FBO operating costs

Ryan

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I am currently finishing my mba and for one of our projects we are required to write a marketing plan for an imaginary business. Ive chosen to write one for an FBO. In the plan we are required to include all costs associated with the business.

I was wondering if anyone has experience in this area and could give some ballpark figures for the following:

monthly rent for building
hangar rentals
average pay given to CFIs
average pay given to mechanics
average monthly cost to operate a C-172
any other costs I might have forgotten

Thanks in advance for any info.
 

LAXSaabdude

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Ryan said:
monthly rent for building
hangar rentals
Really depends on the area, this one will vary widely.
average pay given to CFIs
This is typically a variable cost/revenue. CFIs make nothing when they are sitting in the lobby, but when I was instructing the FBO charged about $25/hr., and CFIs were paid $15.
average pay given to mechanics
Don't know, but it seemed like they were always busy, unlike the instructors.
average monthly cost to operate a C-172
I think FBOs typically lease back their aircraft, so there is no real "cost" to these aircraft. In fact, the FBO makes money on both the rental and the maintenance.
any other costs I might have forgotten
I'm sure insurance will be a fairly large part of the costs.

LAXSaabdude.
 

doug_or

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Building and Hangar costs vary wildly, try asking a a specific airport.

CFI's usualy make $10-20 an hour

Not sure about MX, they might chime in or you could look up pay rates in job ads

Monthly cost of operation is almost all based on how much it is flown (and local 100LL gas prices). You local library/megabookstore should have a book about aircraft ownership.

Other costs- the airport I last operated at took 3%off the top of all transactions in addition to rent. Beyond that, insurance (huge), advertising, scheduling. Will you be selling fuel? Will you offer catering?
 

Publishers

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Building and hanger are so dependant on where you are, not only what part of the country but whose airport system are you in. Some airports are all rent based and others rely on a commisson percentage, fuel flowage fees, etc.

These same factors impact the rest of the costs as well. Maintenance personnel with a major jet shop are a good deal different than piston only mechanics on a small airport. $25 to $65 per hour.

The biggest single cost you have not mentioned is insurance. That is a huge factor.

In addition, even leasebacks cost money. IT would not be uncommon for the company to pick up the maintenance etc. and have to guarantee hours.
 

cynic

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Don't forget to factor in campaign contributions to the city commissioners so you can have exclusive fuel rights!

You don't just go to an airport and open an FBO. Doesn't work that way. Do a plan for a Subway, much easier.
 

BD King

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Insurance. All. Including liability, health, workman's comp insurance, aircraft,property, etc.

State unemployment
FICA contributions
FUTA contibutions
Accounting
Legal
Utilities
Office equipment
Lobby furniture
Courtesy car
Fuel trucks (tanks?)
Occupancy permits
and on and on and on

www.bdkingpress.com
 

Hung Start

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Mr Cynic is a cynic, you can NEVER have exclusive rights to anything, if it is a FAA funded airport. Grant rights and stuff.
Insurance is one item you did forget, and it a huge and burdensome requirement. There are a number of insurance issues. 1) product liablity and completion, 2) workers comp, 3)building (even if you don't own it, the county or whatever will make you insure their property) 4)health insurance for employees, 5)hangarkeepers.

Product liability is if your mechanic messes up, or you mess up putting fuel into somebodies aircraft. It is based on how much business and fuel you pump. The more you do, the more it cost. I pumped 200K gallons and did $150K retail work in my shop, and it was about $6,000 per year. I had no claims.
Wokers comp varies by state, but in my state it was awful. I had scheduled charter going on, regular charter, and 4 mechanics. The highest was the pilots, even thouh I argued we have no long term care. Either we come home at night or send a mop. But it still ran over $15,000 per year. I had 1 claim in 12 years of business, a mechanic got a hernia.
Health insurance ran $4200 month, 17 enrolled employees, that was my share.
Hangarkeepers was if you damaged a plane while towing, etc, on your ramp. It ran $8,000 per year. You didn't dare call in a claim unless you totaled something, because the insurer would always say you would get cancelled if it ran too high.
I had 14 aircraft, runing from a King Air to 402's to 150's. Insurance cost was $130,000 per year. These figures are about 3 years old, so you can guess they went up a bit. To give you an idea, did about 2.5 million in total sales, take out payroll, gas, heat, eectricity, water, taxes, and maintenance, and of course insurance, ,, well it was a fun business anyway.
And, I did have to pay for the planes, no leasebacks involved. Morgage on them ran $24,000 per month. But I did sell them all for a profit!!
Ah, yes,,, capitol gains tax!! :)
 

BeeFCaKe

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I don't know if an MBA should gather info on a forum. Why don't you call Cessna and ask them for some realy numbers (ie amortization and 1st five year maint expenses). Go and visit an FBO and tell them your story to see what they will share with you...
 

NuGuy

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I have to agree to the above...

A better way to go about it is to rent space on the airport and then outsource EVERYTHING.

Maintenence? Rent space to an outside contractor/A&P. You get to minimize liability concerns.

Flight School? Same thing...rent space for someone else to take the risk.

Have the leases set up for a fixed rent plus a slice of the revenue.

The only thing the FBO should be involved in is selling fuel and space (tiedowns/hangar space). Even then, reduce your headcount by getting a self-serve pump for Avgas, as most bugsmashers don't mind pumping their own gas to save a few $$$.

Put the money you save towards the nice amenities...crew lounge, flight planning area and a crew car to attract the corporate crowd, as that's where the money is. Don't forget to hire some buxom gals for the front desk. Corporate guys like to look at them, because it makes them forget the hags back home.

Nu
 
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