FBO Refueling Management: Your Bottom-Line Anchor
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Credit: getty images/icholakov
The secret to running a successful FBO enterprise hinges primarily on effectively managing your refueling business. What an FBO puts on the bottom line from fuel sales literally anchors the entire operation.
Yes, other revenue streams are important for cash flow and keeping the lights on, such as hangar rentals and aircraft maintenance, but it’s fuel sales that does the heavy lifting when it comes to meeting payroll, paying benefits, facility upkeep and the ever-escalating cost of insurance.
In developing and teaching the FBO Success Seminars we emphasized the importance of three key elements to managing retail fuel sales:
1. Watch your margins
Whenever FBO’s take delivery of jet fuel, it is important to know the cost of fuel that is already in your tank farm and cost of fuel you are receiving. For instance, when you negotiated your retail fuel agreement with your fuel supplier, you put together an indexed based agreement. Your price is based upon the weekly average of the Platts Index, plus a fixed differential fee. Therefore, the price changes every Tuesday.
So where do you get the Platts Index numbers? Ask your fuel supplier! You can also review IATA.org Jet Fuel Price Monitor and conduct an internet search for the latest crude oil prices in order to track price change trends.
Other costs to consider include federal taxes ($0.244 per gallon), local/state taxes, LUST ($.002 per gallon), transportation and airport fuel flowage fees.
2. Buy fuel at the right time
As mentioned above, your price changes every Tuesday with the change in the Platts Index, either up or down. Sometimes the index can change dramatically and can affect your profit margins. With strategic purchasing, you can increase your margins by having lower cost fuel.
If the Platts Index is going up, do not buy fuel. Conversely, if the Platts Index is going down, buy fuel that week. This fuel hedging technique is of course based on your fuel storage capacity and the amount of fuel you are pumping. However, over time you can save money on your fuel purchasing.
3. Stay competitive in your pricing
Don’t give it away. Many FBOs fall into the trap of discounting fuel because another FBO on the field, or at a competing nearby airport, is trying to gain market share through deep fuel discounting. This can only lead to a downward spiral of not being profitable.
Being in the fuel business allows for substantial amounts of cash flowing through your business. A load of fuel can cost up to $40,000 or even more. With two 20,000-gallon storage tanks, you can easily have more than $100,000 tied up in fuel inventory.
Warning! Trying to keep pace with high discount competitors can mask margin deterioration because you have high cash flow. But that is usually short lived!!
Do your homework with an online market survey to help set your retail fuel price. Utilize available online tools and conduct a 50-mile radius survey from your base of operations. Also, you can expand your search nationally to get a feel for all markets.
And by all means, go visit the competition. See how they stack up by comparison. Do they have a better ramp or updated facilities? Discover what your advantage might be.
We know that fuel pricing needs to be competitive. But we also know that most fuel is not sold at the posted retail price. Remember that most fuel suppliers have contract fuel programs and that they add a margin on top of your negotiated into-plane price. Therefore, do not under sell yourself. There are also independent fuel discounters, so there is no need give it away!
Refueling Management is one of the four R’s we introduced in our opening FBO Management blog series: Managing the R’s to Profitability. The four R’s are:
1. Risk Management
2. Relationship Management
3. Refueling Management
4. Real Estate Management
In our last blog post we discussed Relationship Management. Next, we will delve into the ins and outs of Real Estate Management.
© 2025 ABSG/TJG
Please leave any comments you have about this blog post below. If you have any questions, please send us an email: John Enticknap, jenticknap@bellsouth.net; Ron Jackson, ronjacksongroup@gmail.com.
ABOUT THE BLOGGERS: John Enticknap is the founder of Aviation Business Strategies Group (ABSG). He has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of ABSG and president of The Jackson Group (TJG), a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.