Pages 274 to 277 discuss the effects and ramifications of COVID-19.
Safety is the primary goal of any aviation operation and an FBO is no different. The Occupational Safey and Health Administration (OSHA) covers virtually all FBOs and their regulations are very comprehensive and very strict. Violations can be very costly and can even lead to closing the business.
The International Civil Aviation Organization (ICAO) has issued guidelines for the creation and implementation of Safety Management Systems (SMS) in the aviation industry. The principal aspects of implementing an SMS system include conducting a safety risk assessment and proactively implementing a safety culture.
Security is a major area of concern for an FBO. Aircraft have already been used as terrorist tools, and even though general aviation aircraft are much smaller than airliners, they can still be used very effectively as weapons of terrorism. The Transportation Security Administration (TSA) has published guidelines for general aviation operators regarding security. Pages 278 - 282 discuss the security aspects of general aviation operations.
Quiz four
Week twelve:
Reading Assignment: Prather: Pages 285 - 310
Review:
Financial management is the use of financial statements that accurately reflect the financial condition of a business to identify its financial strengths and weaknesses. It enables the business to make financial projections on which to base financial decisions. These financial records enable the business to interpret past performance, measure present progress, anticipate and plan for the future, control operations, identify significant trends, compare results with other similar businesses, make financial decisions, and comply with government regulations.
The balance sheet provides a snapshot of the financial health and status of a business at a specific point in time. It includes a detailed list of the tangible and intangible things that the business owns - called assets, what money the business owes to either its creditors - called liabilities - or to its owners - the owner's equity or the net worth of the business.
Assets can include tangible things as cash, inventory, land, buildings, airplanes, tools, furniture, and intangible things such as copyrights, patents, and trademarks. Money that is owed to the business is also an asset - called accounts receivable.
Liabilities can include business debts, loans to the business, and sales to the business on credit.
Owner's equity - or net worth or capital - is money or assets put into the business by the owners.
The basic accounting formula is: assets = liabilities + owner's equity
The income statement shows a company's income and expenses over some specified period of time.
Financial ratios allow the managers to have a tool for spotting trends and for comparing their business with other similar businesses. Financial ratios can identify trends and provide an early warning sign of potential future financial problems in time for them to be corrected.
Balance Sheet Ratios
The following ratios are derived from data contained in the balance sheet.
The current ratio is a measure of the financial liquidity of the business and its ability to pay short term debts that are due within one year. It is an excellent measure of the financial strength of a business.
Current Ratio = Total Current Assets / Total Current Liabilities
A generally acceptable current ratio is 2:1, or 2.0.
The Quick Ratio is one of the best measures of the liquidity of a business. It indicates the ability fo the business ot meet obligations with "quick funds."
Quick Ratio = Cash + Government Securities + Receivables / Total Current Liabilities
A generally acceptable quick ratio is 1:1, or 1.0.
The Debt / Equity Ratio indicates the extent to which the business is dependent on debt financing. It indicates how aggressive a company has been financing its growth thru debt financing. The higher the ratio the riskier the business is for investors.
Debt / Equity Ratio = Total Liabilities / Net Worth
Working Capital is really a measure of cash flow. This is an indicator of the firm's ability to survive a financial crisis.
Working Capital = Total Current Assets - Total Current Liabilities
Income Statement Ratios
The following ratios are derived from data contained in the income statement.
The Gross Margin Ratio is the percentage of sales dollars left after subtracting the cost of goods sold from income. It shows the percent of sales dollars that are available to pay business expenses.
Gross Margin Ratio = Gross Profit / Income
The Net Profit Margin Ratio is the percentage of sales dollars left after subtracting the cost of goods and all business expenses except income taxes.
Net Profit Margin Ratio = Net Profit Before Tax / Gross Income
The Return on Assets Ratio measures how efficiently profits are being generated from the business assets.
Return on Assets = Net Profit Before Tax / Total Assets
The Return on Investment (ROI) Ratio is one of the most important ratios. It is the percentage of return on the investment made by the owners. It indicates how worthwhile the assets and the efforts that have been put into the business have been.
Return on Investment = Net Profit Before Tax / Net Worth
Financial forecasting is essential for making the decisions that have to be made for operating the business.
Business expenses are categorized by two types: fixed expenses and variable expenses.
Fixed expenses remain relatively constant regardless of the level of business activity. Examples for an FBO can include facilities rent, insurances, salaries, and aircraft lease payments.
Variable expenses vary up and down with the level of business activity. Examples for an FBO can include aircraft fuel and maintenance expenses.
A break-even analysis indicates the level of business operations at which the business neither makes a profit nor loses money. The level of business at which the business would have a before-tax profit of zero.
Week thirteen
Reading Assignment: Prather: Pages 311 - 336
Review:
Human resources is one of the most important resources for any business. A properly qualified, experienced, and capable workforce is essential for any business - including an FBO.
The HR department is responsible for assisting in recruiting and selecting employees, training and promoting employees, arranging for salaries and benefits, and coordinating separation from employment.
Aviation is a very cyclical industry. I have seen phases where jobs were plentiful and phases where jobs were virtually nonexistent. Both situations have their challenges for an aviation business.
Training is a huge aspect of any aviation business. Virtually all aviation personnel require both initial and recurrent training. Some training can be accomplished in-house - like training line service personnel - while some must be contracted to specialty training firms - such as pilot simulator training.
Employee turnover is a constant problem for virtually all aviation businesses. Employee turnover is expensive - make that VERY EXPENSIVE. The perspective employee must be identified, he or she must be hired, and he or she must be trained. That process takes time and money.
Present and Future Challenges
COVID-19 may be a continuing problem - especially if the government goes off the deep end like it did initially.
Airports are increasingly operating their own FBOs which reduces the opportunities for privately owned FBOs.
The consumption of avgas has been declining for some time. As that continues, the cost will increase further reducing the consumption. It has been rumored in the that the oil companies my discontinue making all types of avgas except 100LL. 167,000 piston aircraft in the US depend on avgas.
More and more FBOs are being consolidated under a few large FBO chains which reduces the number of individual privately owned FBOs.
Uncrewed aircraft systems (UAS) are increasingly being used for a number of purposes in place of manned aircraft. That reduces the demand for manned aircraft activities.
Very light jets (VLJ) are becoming more popular with private owners. This can reduce the demand for FBO air charter operations.
The increase in fractional ownership of aircraft will have negative effects on FBO going forward y reducing air charter demands and reducing the ownership of individual private aircraft.
Fuel prices have been increasing steadily for some time. Increased fuel prices reduce the demand for private aircraft use which in turn increases the cost of fuel. A vicious circle.
Sustainable aviation fuel (SAF) has been discussed for some time. It is designed to replace Jet A - not avgas. A replacement for leaded avgas has been discussed for some time. 167,000 piston powered aircraft in the US still use avgas.
Hydrogen powered and electric powered aircraft have both been in development for some years.
FBOs and general aviation have been a weak link in aviation security for some time. To date the TSA has not decided to crack down on this area - but it could do so at any time.
Labor issues have been a problem for FBOs for some time. FBOs cannot match the pay and benefits of many other types of aviation businesses and are at a significant disadvantages in attracting, hiring, and retaining qualified personnel.
Course Research paper - Due Sunday November 23rd
Week fourteen
Final - Due Thursday, December 11