Our CEO, Klaus-Peter Warnke said recently in the press that airlines could save 2–3% of their fuel expenses by using the FuelPlus platform, and that this is equivalent to selling an extra 300,000 seats for a medium-sized airline.
So where would these savings come from and how much could your airline shave off its total fuel bill?
1. Accurate fuel planning and budgeting
The annual fuel volume forecast is the foundation of an airline’s fuel budget and fuel tenders. It must be as accurate as possible but there are challenges. It can be difficult to assemble historical fuel data of actual uplifts and consumptions so Flight Operations teams may have to settle for second best: unreliable averages.
It’s also a real challenge trying to establish a realistic budget for this volume when fuel prices are so complex and variable. But what if historical fuel data was at your fingertips, stored in the same IT system as all your planning and budgeting tools? What if your standard flight schedules and up-to-date location prices were stored here too?
Then you could calculate a volume forecast and a fuel budget within a matter of hours instead of days or weeks. That’s a huge time and labor saving and it’s real – one airline we know reduced the length of time it took to prepare its fuel budget from two weeks to a few hours. And it did it by using our fuel management software.
2. Efficient fuel tendering
The fuel tendering process is one of the areas with the greatest potential for improvement. That’s because fuel is one of an airline’s biggest expenses so when things go wrong (or right) the impact on the bottom line is significant. Tendering is also particularly vulnerable to mistakes and inefficiencies because it’s often a largely manual task.
Firstly, if the fuel volume forecast is based on averages (see point 1), you are likely to end up buying too much fuel or not enough. Either outcome can be costly.
Secondly, if airlines rely on manual systems to conduct the tender process – such as using Excel spreadsheets to gather, ‘normalize’ and compare information from bids – there is a huge labor cost and a high risk of human error. Worryingly, IATA found that up to 80% of effort in tendering is spent on administrative or data capture activities.
However, leading airlines such as Japan Airlines and WestJet use software that can automatically capture and normalize bids for them, ensuring they get the best price for their fuel without wasting time and resources.
If the same software has also generated accurate fuel volume forecasts and automatically prepared tender documents based on this – as airline.One does – then even greater efficiencies will be gained.
3. An optimized dispatch operation
This point is quite simple: when an airline has access to accurate fuel consumption information (historical data) for each leg and flight event, it can optimize its dispatch operation and reduce fuel usage. We know this because one of our customers managed to do this and as a result trimmed 5% off its total annual fuel consumption.
So, ask yourself this: can you automatically capture and process the data from flight events, fuel messages and fuel tickets? Can you then store this data centrally so that all authorized teams can easily access it and use it for their own purposes? If not then it might be time to change your software.
4. Smarter contract management
We know from our 20 years of work with airlines, that managing the sheer number and variety of fuel-related contracts places a big administrative strain on carriers. Price updates and contracted volumes need constant monitoring so there must be an effective flow of information from many sources.
Often, airlines have no choice but to manually gather, link and update all the necessary data (contract terms, fuel price indexes, fuel volumes, duties, fees and taxes, and actual performance). It’s time consuming, inefficient and reliant on individual experience and know-how.
But there’s a much smarter way to manage your fuel supply contracts. If you automate many of the mundane data collection and inputting tasks, you can save time and money or at least re-allocate it to more valuable activities, such as building stronger supplier relationships.
There is a plethora of generic contract management solutions out there, but few can cope with the complexities of the aviation fuel industry. For instance, can your contract management software do the following?
- Automatically generate a contract when a bid is awarded.
- Apply predefined price categories based on the IATA directory
- Import daily market data from providers such as Platts, OPIS and Global Insight
- Automatically calculate averages using this data and update index-based contracts for you
- Keep track of duties, fees and taxes per contract, converting between local currency and invoice currency.
Imagine how much more efficient you could be with this set of features at your disposal. Our new ROI calculator can give you the numbers. Based on a few key pieces of data you supply, such as your annual fuel bill, it works out what you’re likely to save by switching to our airline.One system.
5. Diligent data collection and operations monitoring
As we’ve already discussed in points 1, 2 and 3, if you can automatically capture your data from flight events, fuel messages and fuel tickets and store this centrally, many parts of the fuel management process are streamlined immediately and savings follow.
That’s because accurate fuel uplift and consumption statistics are so vital to many functions – Planning, Procurement, Finance, Contract Management – and because traditionally, collecting and cleaning this data has been a slow, cumbersome process.
But it needn’t be. Diligent data collection and operations monitoring without the administrative burden is very achievable, but you will need the help of specialized software. This system will be able to do much of the hard work for you, such as:
- electronically capture or import data such as fuel volumes at various stages (before fuelling, off blocks, on blocks, etc.) as well as fuel ticket data
- match fuel tickets with effective contracts and calculate the expected cost of each fuelling
- run reports and calculations, including: average fuel price per location and customer, or price overview for each contract
- generate accruals for product and services received
- provide emissions reports that are compliant with CORSIA and EU ETS.
Setting all of this up of course requires an upfront investment of time and money, but the paybacks are huge, particularly after several years.
6. Thorough invoice verification and accounting
Alongside tendering, improving the invoice verification process presents the biggest opportunity for airlines who want to run a leaner, more efficient operation.
With some large airlines receiving hundreds of thousands of fuel invoices each year – and potentially many different items listed on each one – it’s not surprising that many carriers can’t verify every invoice and instead rely on sampling or setting tolerances. Unfortunately, this means that they often over-pay or double-pay for fuel. This is an unacceptable situation for any commercial business and it can be easily put right.
Specialized fuel management software like ours has the ability to automatically check all invoices against data that’s already known by the system – contract prices, actual flight events, fuel tickets, VAT rates for locations and flight types etc. Every single day, it makes sure that you are only paying for the fuel you use, immediately saving you money. Now, that has to be a worthwhile investment.
The software can also create accounting documents for released invoices, automatically send financial documents to a system such as SAP, Oracle or JD Edwards, and apply workflows so that you can easily control your entire invoice checking process – crucial for compliance.
When you take all six of these potential efficiencies into account, the return on investment for fuel management software like ours is impressive. Many of our customers have reported an ROI of well over 10x when the platform is used comprehensively over several years. And this is by no means an exhaustive list; there are many more areas of the end-to-end fuel management process that can be optimized.
How many of these potential savings were you aware of and how many is your airline taking advantage of?