Bloomberg News Cites APP Industry Perspective
For a June 16th report on the FBO industry, Bloomberg News turned to APP Properties CEO Thom Harrow for perspective:
Private Jet Rebound Lifts Hangars, Fuel Providers
By Joe Mysak
(Bloomberg) — The pandemic has beneficiaries: Zoom, supermarkets, liquor stores, houses in the suburbs, country homes even further out, car sales, private jets, FBOs. FBOs? If you’re not in the private-jet set you probably never heard of them. It stands for Fixed Base Operator. They handle fuel and hangar space and sometimes maintenance for your jet at general aviation airports. The V-shaped recovery going on in the private-jet industry means business is back at the FBOs, including those who have tapped the municipal market for financing, like Million Air in Houston, Texas, and APP Properties in New Canaan, Connecticut.
“In April, our network was operating at 10% levels, and right now, we’re back to 75% to 80% of normal — and there’s still very little business from sports teams, law firms, entertainment,” Roger Woolsey, chief executive officer of Million Air, which also operates charter flights, told me.
“Covid-19 took a big hit out of the fuel-selling side of our business,” said Thom Harrow, CEO of APP, in an email. “At some points in April our fuel sales were down as much as 70%. In general, we averaged less than 50% of normal sales over the period late March through late May.” And now things are almost back to normal, he said. It’s not hard to see why. Private jet flights offer a cleaner, safer, and relatively hassle-free experience to the segment of the population that can afford it. Woolsey is seeing a lot of “first-time users” of his charters.
Municipal Markets
FBOs are relatively new borrowers in the municipal market, and novelty translates to high yields. When Million Air borrowed $153 million in 2017, it paid between 6.375% and 10%. In 2018, APP’s Manassas, Virginia, FBO paid 6.625%. Back in the dark days of March, not surprisingly, you could have picked some of these up at below-issue price. The more successful FBOs have more than one location. APP has FBOs in Manassas, Virginia, Fort Pierce, Florida, and Hayward, California, and hangars but no fuel sales at Centennial Airport in Colorado. Million Air has 30 locations in the U.S., Canada, Europe and elsewhere, and is setting up another in El Paso, Texas. The company owns some, but operates most as a franchise.
What’s next? Now that the industry seems to have proven itself by coming through the pandemic, I took to heart a statement by the APP in 2018 that noted significant consolidation in the industry in the past two years and that a number of financial institutions had acquired FBOs — which means that money is looking at it and wondering, What do we have here? Remember “flygskam”? It’s a Swedish word that means “flight-shaming,” in particular, private-jet flight-shaming, and it was popularized recently as climate activist Greta Thunberg targeted global warming. Yeah. Remember that? That was in the days before Covid-19. It looks like when a pandemic comes calling, flygskam is a luxury you can’t afford.
(Joe Mysak is a municipal market columnist who writes for Bloomberg. His opinions do not necessarily reflect those of Bloomberg LP and its owner, and his observations are not intended as investment advice.)