Why haven't rental rates come back down?

Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. He ignored me.

So what is going on? Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?

--
Dallas

"Dallas" wrote in message
.. .

Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. He ignored me.

So what is going on? Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?

--

Could be a matter of fuel contracts. I don't things are nearly as simple as
the price of fuel each time they refill their tanks. I know a lot of folks
in the manufacturing business are still trying to use up expensive metal
inventories. I guess it just takes a while.

In article ,
Dallas wrote:

Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. He ignored me.

So what is going on? Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?

At least some of the small operators out here have been in the hole for
quite a while, and they've been effectively "floating a loan" for
renters. When the fuel prices coming back down, their fixed costs
weren't coming down at the same time. If they could get caught up a bit,
they could start bringing their rates down after a delay, but when the
economy dived, that wasn't going to work as people just quit renting and
taking lessons, in some cases because they'd lost their jobs.

It's been a marginal business at the best of times for a lot of them,
and they're succumbing now.

"Steve Hix" wrote in message
...
It's been a marginal business at the best of times for a lot of them,
and they're succumbing now.

True. Coupled with the truth that most FBO/flight schools are ran by
folks who know far more about aviation than they know about business
management.

Vaughn

Dallas wrote:
Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. He ignored me.

So what is going on? Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?


This is no different that when oil futures go up, gasoline in the ground
skyrockets up immediately to pay for the new gasoline that will be
coming in. When the oil goes down, you do not see the gasoline go back
down as quickly. Even when the oil and gasoline reserves were getting
larger. If you are willing to pay it they will charge that much.

--

Regards, Ross
C-172F 180HP
Sold
KSWI

On May 7, 7:24*pm, Dallas wrote:
Why didn't rental rates come back down with the price of fuel?

At my FBO they only increased the wet rate from $72 to 82/hr.
http://www.northstarmso.com/Home/tab...3/Default.aspx
-----

- gpsman

On Fri, 8 May 2009 09:14:43 -0700 (PDT), gpsman wrote:

At my FBO they only increased the wet rate from $72 to 82/hr.
http://www.northstarmso.com/Home/tab...3/Default.aspx

Wow... I wanna move up there...

My FBO, at the peak, was charging $105 an hour *for a Cessna 150*. When I
started with them a few years ago they were $68 bucks an hour. Now fuel
prices are down to where they were when I started and they charge $95 an
hour... again *for a Cessna 150*.

An old 1970's Cessna 172 costs $120 an hour. It wasn't that long ago you
could get a factory new Skyhawk SP with a G1000 for $120.

--
Dallas

In article ,
"vaughn" wrote:

"Steve Hix" wrote in message
...
It's been a marginal business at the best of times for a lot of them,
and they're succumbing now.

True. Coupled with the truth that most FBO/flight schools are ran by
folks who know far more about aviation than they know about business
management.

Most small businesses know far more about their product than they do
business management.

We just feel worse when the FBO folds than we do the pizza shop. Usually.

Dallas wrote:
Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. He ignored me.

So what is going on? Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?

At least you are still able to fly. At the FBO/Flight School I have
rented from for more than six years, the entire fleet of aircraft have
been grounded since January. The excuse was that they can no longer pay
for the insurance on those aircraft. So now the only 2 remaining flight
instructors are biding their time manning the front desk. I fully expect
the place to close up completely within 12 months. 30 or 40 renters are
now either not flying at all or being forced to drive 40 miles to the
next closest FBO with rentals.

Zack Sten

On May 9, 7:32*pm, Zack Sten wrote:
Dallas wrote:
Why didn't rental rates come back down with the price of fuel?

Renters saw major increases in rates during the fuel price run up. *After
the oil bubble burst my FBO dropped their rates a tiny fraction as the
price of fuel dropped back down to where it used to be. *When I asked what
was going on the chief pilot explained that they call around to other FBOs
and their price is competitive.

I called around and found that he was correct, everybody's price is still
up. *I also ran a quick study from their online booking system and found
that their rentals were down 60% in December and 54% in January.

My comment to the chief pilot was that airplanes sitting on the ground
aren't doing anybody any good. *He ignored me.

So what is going on? *Is there some invisible expense increase at FBOs
that's keeping their prices up or do they not understand the laws of price
and demand?

At least you are still able to fly. At the FBO/Flight School I have
rented from for more than six years, the entire fleet of aircraft have
been grounded since January. The excuse was that they can no longer pay
for the insurance on those aircraft. So now the only 2 remaining flight
instructors are biding their time manning the front desk. I fully expect
the place to close up completely within 12 months. 30 or 40 renters are
now either not flying at all or being forced to drive 40 miles to the
next closest FBO with rentals.

Zack Sten

that sucks, my sympathies.

Maybe you can buy one of their planes cheap when they go under.