Wednesday, May 23, 2012

Does the purchase of Aviation Fuel play a major role in your FBO?

Aviation fuel producing companies total approximately only 30 separate corporations, therefore the blend choice and base or wholesale pricing of all aviation fuel here in the U.S. is rather limited. We are lucky as consumers here, as there exists far less freedom of choice in the rest of the world.

Very few of the raw product producing companies sell direct to the FBO network across this nation. Most of the product is sold and distributed through non-producing suppliers who obviously seek to make a profit from their endeavors.   Often an FBO also is unable to deal directly either with the nearest refinery, or fuel distributor because the airport at which they have chosen has a tenant agreement in place that requires all of the FBO that at based there to purchase their fuel through the airport or local municipal administration. The further away the supplying refinery, the greater the product cost.

Once the fuel makes it into the storage tanks of an FBO, the spot market price quoted by the commodities markets bears very little resemblance to the price that the FBO has paid, and is now ready to sell onto you. In the common situation where the FBO has been required to purchase its resale fuel from the landlord airport, the only way they are able to be price competitive to their neighboring FBO's either at the same field, or at other airports within the same city region/area, is to either reduce their overhead or to buy more fuel than their competitors thus receiving a discount from the airport, based upon how much they buy each month.

The distribution system that has been described above is pretty typical and thus makes a tough for any FBO that is faced with competition at the same airport, a contracting pilot population, and the current administrations attempts to smash the General Aviation into smithereens. Many of the FBO's that have chosen to build comfortable, amenities-rich, and visitor pleasing facilities that are staffed with well trained, competent and customer orientated staff, elect to charge a 'ramp fee.' This practice is widely viewed by many as being unfair, however you basically get what you pay for, i.e. if self-service pumps in the rain are the only service that you require, then you should expect to pay less than when you enter and exit through the smoked glass doors of an architectural wonder that serves coffee, cookies, has sleep, multi-media entertainment, flight planning rooms, courtesy cars, offers hangarage available to all transiting aircraft, and 24 hour guarded security.