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Airlines

Oil change

Fuel price volatility and high costs are forcing airlines to look for better ways to manage this segment of their cost base. Keith Mwanalushi takes a closer look at how effective today’s fuel management solutions really are
 

It now seems the importance of a fuel management information system is an industry imperative. Fuel is the biggest single cost to all airlines and represents anywhere between 25% and 50% of an airline’s total annual expenditure. Industry calculations show that just a $1 increase in the cost of a barrel of oil translates into an expense of over $1.6 billion for the airline industry.

 

“It’s extremely important for carriers to understand and develop an efficient fuel management system,” affirms Andy Smith, the sales director at the Hannover-based FuelPlus Software. “This huge expense and the management of it can have a massive effect on the successful running of an operation and will have a direct impact on an airline’s profitability, competitiveness and sustainability,” he adds.

 

As reported by IATA recently, the economic optimism is also causing fuel prices to go higher. “Whilst in the past an efficient fuel management system may have been seen primarily as a means of delivering a commercial advantage, it is fast becoming an essential part of an airline’s cost management toolkit,” observes Mark Goodhind, vice president for business development, aviation at Optimized Systems and Solutions (OSyS).

 

Fuel management is clearly more than just monitoring operational data. Smith believes that it’s an enterprise-wide process that includes all departments involved in fuel. “The planning department is responsible for calculating a robust fuel volume forecast for the coming financial year. This information is used by the purchasing department to run fuel tenders in order to ensure sufficient fuel at each location to support flight operations. The tenders lead to new contracts which need to be maintained regarding price updates and volume requirement changes.”

 

He further explains that the dispatch department requires statistical fuel data as well as fuel prices in order to calculate trips and tankering fuel volumes for each planned flight. After completion of a flight, the operations team then collect flight and fuel delivery data in order to track actual fuel uplift and consumption data. “This data is enriched with effective contract prices in order to calculate accrued liabilities, which are required by accounting people for the month’s end closing,” says Smith.

 

Accountants are in charge of verifying invoices received for fuel products and related services. He emphasises that these invoices are checked against operational data such as flight event and fuel delivery as well as contractual data such as fuel price and applicable taxes.

 

“As you can see, each department is in need of data generated in one of the other departments. It’s absolutely necessary to implement an integrated fuel management system that takes care of the requirements of each department whilst enabling collaboration between departments in a seamless way,” Smith stresses.

 

So ideally, access to accurate reliable data means that fuel-saving opportunities can be identified and tracked to reduce the fuel spend. David Carlisle, chief executive officer at ETS Aviation, which developed the FuelSaver software system, acknowledges that the opportunities to reduce fuel are well-known within the industry, but most airlines currently lack the ability to monitor their fuel-saving initiatives. He says having the right software, supported by expert consultancy, empowers the airline to be able to effectively control and enhance its operational performance efficiency and a key part of that involves using data that is readily available.

 

“It just needs matching,” Carlisle says. “We regularly work with airlines and carry out assessments to determine their fuel-efficiency performance verses industry standards. We also locate future potential savings and wrap up our findings in an extensive report.

 

“In general, we locate potential savings, typically in the region of one to 3% of the total fuel cost, by just looking at operational improvements using the current fleet and operational systems, and even for a very modest airline fleet size this is worth millions of dollars in reduced fuel cost,” Carlisle adds.

 

Keeping operational costs under control is paramount, especially for low-cost carriers. So how exactly do these technologies work? Smith from FuelPlus Software says its technology enables airlines to maximise fuel efficiency by supporting the implementation, monitoring and reporting of a fuel efficiency programme. The software utilises both commercial and operational data to offer airlines the most complete picture of fuel burn, fuel cost, potential fuel-saving opportunities and the positive financial impact achieved by introducing fuel-saving measures.

 

Speaking about the OSyS solution (VISIUMFUEL), Goodhind adds that the low-cost carrier model is founded on the use of modern fuel-efficient single aircraft fleets, thereby saving money on maintenance, repairs and training of pilots. “However, in common with all other airlines, the actual day-to-day operation of these assets can still be the subject of improvement and can drive significant operational cost savings. >>


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