“ What do we do at present – this Covid 19 thing is throwing my FBO for a loop “ . . . .
Dear Clients:
Many of you have reached out this past week asking for our counsel and recommendation about “what’s next” for the FBO industry in light of the expected Covid 19 infections and hospitalizations, and the resultant restrictions and or lockdowns being discussed and instituted.
What will this potentially do to your FBO’s General Aviation activity and near-term FBO sale interest and transactions?
Your anxiety is certainly understandable!
Understanding, planning, and projecting what’s likely next is certainly challenging to say the least. But we can offer our current best thoughts, observations, and recommendations for you.
1. General Aviation Activity – Compared to many other industries and business segments, including commercial aviation and other aviation subsets, general aviation and FBO’s have fared very well activity wise for the most part in the most recent short term. Up until approximately a week before the national presidential election, general aviation activity was strong, and the FBO income results reported by our clients were steady and improving.
The closer we reached the national election, and now the period post election has seen a softening of activity in most markets, and a corresponding drop off in the ancillary maintenance and avionics sub business markets.
2. Potential Lockdowns – The current national conversation on a state-by-state and local basis appears to be a near universal increasing of restrictions and various levels of shutdowns.
Owners and users of general aviation aircraft have the means and freedom to continue one of the safest modes of air travel during these challenging times. The “$64,000 Question”, for those that remember this analogy, is will the United States be further restricted and/or shut down for a period of time, and whether or not FBO customers will have the desire, access, and ability to travel using general aviation and your FBO?
Further restrictions will mean other businesses to a certain extent will be affected as well, and vacation or social destinations will be similarly restricted it has been suggested.
Other than general aviation users traveling to visit family or relocate to perceived “safer” geography, many are predicting that general aviation business travel will slow through this immediate period until the beginning of the New Year, January 2021, until Inauguration January 20, 2021.
To the specific question raised by our current clients and potential future clients, “What will be the impact on FBO sales; will transactions be still sought by buyers? Will activity that we witnessed in earlier 2020 continue? . . . ” Our consensus is that over the next few months due to the holidays, the national uncertainty and the ramp up to the Presidential Inauguration, general aviation activity will be dampened to some extent. However we feel that buyer activity for FBO’s will resume post Inauguration, shortly thereafter.
Even today we continue to field numerous inquiries for FBO acquisitions at consistent levels from qualified buyers.
Our recommendation: What we hope to be only a “temporary pause”, this is perhaps the ideal time to position your FBO for an ultimate 2021 or later sale.
Suffice it to say there will be challenges in FBO valuations with CY 2020 income being negatively affected by Covid 19, versus normal CY 2019 financial performance.
FBO Advisors has several strategies for mitigating lower CY 2020 income impacts on sale values . . . and we are available to both current and prospective clients to discuss these strategies.
Please feel free to contact us with any questions. We wish you and yours the utmost in health and safety during these unprecedented times.
The bottom line – do not despair!
FBO Advisors, LLC
Serving the FBO industry for more than 45 years!
Please feel free to direct comments to us on our views and opinions cited . . .
FBO Advisors © 2020