Are fuel costs a significant part of your flight operation? Are you paying too much? If so, what are the best strategies for controlling them? Andre Fodor, aviation director, Johnsonville LLC offers his top tips …
The purpose of a well-organized flight department budget is to identify the cost centers that most impact your bottom line, and to assess ways to improve, modify or optimize how the money is being spent.
In previous consulting engagements I’ve been asked to assist with trimming a flight department’s budget enabling it to become a leaner, more efficient operation. Frequently it boils down to a lack of understanding of the expense structure and a ‘pay-as-you-go’ approach that led the managers to overlook the higher cost centers and instead focus on those that yield poorer savings.
For example, fuel purchases can account for 51% of an operation’s expenses. Having diligently accumulated years’ worth of data on fuel burns for every leg flown, the total gallons used Year-to-Date, and the vendors from whom the fuel was purchased, our flight department is able to monitor fuel price trends and select the provider offering the better overall pricing.
In any flight operation, fuel is a significant expense. As we consider some of the tactics that can be employed to help reduce the costs of fuel, it’s important first to touch upon two important components of a fuel management program.
Does Tankering Guarantee Savings?
Tankering offers operators valuable opportunities to make fuel savings. When flying to a major metropolitan airport, for example, tankering from your home base where you presumably have preferred pricing, may save you money. In our case, it can save up to $3 dollars per gallon.
In some European countries, the mineral taxes can easily double the total cost of the fuel, and tankering becomes a necessity. But beware. There is a point of diminishing return and tankering can cause a significant increase in fuel burn and the missed opportunity of having ramp fees waived with a fuel purchase.
Some nations also frown on tankering, and you may be penalized or taxed on excessive fuel remaining in your tanks. So, if you are to enjoy the cost savings of tankering, you’ll need to plan ahead for each flight you make, ensuring that the savings from tankering really do outweigh any taxation or waived ramp fees, for example.
Finding the Fuel Burn Flight Profile Sweet Spot
A fuel burn flight profile is a managed approach to aircraft operations where you determine the sweet spot for different flights. For example, a positioning leg may be flown at a slower long-range cruise speed, while an occupied flight is flown at high-speed cruise on short domestic legs and intermediate speeds on international long haul.
You can get quite sophisticated with your fuel burn flight profile, adding items such as engine reserve costs into the mix.
The Role of Fuel Cards
If you are a flight operation that shows up at the FBO and pays retail price for your fuel, thank you! You are leaving the breadcrumbs for me and other savvy operators to benefit from. If you’d rather not put money into our pockets, then you’ll need to think more carefully about fuel cards.
In my flight department we subscribe to no less than four fuel cards. But how did we come to the decision on which cards we’d add to our arsenal of operating cost control?
First, we check with the fuel card providers which one buys us the cheapest fuel and at which FBO facility. Based on this, and assuming the FBO is capable of the level of service we expect, we will call the front desk at the FBO, explain our operation and request their current retail costs and whether they can give us any other advantages or discounts.
If you haven’t tried this before you’ll probably be surprised at how, simply by asking, you can realize some valuable savings. From there, we typically request a fuel release and will use it for all charges in order to expedite our turns.
On overseas trips, our international trip planning provider will use all our fuel card accounts and will leverage their buying power through their own fuel card providers to identify the best fuel savings for us. The trip planning provider we work with knows this is an important component of the service they provide us.
Additional Fuel Card Benefits
Adding to the benefits of buying fuel though card services is that some will handle the VAT refunds for you. Whenever this is applicable it can yield you valuable savings. If you are a large operation the total savings here can become very significant.
One more form of fuel leveraging that has yielded success is via Fuel Buying Associations. In the US, one membership costing $500 per year yielded savings on its first use that literally covered the membership costs for the next two years.
Membership often takes us to FBOs that charge nothing for parking, and we ultimately buy ‘courtesy fuel’ while taking full advantage of better pricing somewhere else.
Though my flight operation has several fuel cards, we do try to concentrate most of our purchases with one provider. Their pricing is typically the best, and by concentrating those purchases with one company we have greater bargaining power to negotiate better fuel discounts as a ‘preferred’ customer.
All the above actions could represent money saved on your annual budget; yield enhanced benefits for your principal; provide better job security for you; and give you the satisfaction that you are successful in the stewardship of your operation’s cost. All in all, that’s a job well done!