Choosing an FBO and Instructor

by William R. Trippett, B.S., J.D.

            Choosing an FBO and instructor, whether it is for flight lessons or for renting aircraft is almost an art.  In most large metropolitan areas there are literally dozens to choose from.  Even in a small community there may be two or three within a short driving distance.

            The choice of the FBO is not made easier by a choice of sizes or by the form of business entity that operates the FBO.  There are, for example, many FBOs that are incorporated, perhaps most, given the exposure to liabilities in the FBO business.  While most FBOs are profit making companies, some are run as clubs.   Others call themselves “clubs” even though they are in reality private for-profit businesses run by individuals who take the profit for themselves and not for the club’s members.  How these organizations operate is significant to the pilot.

            The nature of the FBO is critical to the renter or student in two important ways.  First is the financial stability and its effect on the airworthiness of the aircraft and the safety of any deposits made by customers, and second is the nature of the insurance carried by the operator.  The latter issue is covered by my article entitled “Renter Beware.”

            The financial stability of the FBO will determine several issues.  Does the company have sufficient financial stability to return your deposits if you need to withdraw?  What kind of agreement does it ask you to sign?  How are you charged for the services it provides?  Is the company a for profit organization or not for profit?

            There are far too many sad stories involving pilots who placed large sums of money on deposit for flying and then lost that money when the FBO went bankrupt.  The FBO business is a notoriously poor one for financial stability.  When the FBO starts losing money there is the temptation to take in large deposits on deep discounts for flying just to pay the current expenses.  This should be a warning.  I have personally represented many creditors in that situation and the failure of the FBO almost always means that the depositor, who is treated as a general creditor, loses his or her money. 

            Note, too, that it is not only the for profit business that can go broke.  In the not-for-profit situation the quality of management is also an issue and will contribute to financial stability.  Where there is no one who is on staff as a paid manager, the pilot should wonder about how well the organization is managed, particularly with respect to aircraft maintenance.

            There are many not for profit organizations that are very successful.  The sounder ones have highly qualified paid managers.  That is what you should look for when the FBO really is a club.

            When the FBO is really a private corporation posing as a club you should look very closely at what you are paying for.  Club-like organizations are akin to the health “clubs” and much of what you are paying for dues may not be allocated to your own flying.  Paying dues to belong to a company that is purely a profit making business seems a bit much unless there is something given in exchange in the process.  If your “club” is charging you the same rates as the other FBOs on the field as well as a monthly dues, you should wonder what you are getting back for those dues.  Some FBOs will give you a break on charges in comparison to regular customers if you join as a “club” member.  You should add up what that additional cost is over the course of a year and calculate the amount of flying you could do at the regular rate.  If your expected flying hours are not sufficient, you will not get the benefit of being a club member back in reduced charges.

            Another indictor of the financial character is how the business treats its instructors.  It is a very dangerous practice to treat instructors as “independent contractors”.  Where instructors are being treated as independent contractors it is usually because the FBO does not have to pay for the employer’s share of the withholding taxes, worker’s compensation charges and unemployment taxes.  The FBO saves a lot of money by treating these persons as “independent contractors” even though it is very rare that they will qualify as such under state law.  The FBO that treats instructors as independent contractors is subject to a high degree of suspicion as to its financial stability and you should have a really good explanation for that practice before you choose such an operator.

            Even where the treatment of instructors as independent contractors can be justified legally, one should consider the effect.  Where the instructor is truly an independent contractor, the FBO has no control over that person or the quality of his performance.  In order to maintain the legal separation between the instructor and the FBO, the FBO will try to distance itself legally from the instructor.  The insurance question again arises.  Who is covering the instructor?  If the instructor creates a problem as an employee the victim can look to the employer.  That is not true when the instructor is an independent contractor.  And if the FBO claims that it does have control over the instructor is the instructor really an independent contractor?

            Like any other commodity, you get what you pay for.  Where the FBO sells you its service at lower cost by treating its instructors as contractors you are very likely left with substantial exposure if an accident occurs.

            Another indicator of the nature of the policies of the FBO is how many instructors it keeps on staff.  Some FBOs use instructors to make money on them, not through the training they give to students, but from the checkouts they have to get to be able to teach at that FBO.  Some FBO operators rely heavily on the natural competition between instructors in a “seller’s” market.  In many cases the already high turnover rate for instructors is made worse by such tactics.

            If your FBO is packed with instructors who are not doing much of anything, is that operator really there to sell you service or partly to sell his services to the instructors? 

            There are a number of other tests you can apply to check out the quality of an FBO.  Is it clean and uncluttered?  Are the people there professional?  Who does its maintenance?  What condition are the aircraft?  What are the qualifications of the Chief Flight Instructor?  What instruction system does it use?

            Choosing an FBO wisely should involve a careful comparison of the available choices.  Lowest cost, particularly where techniques like using “independent contractors” should be a tip off that not all is right and that you truly will get what you pay for.