What FSE Services do you want?

[Peter Grey]

As an initial investor and board member of Independent Finance, I can ask the other board members to see if PilotEdge flyers could get a discount on loans from us. Let me know if that would interest you guys. We have financed everything from a J3 Cub (< $50k) to a P-3C (> v$8m).

I personally don't think something like this is needed. I don't want to give someone an "advantage" on a third party platform because they are a PE member. That gets close to violating some of the FSE TOS if I read it correctly.

I think I need to explain what brought up this post and what's going on in the background.

I created this post with a few things in mind:

1. FSE is a positive influence on PE. It gives people a reason to fly and improves the PE community. We wish to see the PE FSE community stick around and grow.

2. I know that the TSP FBO network is not profitable [Edit: The TSP network is profitable in terms of day to day operating costs, but not in terms of capital costs], the Golden Eagle network is lucky to see 5 planes a week (and does not cover it's own operating costs). FBOs have a recurring cost to operate, the supplies costs for the Golden Eagle Network are around v$33,000 a month and that doesn't include the time/cost to actually get the supplies to the FBOs. I don't know what our new towered airport networks make, but KSNA is on pace to have 100 operations this month, KSNA costs v$6000 a month so that's around breaking even (ignoring fuel).

Anyone who knows anything about FBOs on FSE knows that few are anywhere near profitable. At an average of $50 a transaction I'd need 22 operations (job ground fees) a day to be profitable, that won't happen (obviously fuel sales help, but that's pretty rare). Obviously the common thing on FSE is people get bored and networks go away. We don't want this to happen here as this is great for the PE community. I don't think we will ever have a situation where we have a large profitable FBO network (certain popular airports will be profitable, but the network as a whole no).

3. The current demand (as indicated in these posts) is for us to own more airports in the coverage area. For some perspective on that there are 296 FSE airports in our coverage area. If all 296 were 1 lot airports (they aren't), the DAILY supply cost would be v$15,000 if we owned all of them. I can average around v$10,000 a flight hour. So that's 2 hours a day just to be able to buy supplies, of course supply delivery would be impossible in this case. Note supply cost is exponential with airport size. An airport like LAX costs v$450 a day, 46CA costs v$50.

Obviously other people within the community would own networks as well, but if something like this is a goal we need a "dumping ground" for airports no one else wants. Who would want the BYS, NV11, O02 network?

4. Fuel can be used to an extent to help with profits but several people have already complained that our fuel prices are too high. The Golden Eagle network has very low fuel prices and I've sold just over 100 gallons so far this month (in 3 sales). At that rate I'll make v$80 on fuel this month (after my purchase cost). Even if I sold it all at the system price that profit would only be around v$250, and I bet at that price I wouldn't have gotten some of those 3 sales.

Fuel is ultra competitive. When I set up shop at L35 (I only own 1 of 2 FBOs), the other FBO dropped his/her fuel price to be around v$0.30 below cost. I don't know why as that doesn't help them in any way I know of, but it proves the point that they don't want me to be there.

I make money on each gallon of fuel I sell but it will never be enough to pay for anything else. I make 10% on fuel for the record.

5. So with those points in mind we need an alternate method of raising funds to make this sustainable without requiring us to do lots of flying. Don't get me wrong I like flying FSE, but it's "part of my job" to an extent and therefore not really a hobby. There are a lot of ways to make it self sustaining (hence this post).

Based on the post it seems like the demand is for us to provide medium size aircraft and financing. That makes sense, small aircraft are easy to get and large (by FSE standards) aircraft aren't that popular on the network (we don't see many turboprop flights bigger then a B350).

Both of these have the potential to create "self sustaining" models. Aircraft leasing has minimal ongoing cost (after the initial large capital investment), and aircraft financing can be done via automated web tools and therefore require minimal daily work. Leasing has variable income (we have to lease to make money) so I'm most likely focusing on financing first. Based on what I've seen finance demand is high and I regularly see finance sites say they are out of money to loan out.

So if we can build a set of services to "pay" for the FBO network the overall FSE operation will be around for much longer. Depending on it's success it would also allow for an increase in the FBOs (right now there are no plans to expand the Golden Eagle network and the TSP networks as they are reaching the "hard to keep up with" area).

The thing we lack is capital (I did my first ever FSE flight late last year). I'm working towards that with flying right now but I'm around 1.5 Million short of the absolute minimum (1 Million) I'd need to offer any sort of financing (and considering how much I financed my for C46 for 1 million would not go very far). Note that based on some math we'd need around 4 million in capital to make the Golden Eagle network sustainable solely on aircraft financing. The TSP network would need more then that.

Bringing in investors (or offering a "bank" type deposit system) would help with that, then we would need to consider return on their investment. As the FSE bank pays 3% (on the first million), we need around a 5% yearly return on investment to make it worth people's time. Add the banks share and now we need to generate around 10% a year on funds. This is actually inline with most financing companies (remember I'm talking yearly return, that's not the same as loan rates). I hesitate with having investors as that adds complexity, but short of winning the FSE lottery that's the realistic option at this point.

Obviously there is loss risk but with proper safeguards and the way the FSE sales work we won't ever lose that much money on a no pay. We get the airplane in that case as well (which we could use to get back capital or start the leasing side).

Once the money is in the rest of the stuff is actually easy. We have the brain power to make the website (which we don't actually need to start, and I actually plan to do myself as an excuse to refresh my coding skills) and most of the actual financing details have already been worked out in my head.

If people want to invest in this I'm not opposed as I said before. Honestly I was planning to wait to bring any of this up, but based on the questions I'm getting it makes sense to explain the vision at this point.

That's it for now. If there is serious interest in investing I'll have chats with those interested, otherwise you won't see anything on this for several months as we generate capital.

[Peter Grey]

For another data point on all this, our biggest non PE SOCAL competitor just posted on the FSE forum about him dropping fuel prices to very low levels to stimulate demand away from us. We aren't going to "win" the FBO race anytime soon. Hence the need for non FBO services to bailout the FBOs.

[BonanzaDude]

There is no money in owning FBO's. I fly my a$$ off in order to keep mine afloat. That is one of the reasons that I sold most of my SoCal properties. I wasn't flying on PE and it's a PITA to keep enough supplies on site.

The financing process is an extremely expensive endeavor. We started with v$25m and have needed more capital to keep afloat. If you plan to just provide financing to PE pilots that makes it much easier.

John

[kullery]

Is there any reason that the PE/FSE community as a whole can't assist with the fund raising? Just make a few of those "high dollar" money raising flights each week and ear mark the profits to help out. I won't have access to my sim for a while, but I've just made a small token transfer (to Golden Eagle Aviation Services) to help get the ball rolling!!! What better way to spend fake money!!

Peter will never ask for help but that doesn't mean we can't chip in to help anyway.



Edited to reflect Peter's prefered account to receive contributions

[stealthbob]

Is there any reason that the PE/FSE community as a whole can't assist with the fund raising? Just make a few of those "high dollar" money raising flights each week and ear mark the profits to help out. I won't have access to my sim for a while, but I've just made a small token transfer (to H72387) to help get the ball rolling!!! What better way to spend fake money!!

Peter will never ask for help but that doesn't mean we can't chip in to help anyway.

We are in complete alignment...

I have been keeping an eye on this thread and was about to ask how can I help sustain a PE network?

I video gamed it on FSE for a couple of weeks so that I could buy a nice low hour Baron, immediately ferried it out to the PE coverage area. This was so that I can fly random but proper flight rule routes on the network, money secondary.

For me as long as I can cover my maintenance costs I am good, only thing then is I would ultimately like some aircraft variety...for example would love to haul freight in a DC-3. (love that plane)

Let me know what I can do to help the PE FBO community...as limited as my capacity to help is mind you.

[Peter Grey]

I have found out from Keith that TSP is now profitable in the sense of sustaining it's current size, it's not making enough to build new FBOs. So I do need to retract that part of my discussion.

Keith and I are going to talk about this in the near future and come up with a detailed plan, more at that time.

In the interim I can't stop people from transferring v money to myself, I won't be doing anything with it until we have a plan developed. A "community" funded bank (like a credit union I guess) is an option, but Keith and I need to sort it all out first.

Basically, the sudden surge here is pushing us well ahead of the timeline we (well really I) were looking at.

[Peter Grey]

It wasn't clear in my last post, so for clarity.

I greatly appreciate the funds that have been sent to me.

Any funds received will be solely used as part of an expansion of the FSE services we provide. If anyone wants any funds back either now or after we announce what we will be doing that will be honored.

I'm trying to be careful with this as it quickly has the potential to spiral out of control if we aren't careful.

[wmburns]

This is completely IMO and based upon my experience mainly flying BE58's. In my case the cost of rental is about 10.3% of net income. The cost of fuel is about 3% of income.

Think about it, if you were able to get fuel 10% cheaper somewhere, this only increases your earnings by 0.3%! Less than one half a percentage point. To me it seems silly to chase fuel prices anymore than making a quick decision where to fill up along an already planned route.

For those of you that rent wet, why does the fuel price matter at all since the owner pays?

I admit that my experience may not be typical. For the most point, I fly full BE58 loads, use economy power cruise settings, and rent DRY so that the fuel savings come back to me. OBTW, the economy cruise lowers the BE58 fuel use from 28 GPH to 20 GPH! That's a 28% reduction!

What are others experience regarding the cost of rental and fuel as a percentage of income? I would love to hear about it.

IMO the FBO owners should NOT attempt to increase volume at the expense of making enough profit to sustain operations. Be business smart and let someone else sell fuel at cost or a loss.

In my case, ground crew fees often meet or exceed the cost of rent. Why don't people complain about those fees? Is it because most just consider part of the cost of doing business? Or is it there isn't much control over ground crew fees where as there is some choice where to buy fuel?

[stevekirks]

In reading the FSE manual, it seems like FBOs were never really structured to make money. Fuel also doesn't make money (referencing Peter's posts above) so leasing/financing makes sense. My FSE barrier to entry (meaning "playing the game") is the pre-planning of flights to get departure and arrival pairs. Then I can go into flight planning which leads me to the reason I fired up the sim in the first place: connect to PilotEdge and fly.

I am wondering if a website to remove this barrier would help. The MyFlightRoute (MFR) website helps me find the big paying jobs, but I'm thinking of something with this feature set:

1. Common revenue routes sorted by flight time
2. Common revenue routes by payout
3. Numbers 1 & 2 combined with a filter for the aircraft you have available in the sim.

Example:

1. I own the A2A Piper Cherokee in FSX. I want to fly it for 1.5 hours on PE tonight. I want to use that time to make money is FSE.
2. I would go to this mythical website and tell it:

* I have a Piper Cherokee
* I have 1 hour to fly (assuming half hour of prep)
* optional - I want to carry X numbers of passengers/freight

3. The website would say

* Here's a list of city pairs that would work
* Here's a random city pair that would work
* Here's a list of chained city pairs that would work
* Bonus feature: link to MFR's CRAFT page

Reducing the barrier to flying more on FSE/PE could push up revenue.

You know, this is starting to look like a PE feature with the FSE backend where a new PE client would have the FSE features rolled in. New classes (?) to teach fuel and trip planning...

Like PE staff need more ideas from the pilots...

[Nelson L.]

I would be very ok with stevekirk's idea - it would certainly make pre-flight planning much simpler and easier. It'll also probably entice me to bust out the GA a little more often instead of simply generating an airline schedule at the click of a button! Too much work for my lazy fingers to go to the FSE website, fill in the forms, then think of a departure/arrival schedule with "pitstops" along the way - the planning is the reason my king airs are gathering dust... How easy it is to code may be another thing, but seeing as my knowledge of coding extends as far as binary, I'm going to blissfully assume its a piece of cake and Ken can make it happen by tomorrow