A Runway to Growth for Airport Services Companies

How BBA Aviation, the world’s largest “fixed-base operator,” achieves higher-than-average growth in an industry of thousands of small rivals.






Key Takeaways

 

  • More than 3,200 companies known as fixed-base operators (FBOs) provide aviation services at airports around the world, refueling, maintaining, and stowing private and charter aircraft.
  • Most FBOs are small, independent businesses that operate at one or two airports. Only two companies, UK-based BBA Aviation and US-based Atlantic Aviation, run a large network of locations. In 2016, BBA acquired a rival FBO network, Landmark Aviation, and is now the industry leader.
  • FBOs benefit from favorable industry dynamics. As FBO airport leases turn over, on average, every 15–20 years, opportunities to displace an existing operator at a given airport are rare, creating high barriers to entry. Moreover, as private or chartered air travel is unlikely to be surpassed as the fastest way to travel anytime soon, the risk that customers will choose an alternative form of transportation is low.
  • Industry growth within the US is expected to mirror GDP growth and remain in the low single digits for the foreseeable future. Companies that currently operate or succeed in building out networks—especially those with locations outside the US—may achieve higher-than-average earnings growth due to economies of scale.

Disclosures

 

The “Fundamental Thinking” series presents the perspectives of Harding Loevner’s analysts on a range of investment topics, highlighting our fundamental research and providing insight into how we approach quality growth investing. For more detailed information regarding particular investment strategies, please visit our website, www.hardingloevner.com. Any statements made by employees of Harding Loevner are solely their own and do not necessarily express or relate to the views or opinions of Harding Loevner.

Any discussion of specific securities is not a recommendation to purchase or sell a particular security. Non-performance based criteria have been used to select the securities identified. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of holdings for the past year, please contact Harding Loevner.

There is no guarantee that any investment strategy will meet its objective. Past performance does not guarantee future results.

© 2022 Harding Loevner