Mergers and acquisitions in the management, charter and FBO sector will continue, according to Mark Johnstone, managing director EMEA for BBA Signature Flight Support; attorney Laura Pierallini of Studio Pierallini; Patrick Hansen, CEO Luxaviation group; and Joe McDermott, FBO consultant, all of whom participated in EBACE’s “Big Is Beautiful” consolidation forum on Wednesday, moderated by MachMedia’s Taunya Renson-Martin. Greg Thomas, president and executive chairman of Privatair, was the lone dissenter.

“It’s extremely difficult to survive with a small fleet. Acquisition provides a faster mode of growth than organic growth,” Hansen says. “There are many AOCs [air operator certificate holders] that are trying to sell themselves; there are many AOCs with bad balance sheets.”

Hansen and other panelists believe that consolidation in the sector will continue because of the advantages of branding, buying power, economies of scale and better customer service.

“It’s absolutely about the customer,” says Johnstone. He believes that large firms, such as BBA, can provide a uniformly high level of safety, security and value for the customer. Size matters when it comes to having the financial clout to improve facilities. Johnstone noted that BBA, now with 199 company-owned facilities, is investing £26 million (US$38 million) in its London Luton FBO, and it’s building a new FBO at the San José International Airport in northern California.

Not so fast, cautions Thomas. “Sure, there are benefits to having a big fleet, such as lower insurance premiums, mass purchasing of fuel, training and FBO services.” Having a large fleet of aircraft under management that are available for charter also attracts new management clients who are lured by the prospects of defraying fix costs by renting out their aircraft when not needed for their own use.

But aircraft owners can be very picky about an AOCs attending to their individual needs. One slip-up and they can move their aircraft to a competitive management and charter firm.

And even if an AOC can balance expansion while providing a high level of service, there are “massive amounts of protectionism” at the state level to impede mergers and consolidations, says Thomas. He pointed to TAG Aviation Holding SA and its U.S. business unit being fined US$10 million to settle allegations that they controlled charter aircraft for years in violation of U.S. bans on foreign ownership of such operations.

That led Privatair to pull out of the U.S. and pare down its fleet from 60 to 50 aircraft. Ultimately, says Thomas, its revenues actually increased, as the firm concentrated on activities with healthy margins.

“Independents [AOCs] are being forced out,” says McDermott, especially if there are four or five at the same airport. “It’s a race to the bottom” because of competition and cutthroat pricing. “It’s hard for a small firm with only a few locations to compete” against the big FBO chains.

But some small firms continue to thrive because of the quality of personal service that they provide to their clients, counters Thomas.

There are numerous legal issues associated with growth by acquisition says Pierallini. “Increased legal costs” during everyday operations “drive consolidations.” But being acquired, in whole or in part, has to be managed carefully to avoid running afoul of foreign ownership constraints. She says that AOCs not only have to meet 50.1% majority ownership requirements, but that they also have to demonstrate 50.1% management control.

All participants agree that business aviation is about personal relationships between employees, charter and management customers and business associates.

“There are human issues. People don’t like change,” says Hansen. That’s especially true for customers, so he’s kept the Luxaviation brand separate from the ExecuJet brand, while it has acquired Fairjets GmbH, Abelag, Unijet and a majority interest in London Executive Aviation.

“Our industry is all about service”. The people side of the business is critical, says Johnstone. It’s essential to make people feel at home when they’re absorbed into the BBA Signature family.

Yet, there’s been plenty of buzz by business aircraft operators on social media about BBA Signature’s acquisition of smaller mom-and-pop FBOs growth crowding out competitors and driving up prices for fuel and services. Johnstone responds that many small family-owned FBOs don’t have a succession plan, so they want to sell out. He also says that small firms don’t have the financial resources to build new hangars, expand maintenance facilities and buy new equipment.

Thomas, though, says growing in size doesn’t equate to producing higher earnings. He says Privatair looked at acquiring TAG Aviation, ExecuJet and other firms, but walked away because the potential growth in revenue didn’t justify their asking prices. Heavy maintenance and full-service FBOs with high transient traffic are strong revenue producers. He’ll leave it to other firms, such as BBA, to pursue large-scale acquisitions of smaller companies.