Economies of scale are important in the jet fuels market, but effective competition is about breadth of services, say leading suppliers
As any salesman dealing with jet fuel knows, fuel is fuel. Competing on the basis of a homogenous commodity is a sure fire way to find yourself trapped in an endless cycle of margin squeezing.
There are a number of ways that fuel suppliers can look to differentiate themselves and they all come down to “added value” in some shape or form. James Wiskin, a director at Flightworx Aviation UK, which provides flight planning and flight support services for corporate and private aircraft, points out that price itself can be a value-add. This is particularly true if you have a large enough business to give you leverage with fuel suppliers like Exxon and Total. But securing the best price can also mean knowing the local territory and players better than the competition.
“One of the ways we add value is by sourcing the cheapest refuelling option for our clients at their destination, wherever that may be,” Wiskin says. “We have excellent relationships with the major fuel suppliers and the fuel handlers, and negotiate deals for our clients. Most airfields will have between three and 10 fuel suppliers who provide fuel services to the airport and it is all about negotiating for the best price.”
Fuel prices, of course, are highly dynamic, increasing the complexity of being a fuel services provider. “The price of the underlying fuel changes daily and the big suppliers will update at least weekly. Usually the price delta is a couple of cents, but in September we saw a change as high as 20 cents per gallon, so we really can save the client a significant sum over the course of a year,” Wiskin says.
The average light jet will probably require about 300 US gallons, but how much the pilot will be paying per gallon depends hugely on location. In Dubai the price might be as low as $3.30 a gallon, since the fuel comes without additional charges for VAT and other taxes, while in Berlin on the same day it might cost $10 per gallon including fees and taxes.
While the basic cost per gallon might be only $3.50 in Europe, not vastly higher than in Dubai, you have to add on some $3.30 in tax plus the service charge to get the fuel to the aircraft, which can bring it up to $9-10 per gallon. A complication from the corporate or private owner’s point of view is whether handling and airport fees are bundled in with fuel costs or not.
“In the US, the FBOs will provide a fuel price with no handling fees, but their fuel price is a lot higher because it in effect includes handling. The rest of the world tends to separate out handling fees and airport taxes from the price of fuel,” Wiskin says.
“One of the services we provide is that we will give clients a quote in advance when they know their destination, or destinations. It will itemise each line of expense so that they don’t get any surprises. We give them a very accurate guide as to the fuel prices, handling prices and fees at the destination airport. That way they can get a full breakdown of their likely costs and can ensure that the trip makes sense in the light of what they want to do or who it is they are flying out to meet,” he says.
Another thing larger service providers bring to the table is the strength of their relations with fuel suppliers around the world, compared with individual operators. Fuel suppliers that are offering credit will want a substantial deposit, and if you are flying to multiple different destinations, deposits can soon stack up with several different fuel suppliers.
“We have a relationship with about 30 to 40 different fuel suppliers. We operate some 350 aircraft around the world. This gives us a great deal more leverage than an individual corporate, which may have one to three planes, or a private owner with a single aircraft. So we get smaller deposits and better prices on fuel,” Wiskin says.
Craig Sincock, president and CEO at Avfuel, one of the leading independent fuel suppliers in the US, takes much the same view, but on a larger scale, and confirms that added value is what makes the difference. For example, Avfuel’s flight planning company, Avplan Trip Support, recently teamed up with Jet Support Services Inc (JSSI), which provides cost maintenance programmes for the business aviation industry, to provide clients with a resource to manage any unexpected maintenance issues that might crop up while clients are travelling.
“Simply by contacting their Avplan agent, customers will have access to a JSSI technical advisor wherever the aircraft is located. JSSI have a large technical team worldwide to support their own hourly cost maintenance clients and that is now on call for our clients,” Sincock says.
Avfuel’s proposition for flight departments and private owners rests on the fact that it has more than 600 branded dealers around the world. The bulk of these are in North America, but it has made strides in building a dealer network in the UK and Europe, with dealerships from Belfast to Luton and London City.
Outside of its branded dealer network, Sincock points out, Avfuel customers have access globally to some 2,500 locations. “There are not many spots on the planet where we cannot provide services to our clients,” he says. In places the company does not cover directly, Avfuel will try to assist via its extensive network of contacts.
“What this means for flight departments is that they are covered by our pre-authorised credit arrangements, plus 24×7 support. When pilots land they have a tremendous amount to do on the flight deck. It is nice that ground services know that they are coming and that everything is taken care of,” he says.
Sincock: Avfuel customers have four ways of accessing fuel planning and obtaining credit pre-authorisation
The company’s trip planning service is a huge value-add in its own right. “We have a complete trip planning department which operates in two ways. We can do your entire trip support or you can pick various support items off a menu and have us do some while your own flight department does some,” Sincock says. The great advantage here is where a corporate customer’s plans change en route they can simply call AvPlan’s team and have them work out the new details.
“As a pilot you may have the whole trip worked out but as you are running for the plane you get a call that throws everything up in the air. Suddenly you need ground and fuel support services in Hong Kong and you want to know the weather on your new route. Plus some of the international destinations require permits or time planning and coordination with air traffic control. It is a tremendous advantage to be able to simply delegate all that to our trip planning service. So what we are saying is, yes, we are a fuel company and can provide you with great access to fuel, but we can also do trip support and flight planning on demand,” he says.
Another big value-add for flight departments and corporate accounts departments is the ability to provide online billing. “We do a complete synchronised service with the customer’s IT so that everything from yesterday is already in your system and available for viewing,” Sincock says.
There are at least four channels for customers to get access to fuel planning and to ensure that they are pre-authorised for fuel credit services. “They can pick up the phone and talk to a real person. They can use our fuel card at any of a large number of locations. They can go on the web and arrange pricing, or they can email our support services. Many pilots these days are using the Apple iPad and that links in well with our services,” he says.
Sincock points out that a number of advantages to customers flow from the relationship that Avfuel has with some 600 FBOs. “We supply a whole range of things to FBOs, including credit facilities and fuel cards. We do quality assurance and insurance, and we have a division that provides assistance with investing in and developing infrastructure such as fuel tank facilities for large international airports.
“AvInsurance provides aircraft insurance, but it also provides FBOs with a whole range of insurance services. In short, value-add is absolutely the name of the game when it comes to being at the forefront of the fuel services market,” he concludes.