Buyout Hinges on Fuel Servicers at Six Airports

WASHINGTON (CN) - BBA Aviation must divest facilities at six U.S. airports if it wants to go through with its $2 billion acquisition of Landmark Aviation, the government said Wednesday.

London-based BBA is the parent company of Signature Flight Support, which has the world's largest network of airport fixed-base operator assets, or FBOs. Signature has about 70 such facilities nationwide.

FBOs are businesses that are given the right by local airport authorities to sell fuel and other services to private and corporate aircraft operators, according to the U.S. Department of Justice. Those customers can only buy fuel from authorized FBOs.

Landmark Aviation has about 60 FBOs in the United States, the third-largest network in the country.

BBA agreed last September to acquire all of the equity interests in Landmark for just north of $2 billion.

But the Justice Department filed a civil antitrust complaint in Washington, D.C., Federal Court on Wednesday, claiming the proposed acquisition of Landmark by BBA would likely lessen competition for FBO services at six airports: Washington Dulles International, Scottsdale Municipal, Fresno Yosemite International, Jacqueline Cochran Regional, Westchester County, and Ted Stevens Anchorage International Airport.

"At each of these six airports, Signature and Landmark compete directly on price and quality of FBO services," the 11-page complaint states. "The proposed acquisition would eliminate this head-to-head competition, resulting in higher prices and lower quality of services for general aviation customers at each airport."

FBOs make most of their money from fuel sales, but they offer other services as well.

"Full-service FBOs do not typically charge separately for certain ancillary services such as conference rooms, pilot lounges, flight planning, and transportation, and instead recover the cost of these services in the price that they charge for fuel," the government's complaint states. "Full-service FBOs do, however, often charge separately for hangar and office space rentals, aircraft parking and storage, aircraft handling, tie-down and ground services, deicing, and catering."

The government says BBA's proposed buyout, as it stands, would lead to an FBO monopoly at three of the six airports, and would give Signature more than an 80 percent market share at the other three.

"Competition between the Signature and Landmark FBO facilities at [the airports] currently limits the ability of each company to raise prices for FBO services," the complaint states. "This head-to-head competition also forces each company to offer better services to customers. The proposed acquisition would eliminate the competitive constraint each firm imposes on the other at each airport."

The feds want BBA to divest Landmark's FBO assets at the six airports to another buyer, and the companies "have represented to the United States that the divestitures required...can and will be made," according to a proposed settlement agreement.

BBA made about $2.3 billion worldwide in 2014, and more than $900 million of that came from Signature's FBO business in the United States, according to the Justice Department. Landmark reportedly made over $500 million from FBOs in 2014.

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