As a lifelong cereal fan, I was startled recently to see that the familiar Ralston “Checkerboard Square” was nowhere to be found on the current Chex editions – it had been replaced by the “Big G” of General Mills. And the Nabisco logo was gone from Shredded Wheat as well, replaced by the red “Post” oval.

Thus, the number of US cereal companies had been reduced by 25%, down from 8 to 6.

It’s not just cereal that is experiencing this kind of consolidation. Consider these aircraft names, today seen only in the occasional preowned turbine aircraft ad: Lockheed JetStar, North American (Rockwell Standard) Sabreliner, Jet Commander/Commodore Jet/Westwind, Astra, Hawker Siddeley, and Gates Learjet. Some failed to keep up with advances in cockpit or engine technology; some never found a stable market niche. Others, like Learjet, Astra, and Hawker, found homes as divisions or subsidiaries of larger aircraft manufacturers.

And now, Beechcraft becomes a Textron brand, part of a combined light aircraft division with Cessna. Kinda like what happened with Chex and Shredded Wheat, and for similar reasons – a significant change at the corporate level, either in finances, ownership, or strategic direction.

We’re seeing the same recurring trend in ground services, too. Over the years FBO names like Butler, Combs Gates, Van Dusen, Garrett Aviation, Midcoast, Piedmont Hawthorne, and Associated Air, as well as countless other well-respected independents, are gone: now part of larger chains.

In their place we have organizations like Signature, Landmark, Hawthorne, Million Air, and TAC Air: their acquisitions united under a single brand. Other consolidators, like Ross Aviation, with 19 locations, have left local established brands intact, preferring to leverage those familiar names for marketing purposes. While both models presumably offer better margins thanks to bulk buying power, the first offers customers unified “frequent buyers” programs as incentives to use at all locations.

But why the renewed focus on consolidation now, particularly in ground services? It’s due to a curious confluence of events, some industry driven, and others external:

  • An imminent industry uptick. Flight activity is up in virtually all regions, according to both ARGUS and WingX, driven by improving economic conditions and expanding world markets. JP Morgan’s February report shows a “tentatively firming market.
  • Reduced airline schedules, for the following reasons:
    • Commercial airline consolidation has resulted in fewer flights to many destinations, as the surviving entity eliminates route duplication.
    • Pilot shortages among regional “feeder” airlines are forcing additional schedule cutbacks. Last year’s mandated increase in minimum flight experience for commercial-airline pilots, from 250 hours to 1,500 hours, has dramatically increased the cost for new pilots to qualify for those jobs. They simply can’t afford to fly for near “fast food” worker pay, so are choosing other careers.
    • The pilot shortage is being aggravated by rising demand. The major carriers are trying to replace the retiring “boomer” captains who are reaching the mandatory retirement age of 65, by filching captains from the regional airlines.
  • Aging original FBO owners. Many independent FBOs are family-owned, and the prospective heirs aren’t interested in an aviation career. With a recovering economy, second- and some third-generation owners can now sell at a price that both funds their retirement and leaves the acquirer enough headroom to make a good return on the investment going forward.

So what is the impact of all this consolidation on business aviation? For aircraft owners, it means fewer aircraft makes from which to choose. That seems to be no great loss, as there was insufficient demand to justify continued production. The free market spoke, and consolidation resulted, along with the creation of another “Jurassic jet:” an aircraft to be flown until its next overhaul, and then scrapped. At that point it has virtually no residual or trade-in value.

On the ground services side, consolidation should mean that aircraft operators receive uniform levels of service at more FBO locations. There also will be greater opportunities for them to earn volume discounts based on system-wide combined purchases – particularly for those aircraft based at one of the chain’s locations. Whether the new standard of service matches the original FBO operators’ depends largely on whether the new owners’ customer service programs are comparable to the previous owners’. The challenge usually is for the corporation to maintain the “personal touch” of founding family ownership.

Business aviation is an industry based largely on relationships – among professional pilots and technicians, as well as the people who provide the services necessary for them to fly safely, reliably, and efficiently. After all, there are only 33,000 active business turbine aircraft in the world. And the primary challenge for a consolidator – whether OEM, maintenance provider, or FBO – is to preserve those relationships, by providing the same or improved products and services post-acquisition.

Call it their customers’ own “Chex” and balances.

No Plane No Gain

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