In my many years as president and CEO of a fuel company, and ATP pilot, I have often been asked “How should I buy fuel?” To answer that $64,000 question, it’s helpful to understand the evolution of the fuel-buying process. The way the marketplace looked years ago impacted how it operates today, which will influence the fuel-buying options available tomorrow.

  

A Look Back
Historically, companies that provided fuel and branding at airports also supplied automotive fuel at corner gas stations, and pilots simply purchased fuel directly from FBOs at some posted price. The services necessary to support FBOs and the underlying infrastructure of delivering fuel and services to the aircraft are people and capital intensive, requiring 24/7/365 attention. This substantial resource investment caused many fuel suppliers to examine their return on investment, and to refocus on pipeline and exploration, leaving the heavy lifting of “downstream” activities to companies specializing in aviation fuel distribution with the flexibility to proactively provide solutions.

Next, advanced aircraft and technology created a case for flight departments to request electronic invoicing, online fueling locators, network discounts, credit services, automated price and invoice files, etc.—a daunting task for busy FBOs—thus, a demand by flight departments for fuel suppliers to consolidate these administrative services, which also led to the evolution of third- party contract fuel brokers (of which I counted 38 in the early 2000s).

Each of these business segments served their purpose, but ultimately the marketplace decides what’s of value. It weeded out those business models that couldn’t survive, effectively shaping the current landscape.

Today
So, where does that leave us? We continue to see various movements in the present landscape, such as:

• More FBO consolidation
• Chains buying each other (Both of the above provide fewer fuel options for you.)
• The formation of a few buying associations or clubs covering a limited number of FBOs
• A few established fuel suppliers that provide contract fuel and cover the largest amount of locations

It’s no wonder I’m constantly asked, “How should I buy fuel?” Let me tell you a little secret: there is no one solution—one company—that could provide you with fuel at every location at the best price. So…how should you buy fuel?

First, take the “logical man” approach. Most of these fuel providers have redundancies, covering the same FBOs. Though I should be telling you to always buy from Avfuel, take the “logical man” approach and choose two or three fuel suppliers to work with, as that will cover 95 percent of your needs. You, as a sophisticated and active participant in aviation, already know which companies are at the top.

Second, choose companies that are invested in the industry and will be around for the long term. These are likely the same fuel suppliers that offer the most comprehensive services, the widest range of locations, and highest service levels.

Third, consider hidden costs. Companies that are committed to aviation and the consumer will be close in price. Your evaluation should include a review of additional charges, such as card processing fees, interest rates on late payments, and credit extensions.

Additionally, two areas that are often misunderstood and can create risk for your company and flight department are:
• Proper tax exemption and compliance - I have conversed with many flight operations who are either exempt from certain taxes and don’t know it or unsure which taxes apply when purchasing fuel through third parties. Avfuel, domestically alone, processes a whopping 4,500 tax returns annually to address this issue.
• Appropriate product liability insurance - It’s critical to understand the title of product and risks as it transfers ownership and when the excess product liability insurance that branded fuel suppliers provide applies to you and more importantly when it doesn’t.

Do your homework; dig past the obvious “advertised” fuel cost.

Future
Though we can make educated guesses on the future outlook, only one thing is certain—the landscape will always change. It’s important to keep learning from the marketplace. For this reason, we at Avfuel sit down semiannually with internal/external advisors to try and predict how the evolving market affects our strategy in order to better serve you. We’ve learned from these frequent dialogues over the past 40 years that it’s not about what we think, it’s about understanding your actual needs—as a pilot, dispatcher, flight management team or owner—and developing innovative solutions to meet those needs. I am proud to be associated with such a vibrant group of involved professionals who share the same passion for aviation.