Fuel Price Program Aims to Curb Volatility

 - October 10, 2011, 8:00 AM
TAC Air’s FuelBase price program lets customers lock in a purchase of a specified amount of fuel at a guaranteed fixed price, regardless of market conditions.

Aviation services provider TAC Air has unveiled a new product at NBAA (Booth No. C6927) which the Texarkana, Texas-based company said is aimed at helping flight departments protect themselves against drastic fuel cost fluctuations. Developed in cooperation with sister division TAC Energy, the fuelBase program analyzes a flight department’s fuel usage history through the application of a customized package of price risk management tools and helps sets a price for the amount of fuel needed.

“With fuelBase, flight departments can now remove the guesswork and risk of price fluctuations from their annual fuel budget,” said Matt Davis, TAC Air’s director of business development, who noted the recent volatility in the market. Over the past 12 months there has been a 45-percent swing in the underlying cost of jet-A, which was tame in comparison with 2008. That year saw a 211-percent differential between the lowest price of jet-A and the highest price.

Using the fuelBase program, customers can lock in a purchase of a specified amount of jet-A at a guaranteed fixed price no matter the underlying market price in the future. Customers can also choose to protect themselves by specifying a maximum price that will never exceed an agreed upon value.

TAC Air doesn’t believe in a “one-size fits all approach” when creating these fuel plans. Flight departments can mix-and-match among the program offerings and the custom-tailored contracts can even be designed with escape clauses if the market price dips below the fixed price.

“This is something that has not been made available to the general aviation industry before,” said Davis, who suspects that the volumes of fuel purchased by most flight departments are too small to draw the attention of firms that would typically handle this sort of trading.

The company has experience with price hedging structures as TAC Energy, a wholesale fuel trader, has offered a similar product for gasoline and diesel fuel to the agriculture, construction and truck fleet industries for years. “With the impact that volatile and rising fuel prices have on today’s flight department budgets, we see the need and are excited to be introducing fuelBase to the general aviation industry,” said Greg Arnold, president and CEO of TAC Air parent company Truman Arnold Industries.

The fuelBase program will be implemented for fuel pumped at all 12 TAC Air FBOs, and the company says it has plans to expand it even further over the next few months.