IATA are pushing to introduce a way of standardizing the jet fuel tender process between airlines, fuel suppliers and fuel resellers. And so a group of airlines, suppliers and IATA representatives have created a task force to address this. One thing I like about the name is it’s a task force not a committee or a steering group, a task force which gives the strong message that IATA means business!
You may ask why bother with a common tender standard? Well there are many other worldwide standards and these standards allow us all to know exactly what to expect when in certain situations. And ultimately these standards make our lives a whole lot easier! For example, The Big Mac. For burger fans out there wherever you go in the world you’re pretty much guaranteed a consistent product. Not necessarily good, but you know what you’re getting. The same applies to cars. Wherever you drive a car you can guarantee that the pedals follow the same configuration. And finally traffic lights. Totally the same wherever you go. Put simply, red means stop, green means go. The only difference is that in some parts of the world all 3 colors mean……go.
Humor aside standards are important. And what about in our world? The world of aviation fuel. What standards are there in the way airlines and suppliers conduct their business?
Well already in wide use is the IATA Fuel Transaction standard and the IATA Fuel Invoice standard that enables a variety of different Fuel Suppliers and into plane agents to forward fuel transaction and invoice information electronically.
In fact IATA states that “The purpose of the standards is to facilitate a cost effective exchange of data between parties to ensure an accurate consummation of a buy/sell transaction.” But there is more to it than just accuracy and cost effectiveness these standards very much increase efficiencies in a huge way.
However there is nothing in place for fuel tenders yet this process is widely recognized as a headache to the industry and is why work is now underway to develop a standard.
You may ask why do we need a fuel tender standard? Airlines and suppliers are able to do business, able to tender for fuel, able to bid for fuel and able to conclude commercial agreements for fuel. So why? What are the issues that are shared by airlines and suppliers that makes this so important?
Well it appears there are 3 major issues that demonstrates why this is so important.
This leads to airlines sending offers in a variety of formats and subsequently suppliers sending their responses in a variety of formats. What’s more this is all done in a very manual way which of course takes time, is repetitive and prone to human errors.
So the obvious solution to address these issues or pain-points is to develop a standard and draw on the experience of earlier fuel data standards.
As already mentioned one important thing is that airlines and suppliers use the same terminology. Now we all know the language of aviation, however there are different naming conventions and terminology used. A simplistic example is with airport codes, the IATA code for Dubai airport is DXB, the ICAO code for Dubai airport is OMDB, so in our tenders which code should we use? These differences can lead to misinterpretation and a need for unnecessary checks. And without this first and very important step it’s impossible to begin the process of any sort of standardization.
Next step is to standardize the format and the mechanism of data exchange. So what has now been created is a model using Excel. Something we all have on our computers, and so something that can easily be used by all. This Excel workbook includes all the necessary information required for airlines to complete their requirements and suppliers to complete their bids
This is now something we need to get comfortable with and understand the format, much the same as we’re comfortable with a traffic lights!
Using Excel definitely provides some structure and a more effective way of working, and just putting this in place would be a big step forward. But Excel doesn’t allow you to formulate a true standard. That is where XML is needed, as it’s recognized globally, is endorsed by software industry market leaders and allows for auto processing of data into other systems sharing the defined format.
So with an XML standard in place how will the tender process work? Put simply the XML file will be transmitted via FTP from the airline into a secure server. This file will then get picked up by the suppliers IT system and then later accessed by the person responsible to answer the request. After the bid is completed the file is then transmitted again via FTP to the airlines server for pick up and review by the person responsible on the airline side.
Now that the routine work has been done the negotiation process can begin. There is no system to take the place of your knowledge, relationships and negotiation skills so after the exchange of the standard data it’s now up to everyone involved to get the best deal done!
For this to really work there has to be IT systems configured to send and receive the XML Fuel Tender standard on both sides. This is the final piece of the puzzle and is where the biggest benefits will be found as it is here that automation plays a key role and will massively speed up the process.
If the airline is using a FuelPlus system all fields in the tender standard are auto populated based on the demand plan calculated location by location. Location suppliers are added from the database before transmission directly via FTP to the chosen suppliers’ servers.
On reaching the supplier system if there are contracts in place the tender document is auto populated with index, differential, and all duties, fees, taxes and payment terms. At this point any necessary amendments need to be made to the bid before pushing the button to transmit back to the airlines. On receipt the airline system updates the tender with the details of the bid, applies normalization calculations to rank the bids, before the further negotiation rounds begin. These actions can then continue until the tender is awarded. Making the whole process a lot simpler due to this major automation!
Let’s hope that this finally gets the green light at the next IATA event and more importantly the required buy in from all involved parties. As it will mean