AML Global helps manage fuel costs

 - December 19, 2006, 10:24 AM

In its bid to secure lower fuel prices for the aircraft operators it represents, AML Global is not trying to cut out the middleman. Instead, the company is trying to make the middleman bend a bit more to give the client a better deal.

According to AML chief executive Jamie Shawyer, the UK company estimates that it can save operators an average of 15 percent on the prices they normally pay to fuel resellers such as Universal Weather & Aviation and Air Routing International. AML bases this estimate on its buying power for the volume of fuel it orders, the avoidance of costly credit arrangements between operators and resellers and the indeterminate value of the time operators save by not having to research fuel prices for themselves.

Based in Mauritius, AML logs current jet-A prices from all resellers and for most locations around the world. By analyzing these prices, the firm locks into the optimum price for any given date at any given airport.

For ad hoc purchases, AML will arrange a “one-time release” with the fuel reseller and tells the operator which supplier to go to at a particular airport. It will send the operator an uplift confirmation via fax, e-mail or SMS text message that will approve the supplier to pump the gas.

The seller invoices the reseller for this fuel uplift and the reseller invoices AML, who pays for the fuel and sends its own invoice to the client. The client has to have its credit approved with AML, which shoulders the credit arrangements directly with the reseller and supplier.

AML’s credit rating with the fuel providers is growing. It currently has a 1:2.5 ratio, which means that for every $100,000 it lodges with a supplier, it has credit of up to $250,000. It soon hopes to progress to a 1:3 ratio and expects eventually to enjoy $1 million of credit for a security of $300,000.

AML’s clients do not have to put down any of their own capital to enjoy this credit. AML does its own credit checks before accepting a client’s business (including checks on the aircraft’s certificate of registration to ascertain who the legal owner is). The client is spared the hassle of having to establish credit lines around the world (although, of course, it can achieve the same outcome with one of the fuel purchase cards issued by leading fuel resellers).

For customers who expect to buy fuel repeatedly from a particular airport, AML can arrange an “open release” so that the operator can take fuel from whichever source offers the best price that month. The invoicing process is the same.

AML claims to have almost 100 aircraft and about 20 owners committed to its fuel purchase arrangements. These include types ranging in size from Cessna Citations to Boeing Business Jets, and with owners including major public companies and wealthy individuals.

The company is arranging fuel uplifts throughout North America, Europe, Russia and Asia. Its main office on the Indian Ocean island of Mauritius, which starts dealing with Asian demand in the morning and subsequently hands over arrangements to another office in Guernsey, off the coast of France. AML’s UK owners chose the offshore territories because their friendly fiscal regimes have further reduced costs.

Shawyer, a corporate pilot who currently captains a Gulfstream V, told AIN that the AML approach to fuel pricing has resulted in significant savings for his aircraft’s owner, proving the theory that well organized use of market information can force suppliers and resellers to improve their rates.

One of AML’s directors, a former investment fund manager, is now exploring possibilities for exercising fuel price options to hedge against future price spikes. AML estimates that fuel currently accounts for about one-third of a business aircraft owner’s operating costs.

AML’s first customer following its start in April 2005 was South Florida-based Agro Industrial Management, which owns and operates a GIV, Falcon 2000 and four helicopters. Flight department manager David Bjellos told AIN that he has been satisfied with the service.

“Knowing what the consumer needs was AML’s primary goal, and the team has provided exceptional pricing along with state-of-the-art fuel requests, confirmations and billing using wireless devices, PDAs and the Internet,” commented Bjellos. “It works great and I am able to get a fuel quote and confirmation right from my cellphone or computer. The prices quoted have always been less, and in most cases substantially less, than our previous normal venues for fuel purchase.”

In fact, Agro Industrial hasn’t taken AML’s word for the claimed savings. It has continued to source three separate fuel quotes for each international trip and has yet to beat the quoted AML price.