Viewpoint: Controlling Fuel Costs Comes In Three Phases

Inflation is impacting every aspect of our life lately and even more so on aircraft ownership and operating side. Operating an aircraft is a lot like running a business -- you need to know your numbers, so you know where to focus control measures. If you are just starting out in business aviation, there are many subject matter experts, many free resources within association memberships and networking opportunities to connect with other aviation professionals to help guide you on where to start or find the best value for your time and resources.

You have two controllable costs in aircraft operations on which to spend your time and effort: fixed costs and variable costs. Fixed costs, such as hangar fees, crew salaries, training, insurance, loan interest and taxes are typically difficult markets to dictate pricing reductions. But they are achievable with knowledge or by partnering with professionals that will provide a return on investment. Variable costs, such as fuel, maintenance and fees are controlled a little more easily with more suppliers in the market.

There are three phases to controlling fuel purchasing costs. As you add saving opportunities, you will incur additional processes that can impact your overhead resources and time. In addition, the more data you have on your operations and purchasing trends, the quicker you will gain a return on investment. 

Phase 1
Start by taking a broad stroke on fuel savings opportunities by implementing one contract fuel company that is widely accepted at your regular destination FBOs or join a fuel program like the Corporate Aircraft Association. (Note that this is only for Part 91 operators).  If you are unsure which one will be accepted at the most locations, ask your top 10-20 visited FBOs which fuel contract cards they accept and, more importantly, prefer. This will come in handy later. Once you have decided on the vendor, reach out and set up a meeting with the representative to discuss your operations and goals on fuel purchasing. They should offer some additional insights or recommendations. Utilizing only one company will keep your accounting on the back end down to one uniformed invoicing and reconciliation process that allows for input efficiency.<\/p>

Phase 2

If you are already a savvy buyer looking to add savings to the bottom line, or if you have the additional time and resources to invest in further options, then open up all the contract fuel programs. This should require an introductory meeting with each fuel company representative as they too have a wealth of information for you to tap into. The more they get to know your operations, the more they can assist. Attending aviation events is a great way to get in front of many of those reps throughout the year. Once implemented, utilize trip planning software with the capability to incorporate multiple contract fuel pricing options to quickly allow you and your team to select the best contract at each location. Many will allow you to send a “Fuel Release,” which is an email notice to the FBO that your aircraft tail number will be using that particular contract fuel company. The FBO will not know or see your specific pricing, only the release that has been sent. This requires an additional step for your pilots at the counter to verify that the correct contract release is used. Opening more suppliers will give your operations additional savings, but you will need to prepare your back-end team for the additional workload of reconciling and inputting different types of invoices.

Knowing the data and seeing the opportunities can help justify additional salaried resources, such as a scheduler & dispatcher and accounting personnel, or by offering employees promotions to take on more responsibility to achieve higher ROI. Those roles can also own the fuel relationships to exponentially increase efficiency and costs of the operations with that investment. This is the time to start looking at adding software, such as Fuelerlinx, to help with purchasing and reconciling the back-end data. As you add more options, the more pricing fluctuations and potential discrepancies you will see, especially from contract companies using daily and weekly pricing uploads.

Phase 3
The last phase becomes more time intensive, so hopefully you have invested in the people and resources that allow them to utilize their expertise in procurement, planning, and relationships in the industry to find more savings. Having a dedicated team overseeing 15% or more of your cost of operations becomes more palatable as your company and fleet grows. The last phase is how much and where you are buying to negotiate better direct fuel rates at every location and the waiving of fees associated when visiting those locations, such as security, ramp, infrastructure, habitat and others. This requires considerably more time and a thorough knowledge of all the numbers to leverage the purchasing gallons, the relationship, the commitment to buying from one chain FBO program and the negotiating tactics on the impact of the service providers for winning scenarios. For example, committing to one chain requires foresight of all fees, past fuel data, and projected future use across their program to leverage substantial savings. In some cases, it can cost you more by selecting one provider and being locked into high-cost destinations, especially during big events. That is where the relationship, knowledge, and data is worth the investment in a dedicated team as you grow. 

Build your relationships in the industry as they are a great place to help control or reduce your costs. I have worked in many segments in the industry and helped save millions of dollars in jet fuel for operators. I now focus on a harder market: insurance. Let’s connect at the next aviation show or find me on LinkedIn. You are not alone.

Brad Elliott serves as a sales executive at AssuredPartners. Previously, he held positions as marketing supply chain manager, fuel buying & logistics at Air Methods; president of Summit Aviation; general manager of Desert Jet; customer relations manager at Banyan Air Service and other roles in the aviation industry.