The Aviation Business Strategies Group's (ABSG) Annual FBO Fuel Sales Survey for 2023 indicates a softening in fuel sales compared to 2022, with several factors contributing to this trend. The survey revealed that 41 percent of FBOs reported a decrease in fuel sales in 2023, compared to 29 percent in 2022. Additionally, factors such as increased inflationary pressures, elevated Jet A fuel prices, higher interest rates impacting corporate borrowing, and a downturn in Part 135 flights were cited as contributing to the decline in fuel sales.
“The underlying contributing factors reported in the survey included increased inflationary pressures, elevated cost of Jet A and higher interest rates which hindered corporate borrowing, all of which impacted flight department budgets,” said Aviation Business Strategies Group Principal Ron Jackson in a press release. “Further acerbating the situation was a continuing downturn in Part 135 flights which appears to be an aftershock effect from high charter demand during the peak of the pandemic.”
Concerns within the FBO industry include the high cost of constructing new hangars, effects of inflation and higher operating costs, the transition from 100 LL to 100UL fuel, costs of GSE repair and replacement, and difficulties in finding and retaining qualified employees.
Looking ahead to 2024, ABSG forecasts flat fuel sales, with 41 percent of respondents expecting sales to remain the same as in 2023. Additionally, the survey indicates that 47 percent of respondents do not plan to add any hangar space, possibly due to the high cost of construction. Economic indicators suggest a slow decline in inflation, no expected cuts in interest rates until consistent positive economic data is observed, and oil prices remaining between $70 and $80 per barrel.
Business aircraft flight activity is expected to continue declining in 2024, with Part 91 and Part 135 operations both experiencing reductions. The prospect of a recession and higher unemployment rates poses challenges for the FBO industry, as businesses may need to trim labor costs.
ABSG advises FBOs to operate conservatively, prioritize cash flow, and avoid deep fuel discounting to maintain steady margins. Overall, the industry is expected to face challenges in the coming year, with careful financial management and adaptation to economic conditions being crucial for success.
