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Monday
Feb222016

Essential Fuel Supplier Agreement Elements: Quality Control/Training, Marketing Support and Credit Card Processing

Detailing the 10 Essential Elements of a Favorable Fuel Supplier Agreement, Part 3

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

Publisher’s note: Our bloggers, John Enticknap and Ron Jackson will be discussing these topics and others affecting the FBO Industry at the next NATA FBO Success Seminar, March 8-9, New Orleans.

Previously, we talked about six of the 10 essential elements of a favorable fuel supplier agreement: Term of agreement, pricing methodology,  transportation and delivery, terminal locations, credit terms and taxes. A favorable fuel supplier agreement is one of the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three additional elements of the favorable fuel supplier agreement and provide insight and tips to help you protect your business while adding intrinsic value.

Quality Control and Training

Putting safety first is paramount in developing a good relationship with your fuel supplier. Often your fuel supplier will have resources to help you train your employees in all aspects of the fuel delivery process to help insure not only safety but the quality of the product as well. Your fuel supplier agreement should detail what type of training program they will provide. It may include their own program or supplement your own in-house safety and quality assurance program such as NATA Safety 1st. Determine during your fuel contract negotiations what quality program your fuel supplier will provide. For example, will they come to your facility for training or just conduct an audit? Will they complete quality assurance seminars and at whose expense — yours or theirs?

Marketing Support

Many fuel suppliers offer support for marketing your facility and their brand of fuel. This support often comes  in the form of a co-op program that creates a marketing fund based on your fuel volume. Like many parts of your fuel agreement, the terms or percentage of fuel sales put into these funds by the fuel supplier is somewhat negotiable. We suggest you have a well thought-out marketing program in place to help your negotiations.

Credit card processing

If you want to have a real impact on your bottom line, watching your credit card processing fees is a very important factor. Here are a few tips to keep in mind when you come to this part of your fuel agreement:

  1. These fees are negotiable.
  2. Do your research on what your fees are prior to negotiating with your fuel supplier or local bank.
  3. Train your CSR staff to ask for the no-fee card or card with the lowest fee.

Keep in mind that there are many factors and nuances, and we will not be able to expound on all of them in the framework of a blog. Therefore, we encourage you to attend our next NATA FBO Success Seminar, March 8-9 in New Orleans, where we spend additional time and discussion on these important topics as well as others.

If you have a comment you'd like to share, please do so in the space provided below.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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Monday
Feb082016

Essential Fuel Supplier Agreement Elements: Terminal Locations, Credit Terms and Taxes

Detailing the 10 Essential Elements of a Favorable Fuel Supplier Agreement, Part 2

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

Previously, we talked about three of the 10 essential elements of a favorable fuel supplier agreement: Term of agreement, pricing methodology, and transportation and delivery. A favorable fuel supplier agreement is one of the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three additional elements of the favorable fuel supplier agreement and provide insight and tips to help you protect your business while adding intrinsic value.

Terminal locations

The location of fuel terminals is essential to understanding the transportation cost element of every gallon of fuel you purchase from your supplier. When you talk to your fuel supplier you should establish both a primary and secondary fuel terminal for distribution of your Jet fuel. You need to make sure that the terminals have the storage capability for your product as well as locations within a reasonable distance of your FBO. Know the cost of transportation from each of the terminals as well as any surcharges and extra waiting expense. The cost per mile can be different for each common carrier; therefore, you need to manage this cost. Of course, your fuel supplier may want to assure themselves of good quality control by the carriers, but most all common carriers of aviation fuel are aware of quality control issues and utilize dedicated trucks and trailers. Avgas may come from a long distance due to the limited refinery capacity in the United States. Therefore, the cost of transportation for this fuel type may not be as negotiable as the cost for Jet-A.

Credit terms

Did you know the credit terms provided in your fuel agreement can be negotiated? Providing good financial statements is the primary key and can assist you in discussions with your fuel supplier. It is standard practice today to use electronic payment methods for fuel and reimbursements back to you of your credit card receipts. This system assures both the FBO and the fuel supplier of prompt payments in accordance with your negotiated credit terms.

Taxes: Federal, LUST, State, Local and Flowage Fees

There are five taxes you have to deal with in your fuel agreement: Federal, state, local, LUST and flowage fees. You can’t do much about the fees set by the federal, state and local governments. The flowage fee is a “tax” because it is imposed by your airport authority. An FBO can try to negotiate the flowage fee with the airport authority, but in many cases it is set by the local government and you just have to pass it along to your customer. There are two methods of payment for flowage fees. The first, and most common, is paid based upon the amount of fuel delivered into storage, and the second method is based upon the amount of fuel pumped into wing.

Keep in mind that there are many factors and nuances, and we will not be able to expound on all of them in the framework of a blog. Therefore, we encourage you to attend our next NATA FBO Success Seminar, March 8-9 in New Orleans, where we spend additional time and discussion on these important topics as well as others.

If you have a comment you'd like to share, please do so in the space provided below.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

Subscribe:

Subscribe to the AC-U-KWIK FBO Connection Newsletter

Monday
Feb012016

What FBOs Can Take Away from the NBAA S&D Conference

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

The transient business aircraft customer is still the lifeblood of FBO fuel sales. Attracting them to the FBO ramp is the primary reason the annual NBAA Schedulers & Dispatchers (S&D) Conference is heavily attended by FBO owners and operators.

At this year's event, held January 19-22 in Tampa, Fla., we witnessed both a record crowd and a record number of exhibitors. More than 2,800 attendees were kept busy with 29 scheduled educational sessions and 517 exhibitors consisting mostly of FBOs displaying under fuel company banners.

It's truly a symbiotic relationship. The schedulers and dispatchers benefit from numerous educational sessions and scholarships provided by various aviation services companies. The FBOs get to network and meet face to face with the S&D contingency to make a positive impression in order to attract their coveted turbine aircraft fleet.

Of note is the splendid job of the Schedulers and Dispatchers Committee, along with the NBAA, in putting together and running an excellent conference. Every year seems to get better. Hats off to their tireless chairperson for this year's S&D, Eve Gregory, flight services manager, C&S Aviation.

As we conversed with many of the exhibiting FBOs, we were able to get a feel for some of the top opportunities, issues and concerns facing the FBO industry. In order of ranking, with No. 1 being the liveliest topic, we believe the following statements represent the overall opinion of each topic:

Tankering of fuel and more efficient aircraft

  • Although we will probably see a slight increase in uplifts this year, we are also seeing a few of the larger customers purchasing fuel at previous stops or tankering fuel from their home base through to their destination.
  • We are a transient/resort destination. There is a lower percentage of aircraft taking fuel now than there used to be.

Aging GA owners

  • General aviation is losing people that fly. This hurts our Avgas sales. A lot of the old timers are aging out, and there aren't as many younger pilots and owners taking their place due to high costs of airplane ownership.

Facility fees on rise

  • There's going to be a bigger spotlight put on the cost of providing facility services that was previously paid via fuel sales. With FBOs dealing with contract fuel pricing and better fuel management by aircraft operators, we are going to have to charge ramp, parking and facility fees.

Contract fueling

  • Now more than ever, an FBO seems to have to compete with low contract fuel prices. Also, courtesy fuel purchases are disappearing.

Better customer service

  • An FBO that provides a better customer service experience, one that exceeds expectations of the client to some degree, will be fine in this coming year.

Lower fuel prices

  • Lower fuel prices have contributed to higher fuel margins if we manage these margins wisely. However, the higher margins are countered by the increased salary that is necessary to keep skilled and experienced workers.
  • With lower fuel prices, it proves that fuel is becoming more and more a commodity and no longer the stable source of operational revenue relied on by FBOs for many years.

In addition to attending the S&D Conference, we also released the results of our Annual FBO Fuel Sales Survey. Please click here to see the results.

If you would like to add a comment about the opportunities, issues and concerns facing the FBO industry, please do so at the end of this blog in the comment section.

In addition, we cover many of these topics in detail at our Annual NATA FBO Success Seminar scheduled for March 8-9 in New Orleans. We urge all FBO owners, operators, managers and supervisors to attend this seminar and participate in lively discussions on these topics and others.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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Tuesday
Jan192016

FBO Fuel Sales Survey: 54 Percent of FBOs Say Fuel Sales Increased in 2015

Fifty-four percent of U.S. FBOs say their fuel sales increased in 2015 compared to 2014, according to the 2016 Annual FBO Fuel Sales Survey results released by Aviation Business Strategies Group at the 2016 NBAA Schedulers & Dispatchers Conference in Tampa, Fla.

Of the 54 percent of FBOs surveyed that reported increased fuel sales in 2015, 23 percent reported a 1 to 4 percent increase, 15 percent reported a 5 to 8 percent increase, and 16 percent reported an 8 percent or greater increase, ABSG principals John Enticknap and Ron Jackson say. Enticknap and Jackson are the AC-U-KWIK FBO Connection bloggers.

The increase in fuel sales in 2015 builds on increases in the two previous years. For 2014, 49 percent of responding FBOs reported a year-over-year increase in fuel sales. Surveyed about 2013, 43 percent of FBOs reported greater fuel sales compared to 2012.

“This is the first time since we started the survey that more than 50 percent of the respondents experienced an increase in fuel sales over the previous year,” Enticknap says.

Although a majority of FBOs reported increased sales, 28 percent of FBOs responding to the survey experienced a decrease in fuel sales in 2015, Enticknap says. The other 18 percent of FBOs says fuel sales were flat.

“This is still a fractured marketplace that is showing some positive signs of recovery,” Enticknap says.

FBOs also provided a forecast for 2016. Most FBOs participating in the survey — 58 percent — say they expect an increase in fuel sales in 2016 compared to 2015, Jackson says. Although no respondents expect to increase fuel sales by more than 8 percent, 18 percent expect a 5 to 8 percent increase, and 40 percent expect a 1 to 4 percent increase.

“Looking ahead, more than 90 percent of surveyed respondents said they expect to have the same or increased fuel sales this year compared to their 2015 results,” Jackson says. “If this forecast holds up, 2016 could prove to be a watershed year for the industry.”

These expectations for 2016 are similar to expectations FBOs had for 2015. One year ago, the Annual FBO Fuel Sales Survey found that 61 percent of FBOs were predicting an increase in 2015 fuel sales. In all, 89 percent had been expecting flat or increased fuel sales in 2015.

When asked about their expectations for the economy in general, 41 percent of the responding FBOs said the economy is not heading in the right direction, and 27 percent have a positive outlook about the economy. The rest — 32 percent — were undecided.

Transients’ Tankering Taking Hold

Finally, Enticknap and Jackson asked about fuel purchases by transient customers in this year’s survey.

“Nearly half the respondents indicated that up to 40 percent of aircraft customers coming onto their ramp did not buy fuel,” Enticknap says. “With the current U.S. FBO business model relying on fuel sales to fund their operation, this is an alarming development.”

Enticknap attributes this phenomenon of aircraft stopping on an FBO’s ramp without a fuel purchase to two factors. More flight departments are choosing to tanker fuel to their destinations and back to their bases. And more jets are more fuel efficient.

To adjust to this trend, Enticknap offers the advice he and Jackson share with FBOs at the NATA FBO Success Seminar: FBOs can charge customers a ramp fee and a fee to use the facility, he says.

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Tuesday
Jan122016

Essential Fuel Supplier Agreement Elements: Term of Agreement, Pricing Methodology, and Transportation and Delivery

Detailing the 10 Essential Elements of a Favorable Fuel Supplier Agreement, Part 1

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our last blog post, we introduced our new series on the 10 essential elements of a favorable fuel supplier agreement which is one of the six intangibles that can build equity in your FBO.

For this blog post, we'll break down three of the favorable fuel supplier agreement elements and provide insight and tips to help you protect your business while adding intrinsic value.

Before we detail each of these elements, it is important to understand that you should act in your own best interest by first going out for competitive bids to several fuel suppliers. This will give you a better understanding of the parameters set by each fuel supplier and which incentives are available that may help you in your negotiating process.

Term of agreement

In a nutshell, you should protect your enterprise from engaging in an agreement that is excessively long in order to maintain flexibility within an ever changing industry landscape. As you grow your business, and in particular your fuel volume, you can gain leverage by keeping the term of your fuel supplier agreement within a three- to five-year period. You may find that you can obtain a better fuel price by a longer-term agreement, but you may lose the desired flexibility that a shorter term provides.

Pricing methodology

Understanding fuel pricing methodology will increase your odds of negotiating a favorable agreement. If your FBO is pumping at least 300,000 to 400,000 gallons per year, you should be able to get a contract that has an index-based pricing formula. That way, you can negotiate the differential fee to be paid to your supplier. The differential is the profit margin that the supplier will be receiving on each fuel purchase by the FBO. Unbundle your pricing structure so you know each cost element. For example:

  • Index price
  • Differential
  • Transportation
  • Federal taxes
  • State and local taxes
  • Flowage fees at the airport

This pricing formula applies to Jet A purchases. Avgas pricing, on the other hand, is determined at the time of purchase.

Transportation and delivery

Don't overlook or downplay this element, for there are savings that you can negotiate. First, you need to know the primary terminal and secondary terminal where your Jet A fuel and Avgas will be picked up by the transportation company. Delivery should favor your FBO schedule, such as at night or during the slow periods during the day. This will optimize time for quality control to be completed efficiently.

Also, obtain proposals from multiple transportation firms. Although they must be approved by your supplier, this can benefit your effort to minimize costs. After all, you, as the FBO owner/operator, are the ultimate customer. You should also determine any extra charges, such as delays in delivery, extra charges for high cost of fuel or other fees. Although extra charges for high cost of fuel are not an issue in today’s market, they have been in the past.

As we work through each of these elements, please keep in mind that there are many factors and nuances that we will not be able to expound on in the framework of a blog. Therefore, we encourage you to attend one of our NATA FBO Success Seminars where we spend additional time and discussion on these important topics as well as others.

About the bloggers:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

Subscribe:

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