Aviation fuel management: an overview |
Posted: December 4, 2018 |
Aviation fuel management is a specialist area. To ensure that the operation runs smoothly and cost-effectively, specialist processes and systems have to be designed and operated by employees with particular skills. With quality assurance central to the whole operation, let’s take a look at the key challenges facing the aviation fuel management team. 1. Predict fuel demand and set the budget Fuel supply contracts are agreed well in advance; therefore, it is essential that the aviation fuel management team accurately predicts how much fuel will be needed and how much they will pay for it. Running out of fuel is an expensive mistake, as buying fuel at short notice costs a lot more money than buying it in advance; on the other hand, airlines run the risk of incurring financial penalties if they uplift less fuel than they agreed in the contract. To buy performance fuels at the best prices, the team will have to participate in fuel tenders. Some bids are in different currencies, which can cause complications. Analysing fuel bids is a critical skill, as this can seriously affect an airline’s profit margins and ultimately its viability in a highly competitive market. Again, it is a balancing act. This time, it is a case of weighing up the market indexes and payment terms. A complex set of data has to be trawled through to make valid comparisons. Fuel costs account for around one-quarter of an airline’s operating expenses, so mistakes are very costly and could be catastrophic. Airlines require up-to-date and accurate information on how much they are spending on performance fuels. Armed with this information, they can plan the required cash flow and review the expenditure to identify areas in which they could cut costs and increase profits. Data relating to uplift volumes has to be reconciled with data on consumption. The team then needs to factor in the index-based product price, which changes daily. The total overall cost of obtaining the jet fuel is made up of the fuel price, service fees, additional fees, supplier differentials and tax, with potential savings to be made in all these elements. 4. Invoice management Large airlines can receive thousands - or even hundreds of thousands - of invoices from fuel suppliers. There is no standard format and the information will be presented in different ways. Checking invoices takes up a large proportion of the team’s available time; however, it is important that the team gets this right or the airline could be over-paying for its fuel, which will affect profits. With the right team and the right systems and procedures in place, airlines can effectively manage their fuel and maximise profits.
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