FBO Announces Biz down 50%

[Jay Honeck]

I just returned home from my Airport Commission's monthly meeting, and what a downer. Our FBO announced that -- for the first time in years -- they've had a very down quarter. In fact, the owner estimates that his business is off a whopping 50% from this time last year!

I know flying is way down -- Mary and I rarely see other planes at airports when we fly anymore (our "weekend" is Wed/Thu, so we fly during the "dead times"), and our fly-in business at our aviation theme-suite hotel has dropped way off -- but to hear it quantified like that is still like getting hit with a bucket of ice water. How long can our aviation infrastructure take that kind of stress?

The FBO owner says that for his charter business to be profitable, his fuel prices should be 20 - 30% of his expenses. This last quarter, they jumped to over 50% of his expenses, and he has been unable to pass such a huge increase along in the way of higher prices. And his flight instruction hours have plummeted, too, as the higher costs have driven away many students.

Talk about a pinch! Are you guys seeing the same thing at your airports?

Let's hope the OPEC meeting on fuel output (announced today) will help lower these skyrocketing gas prices.

 

[SCCutler]

I have a client who owns a flight school, and she is busy as a little beaver... around here, the trainer fleets are flying their wings off, especially with students making their radio calls with an Indian accent.

 

[flyingcheesehead]

Jay,

I think at least part of the problem has to be the terrible weather that we've had in MANY areas this year - Both the insane amount of snow, and more recently the never-ending thunderstorms.

I know our flying club is way off as well - The winter was brutal, particularly Dec-Feb.

 

[KennyFlys]

I have a client who owns a flight school, and she is busy as a little beaver... around here, the trainer fleets are flying their wings off, especially with students making their radio calls with an Indian accent.

I'm staying pretty dang busy. But, unlike the larger schools we get attention from those who want more personalized service and from executives who want quality attention rather than a cheap ticket.

We could just about keep another plane going if we found another instructor willing to make a long-term commitment.

 

[CJones]

I saw a report tonight that the fuel price increase it hitting the rural areas of the country harder than more densely populated areas of the country.

In the south and Midwest, where fuel prices are around $3.90 a gallon, the median income is only about $38,000 a year. Here fuel prices can eat up about 15 percent of a family's budget.

Compare that to the costs where fuel prices are higher, more than $4 a gallon, but so is take home pay. Fuel prices here are only about 4 percent of the family income.

http://www.cbsnews.com/stories/2008/06/09/eveningnews/main4167205.shtml

I think we Iowans definitely fall into the 'rural America' category.

 

[Jay Honeck]

I saw a report tonight that the fuel price increase it hitting the rural areas of the country harder than more densely populated areas of the country.



I think we Iowans definitely fall into the 'rural America' category.

The cost of living between the two areas is widening, too.

We recently spent a weekend in Detroit (for the Red Bull Air Races) and paid $223 per night for a hotel room that wasn't half as nice as one of our one-bedroom hot tub suites that we charge just $99.95/night for -- and we deliver breakfast to your suite as part of the deal!

I've never felt so ripped off in my life -- but that's just "big city prices"...

 

[Jay Honeck]

I have a client who owns a flight school, and she is busy as a little beaver... around here, the trainer fleets are flying their wings off, especially with students making their radio calls with an Indian accent.

Well, I'm glad SOMEONE is flying a lot...

We've had a slew of Indian guests at our hotel, working as computer programmers at local company. They've been, without exception, perfect gentlemen, and all-around great guys.

Obviously I'm gonna have to work on getting them to take flight lessons while they're here!

 

[harryg]

Jay, I'm financially unable to own an airplane like many of you. Therefore, my flying is all predicated upon the rental prices and my current financial situation. Since the first of this year, the rental rates have increased twice and with the cost-of-living increases that we have all experienced, my flying has become less frequent.

 

[dmccormack]

We recently spent a weekend in Detroit (for the Red Bull Air Races) and paid $223 per night for a hotel room that wasn't half as nice as one of our one-bedroom hot tub suites that we charge just $99.95/night for -- and we deliver breakfast to your suite as part of the deal!

I've never felt so ripped off in my life -- but that's just "big city prices"...

"Big city prices" is a function of supply and demand. Out here in BFE, PA, you won't find a room for less than $149/night during the summer months in the regular chains (Hampton, Fairfield, Holiday). Even Nemacolin Resort (with a small runway in the back yard, BTW) has more reasonable prices in the off season.

Apparently demand is up due to people visiting Ohiopyle, Falling Water, and Kentuck Knob.

In February I stayed in a beach front view room in Virginia Beach for $49/night. In August that same room will be $225/night.

I'm thinking the price you paid is more a function of the Air Races than Detroit's charms.

 

[ScottM]

I think you really have a triple whammy happening right now.

As Kent mentioned out Midwest weather for the first part of this year has been really bad. I know that a lot of my flying has been squeezed into only a the last few months.

Second, fuel. Fuel prices have gone threw the roof in a relatively short time. That has cost OPEX to increase while some of it have been passed on to customers in some areas there are other places where it has all been passed on. Either way cost are up for FBOS and customers. If people want and need to do something they will pay but coupled with the third item I can see where we are having problems.

The third item is the economy. It has hit a lot of people. The fuel increases have caused a corresponding increase in other basic items. Some industries such as high tech and agriculture are being hit with the results of off shoring and fuel. Cheaper goods are coming in form overseas and that included fuel. With unemployment up and wages flat for the last few years people have less disposable income.

Couple these three things together and you have a hat trick of issues that have reduced business.

 

[CJones]

I
The third item is the economy. It has hit a lot of people. The fuel increases have caused a corresponding increase in other basic items. Some industries such as high tech and agriculture are being hit with the results of off shoring and fuel. Cheaper goods are coming in form overseas and that included fuel. With unemployment up and wages flat for the last few years people have less disposable income.

I am taking a Logistics Supply Chain Mgmt class this summer as a part of my Operations SCM major. An interesting tidbit that has been discussed in both my OSCM and LSCM classes this summer is how the increasing transportation costs are drastically narrowing the profit margin for overseas vs. domestic production of goods. In fact, Nike already has the wheels turning on moving some of their production from SE Asia at least back to north America.

Another interesting thought that has crossed my mind while pondering this aspect of rising energy costs: IF the increase in fuel prices does indeed cause an increase in domestic production worldwide and decreases the world trade market, it becomes eerily similar to pre-WWII era. One of the factors that nudged Japan into WWII was the fact that the US withheld exporting fuel & raw materials to them. Small countries like Japan that depend on importing raw materials for everyday survival could be the most affected by high energy costs. It will hurt the US, but at least we have the natural resources to survive through a slump until some type of new technology evolves to revive world trade.

 

[ScottM]

Another interesting thought that has crossed my mind while pondering this aspect of rising energy costs: IF the increase in fuel prices does indeed cause an increase in domestic production worldwide and decreases the world trade market, it becomes eerily similar to pre-WWII era. One of the factors that nudged Japan into WWII was the fact that the US withheld exporting fuel & raw materials to them. Small countries like Japan that depend on importing raw materials for everyday survival could be the most affected by high energy costs. It will hurt the US, but at least we have the natural resources to survive through a slump until some type of new technology evolves to revive world trade.

Add on to that the countries that not only need to import finished goods but also food. Those countries may be very hurt. One of those is China. If China were to really feel the pinch they may demand repayment of their loans to the US. That could cause a lot of problems. Just like it is not good in your personal finances to be in debt and beholding to a bank, countries should not over spend and beholding to other countries.

 

[dmccormack]

I am taking a Logistics Supply Chain Mgmt class this summer as a part of my Operations SCM major. An interesting tidbit that has been discussed in both my OSCM and LSCM classes this summer is how the increasing transportation costs are drastically narrowing the profit margin for overseas vs. domestic production of goods. In fact, Nike already has the wheels turning on moving some of their production from SE Asia at least back to north America.

This may be Spin Zone material... but...

Oil has become its own price standard. The dollar has fallen precipitously in the past few years, increasing the cost of imports to US consumers, and decreasing the costs of US goods to overseas buyers.

In an up or a down market, somebody is always making money.

Keep in mind that prior to WW2, Japan also had an imperialistic government, hell-bent on "reconquering" all lands near or around the Sea of Japan, in order to create the "Greater East Asia Co-Prosperity Sphere" -- with Japan as hub, of course.

After Japan's defeat, the Tojo government and nationalistic imperialistic notions were dumped, in favor of corporate loyalty -- thus Sony, Honda, Yamaha, Toshiba, etc.

 

[Jay Honeck]

I am taking a Logistics Supply Chain Mgmt class this summer as a part of my Operations SCM major. An interesting tidbit that has been discussed in both my OSCM and LSCM classes this summer is how the increasing transportation costs are drastically narrowing the profit margin for overseas vs. domestic production of goods. In fact, Nike already has the wheels turning on moving some of their production from SE Asia at least back to north America.

Yep, I've been pondering that possibility. At some point, the high cost of transportation is going to change EVERYTHING in America, from where we live and work, to where goods are produced. There are going to be huge investment opportunities, as well as huge risks.

Unless oil prices turn out to be yet another "bubble", I think we may see a dramatic shift back to domestic production in the near future...

 

[gprellwitz]

Yep, I've been pondering that possibility. At some point, the high cost of transportation is going to change EVERYTHING in America, from where we live and work, to where goods are produced. There are going to be huge investment opportunities, as well as huge risks.

Unless oil prices turn out to be yet another "bubble", I think we may see a dramatic shift back to domestic production in the near future...

Maybe it'll lead to a great rise in telecommuting and telecommunications!

 

[skyflyer8]

Talk about a pinch! Are you guys seeing the same thing at your airports?

Definitely, yes. Seems like I've had a 50% decline in business too.

I still get calls but they are at an alarmingly slow rate... we are advertising the same amount, and I have now been doing this three years and have established a (hopefully good!) reputation... and yet, it seems hardly anyone wants to learn to fly anymore. Actually no. Rephrase that. Hardly anyone can afford to learn to fly anymore.

There was a time I was so busy I was turning people away because I couldn't accommodate any more students, and now it is totally the opposite.

Our Ercoupe restoration project is inching closer to being done. I'm hoping that sport pilot training will increase my business since it is cheaper per hour and cheaper overall for the certificate. It will hopefully remove some of the barriers that are keeping people from pursuing flight lessons.

Also, since I am near Oshkosh I always get a surge of calls during and after AirVenture. I'm really curious to see what happens this time around. If my phone ends up being quiet, then I know I'm in trouble.

It's all been so depressing.... sigh....

 

[gprellwitz]

I was talking to the owner of our FBO the other day, and he said that they're getting more inquiries than ever, and many of them are turning into students! Since I put up a website a few months ago, I'll take all the credit, of course!

 

[Jay Honeck]

Definitely, yes. Seems like I've had a 50% decline in business too.

Our Ercoupe restoration project is inching closer to being done. I'm hoping that sport pilot training will increase my business since it is cheaper per hour and cheaper overall for the certificate. It will hopefully remove some of the barriers that are keeping people from pursuing flight lessons.

Kate, it's interesting to hear that you're restoring an Ercoupe -- so am I! We (myself and 2 partners) just bought a '48 model E (not light sport) that -- while en route to being sold to another buyer -- was damaged by a fuel truck backing into the wing. We got a good deal on it, and are now installing new wings.

We almost bought a Model C, but we determined that a Light Sport Ercoupe is truly a one-person aircraft. It seems that -- unless you're teaching tiny students -- you'd be over-gross every time you take off, no?

So, we got an E model, with a 200 pound greater useful load...

What's left to restore on yours? Are you a member of the Ercoupe Owner's Club?

 

[Missa]

I'm thinking the price you paid is more a function of the Air Races than Detroit's charms.

And where in the city they stayed. Out by Ma's house where Grant & Leslie stayed it was more reasonable but we had a 20 min drive to the races...

 

[Missa]

Unless oil prices turn out to be yet another "bubble", I think we may see a dramatic shift back to domestic production in the near future...

Maybe it'll lead to a great rise in telecommuting and telecommunications!

If the price keeps going up I think you will also see people trying to live closer to where they work. I think about that every day as I walk or ride my bike into work... there is a lot more people out on bikes in the morning.

 

[skyflyer8]

We almost bought a Model C, but we determined that a Light Sport Ercoupe is truly a one-person aircraft. It seems that -- unless you're teaching tiny students -- you'd be over-gross every time you take off, no?

There is an STC to increase the gross weight to 1320 pounds (up from 1260), but yeah, we will have weight restrictions. We will often not be able to fly with full tanks either. We will be at least the third school in WI to have an LSA Ercoupe, so others are managing to succeed somehow.

It is too bad that all Ercoupes can't just be LSAs, period... I know the owners group is lobbying for that, but the FAA isn't budging on the 1320 weight limit for anyone, whether Ercoupes or Champs or whatever else. If all Ercoupes could be LSAs, the sport pilot world would be opened up to a lot more people.

The one I flew to Montana in 2006 was a D-model with a 100 HP engine and 1400 lb. gross weight. My lightweight friend and I had it stuffed to the brim with baggage and were right at gross.

 

[jmaynard]

It is too bad that all Ercoupes can't just be LSAs, period... I know the owners group is lobbying for that, but the FAA isn't budging on the 1320 weight limit for anyone, whether Ercoupes or Champs or whatever else. If all Ercoupes could be LSAs, the sport pilot world would be opened up to a lot more people.

I don't know where the FAA got 600 kilograms (=1320 pounds) for the LSA weight limit, but there are a lot of simple aircraft that would otherwise qualify that don't because of it. The Zodiac's max gross, were it not for that limit, would be 1450 pounds. I could sure use the extra 130 pounds...

 

[KennyFlys]

It is too bad that all Ercoupes can't just be LSAs, period... I know the owners group is lobbying for that, but the FAA isn't budging on the 1320 weight limit for anyone, whether Ercoupes or Champs or whatever else. If all Ercoupes could be LSAs, the sport pilot world would be opened up to a lot more people.

I have to wonder if that push is more for the value it would bring to the planes rather than usefulness by current owners. Some that once sold for $12-16,000 were later selling for well over twice that after the LSA rules were in place.