Fuel Management for North America – Dealing with Taxes, Surcharges and Logistics


The challenge: Calculating jet fuel taxes and fees

The complexity of jet fuel taxes in the United States makes the job of calculating fuelling fees challenging. For example, tax is applied at a federal level (country-wide) and can also be applied at three other levels: state, county and city.

In addition, some US taxes are calculated by net volume of fuel while others are calculated by gross volume, and some are even taxes which are calculated as a percentage of another percentage-based tax!

The challenge for airlines is to calculate and apply these taxes correctly, so that contracts are accurate, fuel invoices can be verified and so that fuel costs can be monitored closely. Even a mid-sized airline could receive 150,000 fuel tickets in a year, so taxes need to be calculated for at least 150,000 fuel transactions. Airlines often have to manually gather information from various sources to do this (fuel tickets, contracts, exchange rates) and calculate taxes using basic desktop software such as Excel. This is a slow, labor-intensive task and one that’s prone to error.

 

The solution: FuelPlus Tax Management module

The FuelPlus software for airlines, Airline.One, now contains a Tax Management module, which will help overcome this challenge. All applicable US taxes can be stored centrally in this module, making it easy for airlines to manage and apply these.

When a new contract is created in the system, it automatically searches for the appropriate taxes for that location and adds these to the contract. The software can also handle very complex pricing scenarios, such as percentage-based taxes based on another percentage-based tax, and can apply taxes based on net volume and gross volume within the same contract.

In addition, the Tax Management module provides various tax reports such as accrued taxes per jurisdiction and tax code.

 

The challenge: Monitoring ‘fuel into storage’ contracts and logistics fees

Many US airlines buy fuel for self-supply; that is to say they operate their own logistics network including pipelines, trucks and storage tanks. This is less common for airlines operating in other regions, which mainly buy fuel at airports to go directly into the plane.

Operating fuel supplies and logistics networks brings additional challenges of course. For example, the Logistics team must undertake a regular forecast of their inventory to ensure supplies are maintained at the right level.

In addition, the costs associated with transporting and delivering fuel into storage must be documented and monitored, and often there is a complex range of scenarios that will affect the price of each fuelling or logistics event.  For example, when fuel is delivered (the time of day or night) can affect the price.

 

The solution: FuelPlus’ contract, inventory, and logistics management features

Airline.One has inventory planning capabilities that allow airlines to use the ‘just-in-time’ inventory strategy. This can prevent fuel shortages while at the same time improving the management of cash flow. With Airline.One, you can:

  • Forecast inventory based on the volume demand plan and scheduled deliveries
  • Prepare monthly volume nominations by using effective supply contracts and available contracted volumes
  • Capture delivery schedules for each inventory, as communicated by the supplier.

In addition, the Logistics module enables you to:

  • Capture or import fuel movements between different storage systems
  • Manage fuel transports on different transportation systems
  • Calculate and track transportation gains and losses
  • Calculate costs for transport and related services by using related transportation and service contracts maintained in the Contract module.

We have also just improved our contract management functions. Airline.One is now better at handling the complex pricing scenarios that relate to storage and logistics contracts. It also calculates the cost of storage and logistics contracts so airlines can get a clear overview of these at any point.