Greenville-Spartanburg Int’l Switches to In-House Fixed Base Operator

Greenville-Spartanburg International Airport (GSP)
Ken Wysocky
Published in: 

Early last year, Greenville-Spartanburg International Airport (GSP) opened Cerulean Aviation and joined the growing ranks of commercial airports that run their own fixed base operators (FBOs). The South Carolina airport took the strategy one step further by also opting to provide cargo handling and ground support services for commercial charter flights. 

Airport officials explain that the move is designed to enhance customer service, increase revenue and make GSP more competitive with neighboring airports that largely cater to corporate and general aviation aircraft. 

Physical infrastructure to support the new businesses cost approximately $20 million. Investments include two new hangars, ground support equipment, cargo handling equipment, fuel farm facilities and fuel trucks. Those expenses do not include the cost of hiring roughly 55 new employees or upcoming infrastructure improvements that might be covered in part by FAA grants. 


Project: In-House Fixed Base Operator

Related In-House Ventures: Cargo Handling; Ground Support Services

Location: Greenville-Spartanburg (SC) Int’l Airport

Business: Cerulean Aviation 

Start Date: Jan. 1, 2017

Estimated Start-Up Costs: $20 million

New Employees Hired: About 55

Primary Investments: 2 new hangars; equipment for general aviation services & cargo handling; new fueling facilities & fueling trucks

Funding: Capital improvement funds; general airport revenue

Consultant: Trillion Aviation

Fuel Supplier: World Fuel Services 

Equipment Vendors: AERO Specialties; Clyde; Doosan Industrial Vehicle America Corp.; Eagle Tugs; Harlan Global Mfg.; JBT AeroTech; SkyMark Refuelers; Hyster Co.; Lektro; Multi Service Technology Solutions; NMC-Wollard; Power King; Starcraft Bus; TLD; Toyota Material Handling USA

Key Objectives: Enhance customer service; increase revenue; improve competitive position for attracting general aviation business

Results: Revenue from fuel sales increased 66%
to $1 million from 2016 to 2017

David Edwards, president and chief executive officer at GSP, reports that on balance, the investments have been worthwhile, because they are spurring business and revenue growth.

Cerulean—named after the distinctive color of the Blue Ridge Mountains that are visible from the airport—opened for business in January 2017. To manage the different service sectors, the airport split Cerulean into two divisions: general aviation and commercial aviation. 

GSP’s decision to bring FBO services in-house rather than contract with an outside firm is part of a larger U.S. trend. In 2007, only 1,060 of 3,500 public-use airports with paved runways longer than 3,000 feet owned and operated their own FBOs. By 2017, that number rose to 1,300—a nearly 23% increase, reports Jeff Kohlman, managing principal of the Aviation Management Consulting Group, which serves general aviation airports and businesses.

Kohlman clarifies the statistics by noting that the company defines an FBO as any entity that sells fuel at an airport, and a fairly high percentage of the 1,300 in-house FBOs only provide self-service fueling. Few are full-service operations like GSP’s Cerulean, he notes. 

A 2017 report from the National Air Transportation Association (NATA) largely attributes the trend toward airport-owned FBOs to the declining value proposition for private investment at airports that are especially dependent on piston-powered operations. More specifically, as the number of private pilots has decreased—licenses have declined 32% since 2000—avgas sales have fallen 41%. Because fuel revenue is the primary source of income for FBOs, declining sales hamper their ability to make investments in infrastructure improvements, the report explains.

Not surprisingly, the report found that airport-owned FBOs are particularly prevalent at airfields with runways less than 5,000 feet long. In contrast, GSP has an 11,001-foot-long runway and handles about 45,000 annual operations, including commercial flights for American Airlines, Delta Air Lines, Southwest Airlines, United Airlines and Allegiant Air.

Opportunity Knocks

“We saw a great opportunity to move forward…and offer our customers a higher level of customer service and more competitive pricing, as well as make investments in new hangar facilities that would raise our FBO service to another level,” Edwards says of the move.

Nathan Garner, director of aviation services, explains that GSP wanted to “break out of the mold” for typical municipal FBOs. “It took commitment from the top and a clear understanding of our end goal, then hiring accordingly,” Garner remarks. “That’s why we structured Cerulean with a manager for commercial aviation services and a manager for general aviation services. There’s a difference in their value propositions; so in order to provide good customer service, we concluded it was best to hire a manager for each of these industry segments.”

So far, the results have been positive. Importantly, the total volume of fuel sold (to both commercial and general aviation aircraft) increased about 32% during the first year of operation, to 14.5 million gallons. “This wasn’t a fluke,” Edwards asserts. “Some of that growth came from commercial fueling, but there’s no question that we had customers come back to us because our prices were more competitive.”

Moreover, revenue from fuel sales increased to $1 million in 2017—a 66% increase over the previous year, when a private FBO handled fuel services. “We weren’t going to do this if we weren’t going to make more money,” Edwards says. “Generally speaking, we run Cerulean Aviation very much like a private-sector business. At the end of the day, we’re always looking to get a return on our investment.”

Planning Stages

The move toward in-house operations started in 2014, when GSP officials began considering whether or not to renew the contract of the airport’s resident FBO. The company’s 10-year contract was set to expire at the end of 2016, and the FBO had been operating on the field since 1962. 

Eventually, three options were considered: put out bids for a new operator; run the FBO under a management agreement with a third-party company (similar to the way concessionaires manage airport parking lots); or exercise GSP’s “proprietary rights under FAA regulations” to run its own FBO.

“After a fair amount of deliberation amongst my team and the board (the six-member Greenville-Spartanburg Airport Commission), we brought in a third-party consultant, Trillion Aviation, to see if our conclusions held water,” Edwards recalls. When Trilllion determined that the move made sense, management began assembling a team, buying equipment and planning for facility improvements.

In spring 2017, GSP hired Steve Bowlin to manage Cerulean’s general aviation services and Kelly Wiggs to manage commercial operations. Edwards says their experience (nearly 40 years combined) was critical to the initiative’s success.

Today, the general aviation division employs 21 people, including 15 service technicians and four customer service representatives. About 80% of the employees who worked for the former third-party FBO now work for Cerulean. That was a big help, given the region’s tight labor market, says Bowlin. 

“As with any business where you start from scratch, there was a long laundry list of things to do: getting equipment, setting up accounts and so forth,” he explains. “But the single biggest challenge was assembling a staff and being ready to go on day one.”

The airport also had to select a point-of-sale system for selling fuel and other products on a retail basis. GSP selected an airport business management system called Total Aviation Software, from Multi Service Technology Solutions.

In addition, GSP is investing about $15 million to build two new hangars: a 33,000-square-foot bulk hanger and a 20,000-square-foot corporate hangar for Michelin. 

Equipment Investments

The airport used capital improvement funds to purchase about $400,000 in equipment for providing general aviation services. The new fleet includes three tugs, two made by Eagle Tugs and one by Lektro; an electric tow tractor from Lektro; a lavatory cart from AERO Specialties; two portable diesel ground-power units built by AERO Specialties; four ground power units for indoor maintenance made by Power King; a complement of tow bars and tow-bar heads for various corporate aircraft, manufactured by AERO Specialties; and a 14-passenger vehicle from Starcraft Bus to transport passengers from remote ramps to the Cerulean executive terminal.

Management opted to buy new equipment rather than used or refurbished to reduce the potential for long-term repair costs. “It’s just like buying a new car—you know what you’re getting, without any shadows hiding behind the doors,” Bowlin says. “If you start with junk and it constantly breaks down, you’re out of business. Plus, we wanted to promote Cerulean as a premium-service FBO, so we need to look and act the part.”

The airport also upgraded its fuel facilities at a cost of about $2.5 million. In-ground tanks were replaced with aboveground tanks that provide 120,000 gallons of capacity. GSP added another 30,000-gallon tank this summer, Edwards reports.

A new vendor, World Fuel Services, now supplies GSP’s aircraft fuel. The airport also leases seven fueling trucks, made by SkyMark Refuelers, from World Fuel at a cost of about $158,000 per year. The trucks’ tank capacities range from 1,000 to 10,000 gallons, says Garner. 

Heavy Lifting

The decision to offer cargo handling services for charter flights also required capital investments in equipment—roughly $2 million in all. The inventory of new machines includes two Hyster Company 5,000-pound forklifts; two Hyster 10,000-pound forklifts and two Toyota 5,000-pound units; a 20,000-pound-capacity forklift for handling over-sized freight, made by Doosan Industrial Vehicle America Corp.; two JBT AeroTech high-loaders for handling palletized freight on 747; eight tow tractors made by TLD, Harlan Global Manufacturing and NMC-Wollard; two Stinar stair trucks for 747s and other aircraft; two belt loaders from NMC-Wollard; and more than 90 cargo dollies made by Clyde.

In its first year of operation, Cerulean Commercial handled 1.9 million pounds of imported and 1.5 million pounds of exported cargo. The bulk of that business was driven by BMW, which operates a large plant in Spartanburg, SC.

The airport handled another 20.1 million pounds of imported and 9.9 million pounds of exported cargo for Senator International, a freight forwarder hired by BMW to handle 747 aircraft cargo.

“In essence, we load/unload the planes, provide security, accept the freight, screen the freight and enforce all applicable regulations,” Wiggs says. “You could say that Senator and Cerulean are partners working towards a common goal: to provide upstate South Carolina with an air cargo shipping solution to Europe and Mexico.”

The biggest cargo planes that Cerulean regularly handles are 747s as well as occasional Antonov An-124s. “For emergency deliveries, we see a lot of older DC-9s, 727s and 737s (converted to cargo planes),” he explains. “You name it, we’ve seen it—as small as a Cessna 224 delivering a box the size of your hand, perhaps containing a crucial repair part, and as large as a (six-engine) Antonov An-225 that might be delivering GE gas turbines to a customer.”

Currently, the airport has only one parking space large enough to handle a 747 cargo jet, but construction is already underway on a dedicated commercial cargo ramp. The $14 million project, which is eligible for FAA funding, will add capacity for three 747s by early 2019. Eventually, space for three more will be added for a total of six new spots, notes Wiggs. 

The additional capacity for 747s is significant because scheduled cargo service generates additional landing fees. “As a result, our landing fees have decreased as our total annual tonnage has increased…because we’re able to spread that cost of maintaining the airfield out across more landings,” Garner says.

In addition, a 110,0000-square-foot freight storage warehouse is in the design phase. The projected cost for that project is $13 million.

Hiring & Training 

Finding employees for cargo handling wasn’t easy. “We’re the only people in our region doing palletized cargo,” says Wiggs. “FedEx does it in a limited capacity, as well as UPS, but they’re not building up a lot of pallets with nets and such.”

As a result, GSP had to develop its own training program for cargo equipment operators. Teaching employees to drive a tug and dolly proved to be the best starting point, because it’s one of the easiest machines to master. And fluency there indicates an employee likely has the aptitude to handle more complex machines. Once employees master tug and dolly driving, they progress to using high-loaders and forklifts.

“That can take about a month, mentored by an experienced operator,” Wiggs says. “Mating equipment up to a plane isn’t easy—there are a lot of tricks of the trade for operating that kind of machinery. We also try to cross-train so we can handle the same operations across all our shifts. Full cross-training probably takes six to eight months.”

Spreading the Word 

GSP announced the news about Cerulean at various National Business Aviation Association events—regional meetings, the annual national convention and the scheduler/dispatcher conference. It also placed advertising on websites used by pilots for flight planning. 

Competitive fuel prices play a role in Cerulean’s marketing efforts, though Bowlin says he’s not interested in engaging in price wars with three neighboring general aviation airports. “We’re not going on a race to the bottom…we still want to be a value play,” he explains. “Our fuel prices aren’t the cheapest; so we really need to deliver on service.

“I think that at the end of the day, success comes down to providing great service,” he continues. “If you’re not willing to commit to great service, you’re not going to be successful. And that means understanding exactly what higher-level of service is. It’s not just being a gas station. It means going well beyond what an airline would do for its customers.”

Cerulean consequently focuses on dispatching friendly, welcoming line workers who fully address passengers’ needs and get them where they need to go. Complimentary breakfast and lunch snacks, soft drinks, water and gourmet coffee are also standard. “There are no vending machines,” Bowlin points out. “Everything is laid out for customers. We want to present a competent staff that delivers the kind of service you’d except at a Ritz-Carlton hotel.

“We want them to come away saying, ‘Wow, you don’t see that kind of service everywhere else,’” he adds. “I think that for the most part, we’re delivering that. In some ways, with just a year and a half into it, we’re still in training mode. But our goal is to keep getting better every day.”

Keys to Success

Garner encourages other airport officials who are interested in launching an in-house FBO to begin the process by identifying their motivation and setting specific goals that they want to accomplish. Then, he recommends hiring leadership with a track record of delivering on those kinds of goals. 

“For example, when we decided to take over the FBO operations, we posted a job description and received a lot of applications, many of them from municipal-run FBOs,” he explains. “But because our goals were to improve customers’ experience, provide competitive market rates for fuel and generate revenue for the airport district, we wanted someone with experience in the private FBO industry, not municipal airports. We wanted someone who could operate and manage the FBO as if it was a business because at the end of the day, that’s where we want to be.”

GSP also looked for leaders who could adapt quickly to unexpected circumstances. “You can’t fully anticipate everything you might have to deal with, no matter how much you prepare,” says Edwards. “You just have to be flexible. I’ve got to imagine it’s like any entrepreneur starting a business for the first time. There are things you miss, no matter how many people you talk to or how much due diligence and research you do. The key is just don’t miss the big items.”

Edwards reports that GSP’s move to take its FBO in-house has exceeded management’s expectations so far—and they were high, both in terms of financial return and customer reception, he notes. Initially, there was some skepticism expressed by the outgoing FBO and certain general aviation/corporate customers. “There definitely were naysayers,” he recalls. “But now, they’re our biggest cheerleaders.” 

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