Fuel is one of the most significant costs of an airline or flight operator. In 2022, it is expected to account for over 19% of total airline expenditure worldwide. Therefore, it is no surprise that investing time to plan sourcing and supply of fuel can pay off.
GUIDES FOR AVIATION FUEL
Different types of fuel, different suppliers, and prices
Operators need to realize that suppliers, prices, and fuel availability vary a great deal between locations. This is especially the case when operating internationally, as fuel prices and taxes can vary significantly between countries. Major suppliers, such as ExxonMobil, BP, and Royal Dutch Shell, may offer global service (but not everywhere), but there are many other suppliers to consider with less reach.
These changes need to be factored into flight planning, with fuel choices sometimes affecting schedules and the choice of airport.
Contracts and relationships with fuel suppliers are important. Having an agreement in place gives you fast access to guaranteed prices without having to negotiate. Airlines and aircraft operators may have their own agreements in place, or they may partner with a third-party company to take advantage of their relationships. Fuelworx offers such a service, offering a non-biased reseller relationship with over 100 fuel suppliers worldwide.
Changing fuel prices
Bear in mind that fuel prices frequently change as well. Operators need to keep monitoring changes in prices and availability or engage a third party to assist with this.
To get an idea of the possible impact of this, consider recent historical prices. Estimates for 2022 are that fuel will account for around 19% of total airline costs. As recently as 2008, however, this proportion was over 32%.
For major airlines and other high-volume fuel users, there is also the option to hedge or fix prices in advance. This guarantees future rates paid for fuel, regardless of market fluctuations, and is an important tool in airline cost management.
Base price isn’t everything
Obviously, obtaining a good price for fuel is important – but it is not the only consideration. Operators also need to consider fuelling location, infrastructure, fuel availability, and the possibility of delays. For example, a commercial ramp fueller may offer a better price, but the delays in them reaching your aircraft during a turnaround could offset any savings.
As with other business areas, operators should be considering the total cost of ownership for aviation fuel. This means taking into account not just the base cost, but associated management, relationship, and other costs.
Think about Sustainable Aviation Fuel
While it is nowhere near the majority of supply yet, there is growing interest – and regulation – in Sustainable Aviation Fuel (SAF). Operators should consider their use of SAF, both immediately and in the future. Currently, use is low overall but is still an important part of plans.
Eventually, regulation will shift to require more use. Well before that, though, there is growing market pressure and reputational considerations of falling behind other operators’ SAF usage.
Again, tracking price and availability are important considerations. Currently, SAF is significantly more expensive than traditional fuel, but this will change quickly as usage increases.
Final Thoughts
There is plenty to consider when sourcing aviation fuel in different locations. As such a major part of operating costs, it is worth investing in getting this right. Having contacts and agreements in place to serve multiple locations can help both regular and unexpected operations.
Sources:
https://www.iata.org/en/iata-repository/publications/economic-reports/airline-fuel-labourcosts/ – 2008 fuel costs
https://www.statista.com/statistics/591285/aviation-industry-fuel-cost/ – 2022 fuel costs
