FBO monopoly

Morgan3820

Morgan3820

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El Conquistador
Why is it legal for the FBO at my airport to be given a monopoly?
I fly out of a Class D county owned airport, not real big but we have three carriers serving the hubs and some direct flights. The airport authority has for some time given a monopoly to the FBO who also happens to be the national distributor for Sxxll Aviation fuels. In spite of his status, we have the highest fuel prices in area. They charge up to $1.30/gal more than other nearby airports. My lawyer friend(yes, I have friend that is a lawyer) says that this is legal but he seemed fuzzy on the explanation as to why this is. I thought that monopolies are supposed to be regulated (i.e. utilities, insurance companies)?

Could the county give a monopoly to a single owner of gas stations allowing them to charge the public whatever?

As a side, locally we recently had a pilot crash on approach to a smaller uncontrolled field (fatal). Speculation is that he was stopping to pick up cheaper fuel. I do not hold the FBO responsible but if the fuel was priced more reasonably perhaps a 10 yr. old daughter might still have her dad.
 
If they take federal funds, they can't. However, often there isn't enough business to get a second organization to jump through the hoops to move in and complete.

The last comment is a total non-sequitor. If he can't plan his flights around his fuel buying, it's not the FBO's fault.
 
I'd imagine SFO, BOS, DEN, LEX, MIA and the like have sufficient traffic to warrant a second FBO. Doesn't JFK run their own county FBO?

I always thought the big companies (Signature mostly) get airports to sign exclusivity deals and lure them with big kickbacks.
 
We have a problem at KPWK. There are 2 FBOs. Atlantic and Signature. 100LL at SIgnature is about 7.97 per gallon, and Atlantic its 8.10 per. The airport is owned by two municipalities. The board just shot down self service fuel. Most GA pilots high tail it out of their to get fuel elsewhere. at an airport about 20 miles awa its at least $2 per gallon cheaper.
 
There are two situations where the operator can give a monopoly:
#1 there is physically not enough room to accomodate a second FBO (given the landlocked KTEB has 4, that is hardly ever a valid excuse)
#2 the operator is himself in the business of providing aeronautical services, e.g. fueling.

What the operator can't do is to claim that they are in the #2 category yet contract with someone to provide the actual service. This exemption only applies if the fuel is pumped by employees of the operator and billed on account of the operator.
Airlines dont care, they self-fuel and are not subject to the FBO business.

Chances are, if a FBO operator went to the airport commission and demanded an FBO license and a land-lease to build a new FBO, they would have to give it to him. Setting up a new FBO is a big investment, given the overall direction of the industry, people are not standing in line to burn their money that way.
 
flyingron said:
If they take federal funds, they can't. However, often there isn't enough business to get a second organization to jump through the hoops to move in and complete.

The last comment is a total non-sequitor. If he can't plan his flights around his fuel buying, it's not the FBO's fault.
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As I said in the OP, I do not blame the FBO.
 
Given they are county you can ask for every document relating to compensation from the FBO to the county - no reason to speculate. . .
 
flyingron said:
If they take federal funds, they can't.
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According to the FAA Airport Compliance Manual (FAA Order 5190.6B ), it is legal if the airport operator provides economic justification to the FAA that there isn't sufficient business to keep two FBO's operating. Salisbury MD is one where that has been done. The airport operator must lease the concession via a competitive bidding system, but once bid, the FBO is protected from destructive competition until the next bid cycle.
 
Morgan3820 said:
Why is it legal for the FBO at my airport to be given a monopoly?
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It's known as a municipal or government franchise. Governmental entities have the right to award an exclusive arrangement based upon fair bidding practices and the laws in place which allow the practice.

A cable TV franchise is a typical example.
 
Ron Levy said:
According to the FAA Airport Compliance Manual (FAA Order 5190.6B ), it is legal if the airport operator provides economic justification to the FAA that there isn't sufficient business to keep two FBO's operating. Salisbury MD is one where that has been done. The airport operator must lease the concession via a competitive bidding system, but once bid, the FBO is protected from destructive competition until the next bid cycle.
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Interesting but, does that apply to a self-serve fueling station?
 
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weilke said:
Airlines dont care, they self-fuel and are not subject to the FBO business.
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That is incorrect. Airlines use FBOs too, but in a different sense.



Anyway, pretty simple. You can't force someone to start a business, especially one that is expensive to start, expensive to run and with low profit margins.
 
JGarmin,

Are you sure the county has granted a monopoly?
 
Z06_Mir said:
That is incorrect. Airlines use FBOs too, but in a different sense.
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They use either their own fuel pumped by the FBO or contract fuel. For neither of them it is of much relevance how the FBO gouges the locals.
 
weilke said:
They use either their own fuel pumped by the FBO or contract fuel. For neither of them it is of much relevance how the FBO gouges the locals.
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But FBOs help set pricing on the contract fuel. They can charge a per gallon pumping fee, a standard hook-up fee, or both.
 
3393RP said:
It's known as a municipal or government franchise. Governmental entities have the right to award an exclusive arrangement based upon fair bidding practices and the laws in place which allow the practice.

A cable TV franchise is a typical example.
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Local or state law does not pre-empt the FAA airport compliance manual (order 5190b). Of course, a locality can grant a franchise, but they may risk future airport improvement funds.


8.7. Denying Requests by Qualified Providers.
a. Conditions for Denial.
The assurance prohibiting the granti ng of an exclusive right does not penalize a sponsor for continuing an existing single provider when bothof the following conditions exist:
(1).
It can be demonstrated that it would be unreasonably costly, burdensome, or impractical for more than one entity toprovide the service, and
(2).
menupop.gif

The sponsor would have to reduce the leased space that is currently being used for an aeronautical purpose by the existing provider in order to accommodate a second provider. In the case of denying additional providers, the sponsor must have adequate justification and documentation of the facts supporting its decision acceptable to the FAA.

Both conditions must be met. (See 49 U.S.C. § 47107(a)(4)(A and B).)

Note, just demonstrating that a second FBO would endanger the economic viability of the existing provider is not sufficient to deny a scond entrant. The sponsor also has to prove that they dont have enough physical space to accomodate a second aeronautical provider. Airports like to play games with how much land they lay out for aeronautical uses in their master plan, sometimes they need to get rapped over the knuckles using the threat of lawsuits.
 
Morgan3820 said:
Interesting but, does that apply to a self-serve fueling station?
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It applies to all services, including training, aircraft rental, maintenance, fueling, etc. Economically speaking, if there isn't enough business to support two FBO's, allowing someone else to operated a self-fuel station in competition with the only FBO would make it impossible for the FBO to survive.
 
How about Naples, FL? There are other FBOs on the field but only the county owned FBO is allowed to pump gas. You can go to one of the other FBOs and pay their ramp fee and get their service, but if'n you want gas you have to wait for the county truck to show up and buy government gas.

There's another on Long Island or Mass like that. Forget the field. There the Fire Department owns the fuel truck and they sell the gas for the city or county. Rectrix just charges the ramp and landing fee.
 
weilke said:
Local or state law does not pre-empt the FAA airport compliance manual (order 5190b). Of course, a locality can grant a franchise, but they may risk future airport improvement funds.
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But I didn't specify state or local government in my post. I said governmental entity, which includes the federal government, and thus FAA Order 5190.6B.

FAA Order 5190.6B specifies the terms, which sounds a lot like my verbiage "based upon fair bidding practices and the laws in place which allow the practice."

It's still a franchise according to the definition, granted by the FAA.
 
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Captain said:
How about Naples, FL? There are other FBOs on the field but only the county owned FBO is allowed to pump gas. You can go to one of the other FBOs and pay their ramp fee and get their service, but if'n you want gas you have to wait for the county truck to show up and buy government gas.
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That is what I posted further up. If the airport sponsor provides a service, they can assert exclusive rights for THAT service. In this case, it sounds like the county is exerting that privilege for fueling but doesn't care to get into the other aspects of the FBO business.
 
3393RP said:
But I didn't specify state or local government in my post. I said governmental entity, which includes the federal government, and thus FAA Order 5190.6B.

FAA Order 5190.6B specifies the terms, which sounds a lot like my verbiage "based upon fair bidding practices and the laws in place which allow the practice."

It's still a franchise according to the definition, granted by the FAA.
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I posted the exclusive rights rules from the compliance manual. There is nothing about fair bidding practices in there. IF the airport can prove both prongs, that the new FBO would put the old one out of busines AND that they would be forced to reduce the leased space to the existing FBO, they can deny a second facility.
 
Ron Levy said:
It applies to all services, including training, aircraft rental, maintenance, fueling, etc. Economically speaking, if there isn't enough business to support two FBO's, allowing someone else to operated a self-fuel station in competition with the only FBO would make it impossible for the FBO to survive.
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In krap there is a full service FBO and a self service pump. Owned by different people. The self serve offers nothin but fuel, no mx, barely a lobby, no wifi, no oil etc. the full serve has hangars, oil, open 24 hours, rates with local hotels and rental cars... Did I mention someone there 24 hours vs never ever there? Both are doing fine, they're for different people for sure. I personally like a hangar and fuel I know is filtered and tested daily, so that's where I go even if it costs a buck more a gallon.
 
weilke said:
I posted the exclusive rights rules from the compliance manual. There is nothing about fair bidding practices in there. IF the airport can prove both prongs, that the new FBO would put the old one out of busines AND that they would be forced to reduce the leased space to the existing FBO, they can deny a second facility.
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I'm not arguing about what the statute says. The OP asked why it's legal for the FBO at his airport to be granted a monopoly, and the simple and broad answer is "It's a franchise".

Next time I'll amend my definition to read "based upon fair bidding practices and/or the laws in place which allow the practice."

:mad2:
 
Did you ever stop to think the reason the fuel at your home field is $1.30 more than neighboring airports is because that's the only way the FBO can pay the higher rent and other fees your airport charges?
 
3393RP said:
I'm not arguing about what the statute says. The OP asked why it's legal for the FBO at his airport to be granted a monopoly, and the simple and broad answer is "It's a franchise".

Next time I'll amend my definition to read "based upon fair bidding practices and/or the laws in place which allow the practice."

:mad2:
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With the two exceptions I quoted, the laws dont allow that practice. Doesn't mean airports dont come up with all kinds of pseudo babble as to why they can do this. The reality is, the FBO business at those smaller places is not attractive enough for someone to push the issue.
 
Z06_Mir said:
Both are doing fine, they're for different people for sure. I personally like a hangar and fuel I know is filtered and tested daily, so that's where I go even if it costs a buck more a gallon.
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If I travel by myself, I go to the self service pump at the small airport and tie down myself. If I travel with family, I pay the buck fifty extra and get someone with a golf-cart to help me with the bags and the knowledge that the plane will be in a hangar if a storm blows through.
 
Clip4 said:
Did you ever stop to think the reason the fuel at your home field is $1.30 more than neighboring airports is because that's the only way the FBO can pay the higher rent and other fees your airport charges?
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Perhaps you are correct. I do not know anything his costs. But, He seems to make some profit. He owns for his personal use, no lease or rental, a Cessna Citation, A Bell 407 and a Aviate Husky. :)
 
The local government has decided that A), it is in the public's best interests to have an FBO at your airport, and B), there is not enough business to permit two FBOs to survive, so letting in a second FBO would result in NONE.

You are blaming the FBO for the crash, while claiming not to. However, apparently other pilots are able to fly in and out of that nearby airport, so obviously the problem was in the cockpit, not the fuel truck.
 
Morgan3820 said:
....I do not hold the FBO responsible but if the fuel was priced more reasonably perhaps a 10 yr. old daughter might still have her dad.
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Yeah, right. If the Dad had made a more reasonable decision to buy 5 gallons of "high priced fuel" a 10 year old girl might still have her dad.....
 
Morgan3820 said:
Perhaps you are correct. I do not know anything his costs. But, He seems to make some profit. He owns for his personal use, no lease or rental, a Cessna Citation, A Bell 407 and a Aviate Husky. :)
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I suspect NC has a public records law. Obtain a copy of the lease.
 
Morgan3820 said:
Perhaps you are correct. I do not know anything his costs. But, He seems to make some profit. He owns for his personal use, no lease or rental, a Cessna Citation, A Bell 407 and a Aviate Husky. :)
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Own-use is a different story. The compliance manual requires airport operators to permit own-use fuel farms, subject to the same safety rules as all other fuel farms on the field. However, that private fuel farm isn't allowed to sell fuel to others.
 
If you don't like the price ,go elsewhere. Have you looked into the FBOs cost,and lease agreement to the town. Also are there fees in the price of fuel that go to the town. You should have a talk with the fbo owner,and if your not happy ,say so and buy fuel elsewhere,.
 
Captain said:
I'd imagine SFO, BOS, DEN, LEX, MIA and the like have sufficient traffic to warrant a second FBO. Doesn't JFK run their own county FBO?

I always thought the big companies (Signature mostly) get airports to sign exclusivity deals and lure them with big kickbacks.
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You'd think. CHA is pretty sleepy as far as class C airports go, yet we have both Wilson Air and Tac Air on field. I wonder how they both survive?
 
Morgan3820 said:
As a side, locally we recently had a pilot crash on approach to a smaller uncontrolled field (fatal). Speculation is that he was stopping to pick up cheaper fuel. I do not hold the FBO responsible but if the fuel was priced more reasonably perhaps a 10 yr. old daughter might still have her dad.
Click to expand...

Utter Bull****...
 
Morgan3820 said:
Why is it legal for the FBO at my airport to be given a monopoly?
I fly out of a Class D county owned airport, not real big but we have three carriers serving the hubs and some direct flights. The airport authority has for some time given a monopoly to the FBO who also happens to be the national distributor for Sxxll Aviation fuels. In spite of his status, we have the highest fuel prices in area. They charge up to $1.30/gal more than other nearby airports. My lawyer friend(yes, I have friend that is a lawyer) says that this is legal but he seemed fuzzy on the explanation as to why this is. I thought that monopolies are supposed to be regulated (i.e. utilities, insurance companies)?

Could the county give a monopoly to a single owner of gas stations allowing them to charge the public whatever?
Click to expand...

Unless the FBO is run by the airport sponsor (which is condidered by the FAA to be considered a propriatary exclusive right), the federally obligated airport is required to abide by grant assurance 23, Exclusive Rights, codified in law by 49 USC §47107(a)(4). This grant assurance states that the airport must not permit any exclusive right to provide services at the airport...

...unless both of the following apply:

1) the right would be unreasonably costly, burdensome, or impractical for more than one fixed-base operator to provide the services; and
2) allowing more than one FBO to provide the services would require reducing the space leased under an existing agreement between the one fixed-base operator and the airport owner or operator.

Presumeably there is no more room on airport property to develop for an additional FBO, or to do so would be impractical.

Morgan3820 said:
As a side, locally we recently had a pilot crash on approach to a smaller uncontrolled field (fatal). Speculation is that he was stopping to pick up cheaper fuel. I do not hold the FBO responsible but if the fuel was priced more reasonably perhaps a 10 yr. old daughter might still have her dad.
Click to expand...

What an incredible non sequitor.
 
Ron Levy said:
According to the FAA Airport Compliance Manual (FAA Order 5190.6B ), it is legal if the airport operator provides economic justification to the FAA that there isn't sufficient business to keep two FBO's operating. Salisbury MD is one where that has been done. The airport operator must lease the concession via a competitive bidding system, but once bid, the FBO is protected from destructive competition until the next bid cycle.
Click to expand...

Can you provide a cite from the order stating as such? I am not familiar with such a provision.

If you're referring to 8.7(a) Conditions for Denial, note that two conditions apply, which correspond to Grant Assurance 23, which I mentioned previously.
 
bbchien said:
Yeah, right. If the Dad had made a more reasonable decision to buy 5 gallons of "high priced fuel" a 10 year old girl might still have her dad.....
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Was fuel exhaustion the reason for the crash or insufficient skills?
 
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