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Nick Daddis

Congressman asks FAA, Why Did You Issue That Ruling to Allow the Closing of the Santa Monica Airport . . . ?

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US Representative Ralph Abraham is asking the U.S. Department of Transportation to explain why the FAA entered into a settlement agreement with the city of Santa Monica, allowing the city to close the airport in 2028 and shorten the runway in the meantime.

The settlement agreement with the city of Santa Monica by the FAA allows the city to close the iconic airport in 2028 AND shorten the runway in the meantime.The runway shortening to 3,500 feet from the existing 4,973 feet, is estimated to effectively eliminate about 47 percent of jet traffic that currently flies into Santa Monica Airport (SMO). (We predict that that estimated 47% reduction in jet traffic would actually be greater in the interim period and that the city will succeed in an even greater reduction in jet traffic.)

To quote directly from Representative Ralph Abraham’s (R-Louisiana) letter to U.S. Department of Transportation (DOT) Secretary Elaine Chao and FAA Administrator Michael Huerta, “This agreement departs from the long-standing principle that the federal government will preserve airport infrastructure and hold airport sponsors accountable, especially when they have accepted federal money and committed to deed-based obligations to operate an airport in perpetuity.” The city had signed a transfer agreement after World War II in which it agreed to continue operating the airport in perpetuity.

“The agency’s congressionally authorized mission includes ensuring that airports remain safe and efficient while also protecting our entire aviation system,” Abraham wrote. “This agreement not only appears to take the opposite approach, but [also] to be inconsistent with agency and congressional requirements that changes to airport obligations be fully publicized and documented. I would appreciate a thorough explanation of the FAA’s apparent departure from this mission.”

SMO is a vital asset as a reliever for Los Angeles International Airport (LAX) and a critical part of local and state emergency plans said Representative Abraham. “Further, this deal comes at a time when the president has made clear that the renewal of and investment in infrastructure is a top priority for the administration. Could you provide any analysis that the FAA has utilized or prepared regarding the consequences of its actions, such as negative impact on other airports, area residents, businesses, general aviation, the flying public, and the national aviation system?”

Congressman asks FAA to explain itself over its SMO ruling allowing the city of Santa Monica to eventually close the airport!

As we reported last week in our commentary, “Colossal Consequences to FAA’s SHOCKING Santa Monica Ruling . . . In a stunning reversal the Federal Aviation Administration recently did a 180° reversal of its position to enforce the FAA’s Grant Assurances requiring the Santa Monica Airport (SMO) to remain open for some additional 11 years.”

The National Business Aviation Association (NBAA) and five other aviation interests have petitioned the U.S. appeals court to review the legality of the SMO-FAA agreement. In their petition they also requested a stay against the FAA and an injunction against the city to halt the city’s efforts to shorten the runway, until the appeals court can conduct its review, according to the NBAA.

As we all know it’s impossible to predict the possible success of the industry group petition. The US appeals court can issue the requested injunction to stop the city from shortening the runway OR it can let the city proceed with its aggressive (as approved by the FAA) plan by simply denying the requested injunction and hearing the merits of the petition at an unknown future court date, which by the way can be potentially after the city has proceeded and possibly completed its aggressive runway shortening plan.

The city of Santa Monica can “place its bets” and “roll the dice” and take aggressive action during this time while our general aviation industry and FBO’s hold their breath for a positive ruling. Without the temporary injunction, the city of Santa Monica politically strongly positions itself if it takes quick aggressive action and then as is often said, pleads for forgiveness. We can assume that if the city does take aggressive action prior to a US appeals court hearing it will have determined that its chances of the FAA ruling in its favor being overturned are slim.

And let’s of course remember the most important part, the US appeals court can simply decline to hear the case. At that point those knowledgeable in legal circles have said the industry and the Santa Monica Airport FBO tenants can hope for their day in Federal District Court. As we all know, our court system moves slowly and a speedy trial or hearing at the appeals court level will neither be quick or timely enough for general aviation and the FBO community both in Santa Monica and throughout our country.

As we said in our earlier commentary, the Federal Aviation Administration ruling to effectively allow the city to close down the airport despite the Grant Assurances in place could have devastating and repetitive future impact on the financial health and viability of the FBO industry and general aviation in general.

No one saw this coming.

Stay tuned, the next chapter in this nightmare for the FBO and general aviation industry hasn’t been written yet. We will keep you posted.

March 16, 2017

FBO Advisors, LLC
Serving the FBO industry for more than 40 years

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Signature Flight Support “OUT” at John Wayne Orange County Airport (SNA)

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What some have described as a “soap opera” unfolding, the Orange County Commissioners have voted to award the RFP for FBO services to ACI Jet Center, a California-based FBO operator instead of the incumbent Signature Flight Support. (The other John Wayne Orange County Airport incumbent FBO, Atlantic Aviation, was awarded a renewal of its concession in the RFP process.)

On a 4-1 board vote, ACI Jet — which originally was awarded the contract in January before the vote was contested and then rescinded — won it anew to replace incumbent Signature Flight Support, the world’s largest fixed- base operator. ACI Jet’s interim lease, good for about two years, is effective once the operator provides the required insurance and security deposit. (ACI Jet is a smaller, San Luis Obispo-based FBO operator.)

Reviewing reports of the hearings and process by the Orange County Commissioners in industry publications and the local Orange County Register has made for an entertaining insight (as long as you’re not Signature Flight Support) into the politics of airport RFPs for FBO’s.

The brief history in case you lack that background is the Orange County Commissioners decided to entertain an RFP process to qualify either the renewal of the two FBO incumbents, Signature Flight Support and Atlantic Aviation, or possibly award one or both of the two FBO concessions to new operators. It was reported that the County Commissioners had received complaints over possible “price gouging” by these two FBO chain operators, and in particular a complaint by a long term flight school tenant at the airport.

Not surprisingly, what followed was a two-year “exercise” by the Airport Administration Staff in researching, writing, and issuing finally the RFP submittal.

Let the “games begin” or so they say, and with that Signature Flight Support, Atlantic Aviation, Ross Aviation, and a host of others both local and national entered the foray. Four entrants made it to the final round and

were scored by the Airport Administration Staff who made their recommendation for Signature Flight Support and Atlantic Aviation to be (renewed), awarded the two FBO concessions at the airport.

But not so fast. The recommendations to the County Commissioners by the Airport Staff were just that, recommendations subject to consideration by the County Commissioners of Orange County. And apparently the Commissioners were ready for battle.

Several public hearings ensued and some who attended report that for Signature Flight Support it wasn’t “pretty”. The incumbents were accused of highly inflated retail fuel pricing and that pricing by them was not competitive compared to other nearby airports, by approximately a dollar higher per gallon the reports suggested. Signature Flight Support countered by saying that very little fuel they actually dispensed at the airport was sold at the posted rate, (what some refer to as the “rack” or posted retail price). It was also reported that during this process Atlantic Aviation made a significant reduction in their posted fuel price. The “Orange County Register” reported, “When supervisors in July announced their intent to search for alternate contractors, Atlantic rapidly dropped its fuel price by 31 percent, according to, which tracks airport information. After waiting at least three months, Signature lowered its fuel price by 16 percent around the deadline for contract applications.”

The County Commissioners on February 28, 2017 also re-awarded Atlantic’s fixed-base operator contract. Both roughly two-year interim leases for Atlantic Aviation and ACI Jet will allow for services to be provided while the airport conducts a study for future development of its general aviation facilities, according to county documents.

Signature Flight Support’s response, according to published reports in the Orange County Register was, “Signature, which realized in January it could lose the contract, previously alleged the county had violated federal and local procurement laws and sent complaints to the Federal Aviation Administration and the Department of Transportation”. As quoted in the “Orange County Register” on February 28, 2017, Geoff Heck, Signature’s senior vice president of sales and marketing, said, “The board’s decision, Tuesday, to substitute “an under-qualified bidder” for Signature is in

violation of the county’s agreements with Federal Aviation Administration rules on safety and efficient operations at the airport. Today’s action was not transparent, fair, or objective, and will cause unnecessary disruption at the airport,” Heck added, “Additionally, the disparaging, unfounded and meritless allegations that have been made against Signature to justify this decision are patently false.” Heck said Signature “will vigorously pursue all avenues of redress.”

So what’s next?

ACI Jet is busily preparing to take over for Signature Flight Support at SNA. Atlantic Aviation is continuing their existing operation though probably a little more “price-sensitive”. And Signature Flight Support, well they’ve turned it over to their attorneys and the filing of a complaint with the FAA.

We’ll just have to see where that goes. Our prediction is the FAA will let the local decision stand and not overrule the County Commissioners, and Signature reduces its location count by 1 . . .


FBO Advisors, LLC
Serving the FBO industry for more than 40 years

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Colossal Consequences to FAA’s SHOCKING Santa Monica Ruling . . .

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In a stunning reversal the Federal Aviation Administration recently did a 180° reversal of its position to enforce the FAA’s Grant Assurances requiring the Santa Monica Airport (SMO) to remain open for some additional 11 years.

As reported in the AOPA newsletter of February 2, 2017, “A deal between the FAA and the city of Santa Monica, California, became official Feb. 1 when the Honorable John F. Walter of the U.S. District Court for the Central District of California signed a detailed stipulation and order/consent decree that requires the city to keep Santa Monica Municipal Airport open and operating with reasonable services until Dec. 31, 2028, upon which time it has the option to close the facility.”

To say that the industry was shocked would be an understatement. As far as we can determine this has either never occurred before, or if a similar FAA ruling was issued long ago no one can recall such a ruling truly against the FBO industry.

So what can likely be the effect of this shocking reversal and ruling by the FAA? Well, if you’re an FBO owner or FBO chain like Signature Flight Support, Atlantic Aviation, Sheltair, and the others you might now wonder if your lease term with the airport, say 20, 30, or 40 years or more could be trumped by the airport deciding to bend to the occasional vocal minority of its constituents complaining about airport noise, congestion, or danger from airport accidents and move ahead with closing the airport much as the city of Santa Monica done.

Don’t think this is a far-fetched possibility. FBO Advisors LLC was involved in a similar situation approximately 15 years ago in Stuart Florida where the newly elected county commissioners made good on their campaign promises to vocal constituents to close the “noisy” Stewart Florida airport. FBO Advisors was retained to assist the

airports FBO operators in making their case to the county commissioners against closure. The process was long, expensive, and rife with politics as you can imagine. No matter that the Stuart Florida airport contributed to the economic base of this somewhat sleepy County, the newly elected county commissioners, one in particular who rode to office on the campaign promise to close the airport, were unsympathetic to put it gently to the benefits that an airport and FBO’s serve to the local community.

Back to the potential impact on existing FBO owners such as Signature Flight Support, Atlanta Aviation, etc. Whereas all of them made their decision to purchase a particular FBO at a particular airport based upon the business the FBO (via the airport) generated and the length of the concession granted in terms of lease term, say 30 years or 40 years, these FBO owners conducted extensive pro forma’s and amortization calculations to justify their initial investment.

So it’s not difficult to understand the potential devastating effect this shocking FAA ruling can have on the investment made by these FBO owners and FBO chains. If your pro forma was based upon a 30 year or 40 year amortization schedule and analysis and now you’re faced with a situation like in Santa Monica that Atlantic Aviation is facing, your recapture of your investment originally based upon say 30 years for example has now been shortened by 50% to only 15 years instead of the original 30 years you modeled. The word shocking is appropriate.

Do the FBO’s and FBO chains that might face a surprise accelerated shutdown of the airport or early termination of their lease have any options or redress? That’s yet to be determined and certainly the attorneys on both sides of the issue are going to have a field day, and an expensive one at that.

While we confess not to be attorneys, it strikes FBO Advisors that the early termination of a lease due to the city or county’s desire to close an airport is effectively a “condemnation taking” by the government

and if our conclusion is correct at the very least the FBO’s affected (Atlantic Aviation in Santa Monica for example) perhaps have a condemnation claim, a government “taking” as is described in some leases, and hopefully they can receive significant monetary damages from a court ruling in their favor.

At least that’s better than nothing.

Because of this shocking FAA ruling, fasten your seatbelts if you’re an FBO owner because you now have something new to worry about!

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