NBAA Convention News

Contract fuelers attracting corporate ops now

 - October 14, 2009, 11:55 AM

Fluctuations in the price of jet fuel during the past two years, coupled with the uncertain economy, have steered many operators and flight departments toward alternative fuel purchasing choices in an effort to reduce costs. Contract fueling programs are thus gaining popularity among business aviation operators.
“Ten to 12 years ago, corporate fuel was basically all retail,” said Russ Standefer, Avfuel vice president of contract fuel (Booth No. 2100). “[Now] of all the sales that go into corporate aircraft, about 40 to 45 percent are purchases through some type of contract fuel program.”

“When the economy was a little better and fuel prices were lower, it wasn’t that the flight departments didn’t care how much fuel cost, but it was less of a consideration than it is now,” said Michael Brasier, vice president of fuels for Jet Fleet International (Booth No. 3916). “In the last couple of years we’ve seen more companies looking to contract fuelers to see what kind of discounted prices they can get.”

Due to consolidations in the petroleum industry there are now six major fuel suppliers in the U.S. (Air BP, Avfuel, ChevronTexaco, ConocoPhillips, ExxonMobil and Shell) that not only supply fuel to their branded FBOs but also deal with the 20 to 30 contract fuelers that leverage bulk sales into discounts for their membership base while still managing to earn a profit. “People want to get better pricing now because they have to,” said Standefer. Avfuel, which is an independent distributor and not part of an oil company, supplies approximately 21 percent of the FBO market in the U.S. “Back in the heyday, about a year and a half ago,” he said, “people were somewhat interested in pricing, but their most important function was just getting that mission done. Now every mission is important but every incremental cost that goes into putting that flight together is extremely important.”

Subscribers to contract fuel programs find that not every fueler has FBO locations in all regions. Because even branded FBOs can choose not to participate in a fuel provider’s contract fuel program, most contract fuelers don’t simply suggest that customers join other programs, they encourage it. “It is to the benefit of individual operators to have as many different options and suppliers available to see what their best price is,” said Jet Fleet’s Brasier. Like other contract fuelers, Brasier concedes that his program might not always be the right fit for every customer on every flight. “We have better prices than some of the suppliers in some locations, [but] in other locations other suppliers have better prices than we do, so the individual operator needs to look at all those options.”

Increased Enrollment
While contract fuelers have noted the slowdown in flight activity over the past year and a half, that decline is being offset by an increase in customers. “Unfortunately in these times a number of flight departments have gone out of business,” said Michael Szczechowski, senior vice president for business aviation at World Fuel Services (Booth No. 2345). “So those customers have gone away, but we’ve replaced them and added more people who now are interested in contract fuel but weren’t in the past.” That new interest has led to increased business opportunities for the contract fuelers.

“On a positive note during [the last 18 months], we’ve realized double the number of new card applications,” said Greg Cox, vice president of Universal Weather & Aviation’s UVAir division (Booth No. 5717). “We attribute that to clients looking for value and savings–for example, regional operators that might have paid with credit cards or were billed directly by suppliers and FBOs who have been pushed toward the contract fuel providers.”

Even for existing contract fuel customers, the effort to decrease costs has led them to new awareness of how and where the programs work. “A lot of our new volume is coming from regional traffic, not only within the U.S., but those flying in Europe or within South America who were using our cards only when they would leave the comfort of their region,” Cox told NBAA Convention News. “It’s more of an education process for the customer, telling them they can use the card in their own backyard. We had customers tell us, ‘We thought we were too small to use your program; we don’t have the Gulfstream flying overseas.’”

Another effect of the financial slide has been a renewed interest in contract fueling from FBOs. “We’re continuing to add new FBO partners that typically have not worked with contract fuel companies in the past. They’re looking for strategic partners such as UVair to help drive volumes to their locations at a competitive price,” said Cox. “That’s just to offset the decrease in traffic movement and flight hours.”

While contract fueling can save customers money, it does take more time and research to find the best price, according to World Fuel’s Szczechowski. “Anybody can just drive up and put down a credit card and pay retail–and in some cases that may be the only option–but it’s always worth looking at the contract fuel options.
Typically you need to check a Web site, make a phone call, do something to understand the price and make pre-arrangements.” Szczechowski noted that in this time of flight department cutbacks–where pilots may now be shouldering many of the logistics tasks–those additional tasks could prove unwieldy. “Sometimes it’s a choice that they have to make: are they going to concentrate on flying the airplane and doing all those things and do they have time to make those extra phone calls?” he said. “We certainly encourage it. If you want to look for the most attractive price, then it does take a little extra effort.”