The document discusses how airline fuel consortia operate and manage common-use airport fuel systems through shared ownership and governance. At many major airports, airlines form consortia to jointly oversee a single fuel system rather than having separate systems. This provides more efficient and cost-effective fuel delivery. Consortia are typically established as legal entities or committees to negotiate fuel system leases and operations on behalf of member airlines, ensuring secure fuel supply and quality control.
The document discusses how airline fuel consortia operate and manage common-use airport fuel systems through shared ownership and governance. At many major airports, airlines form consortia to jointly oversee a single fuel system rather than having separate systems. This provides more efficient and cost-effective fuel delivery. Consortia are typically established as legal entities or committees to negotiate fuel system leases and operations on behalf of member airlines, ensuring secure fuel supply and quality control.
The document discusses how airline fuel consortia operate and manage common-use airport fuel systems through shared ownership and governance. At many major airports, airlines form consortia to jointly oversee a single fuel system rather than having separate systems. This provides more efficient and cost-effective fuel delivery. Consortia are typically established as legal entities or committees to negotiate fuel system leases and operations on behalf of member airlines, ensuring secure fuel supply and quality control.
The document discusses how airline fuel consortia operate and manage common-use airport fuel systems through shared ownership and governance. At many major airports, airlines form consortia to jointly oversee a single fuel system rather than having separate systems. This provides more efficient and cost-effective fuel delivery. Consortia are typically established as legal entities or committees to negotiate fuel system leases and operations on behalf of member airlines, ensuring secure fuel supply and quality control.
The principal aim of an airline fuel manager is typically act through committees, representing to ensure the cost-effective, on-time delivery all member airlines in an equitable manner, to of on-specification jet fuel to each of its govern all matters concerning the common-use operating aircraft. Ensuring a secure supply airport fuel systems and, in many instances, off- of fuel to the airfield is also known as keeping airport fuel facilities and distribution systems. the airport “wet.” Getting on-spec fuel to the airport is the first step. Second comes the safe, At locations where the airlines collectively cost-effective administration and operation own, operate or lease the fuel facilities or of airport fuel systems, and maintaining the other assets, they may choose to form a quality of the fuel all the way into the aircraft. legal entity (e.g., corporation, LLC, nonprofit organization). Otherwise, the airlines, through To this end, over the past several decades, a simple committee structure as established in at more than 60 airports in the United States the airline consortium organic agreement(s), and Canada, airlines have chosen to share and will govern and control the operation and oversee the operation of a single fuel system. maintenance of the fuel system facilities. This common, multiple-user system provides a more efficient and cost-effective alternative to While a fuel consortium is responsible for the having an array of exclusive-use fuel systems administration, oversight and operation of on the airport. At these airports, airline fuel the facility, it is typically supported by third- consortia are established to operate, manage party professional services such as legal, and finance improvements to and replacement environmental, engineering, financial, quality of common fuel systems. The consortia assurance and regulatory compliance.
Airport authority has full ownership and control Airport authority owns the fuel system but LLC is the most desirable modern structure, of the fuel system; it publishes and collects fuel chooses to have a group of airlines manage/ characterized by a legal entity that has signed system-related throughput fees from all airlines. operate without a fuel system lease; a fuel system lease with the airport – key Advisory committee – not a legal entity – is alternatively, the airport leases the fuel system elements to obtaining financing for capital formed to help airlines communicate with the to an airline and a fuel committee is formed to investment. Unlike LLCs, corporations may issue airport authority on fuel system-related issues, select the M&O operator, manage the system stocks to attract investment but offer less tax- but typically lacks an interline agreement to and share related costs. Not a legal entity, but return flexibility. define cost/liability allocation and step-up often members sign an interline agreement provisions. to define cost/liability allocation and step-up provisions. Generally, the airport does not dictate the fuel system throughput fee charged to airlines. Fuel Consortium Principles Security of Supply Quality Control The airlines collaborate to ensure sufficient storage and A single system assures higher-quality fuel, with fewer reliable delivery systems, thereby ensuring continuity opportunities to introduce contaminants. of flight operations. Expertise Efficiency By sharing resources, participants are better suited A consortium enables a wide array of carriers to to directly manage the critical on-airport jet fuel consolidate all fuel systems into one and work distribution facilities. collectively to control costs.
Fuel Consortium Characteristics
• Legal entity formed to negotiate on behalf of any • Creditworthy entities able to borrow in public and airline that wants to join private markets • Lease with the airport • Annual budget and membership meetings • Interline agreement to share costs • Full financial disclosure • Non-member rates and non-contracting users • Credit protections from member bankruptcy and • Legal counsel late payments • Maintenance-and-operation (M&O) agreement • Transparent and frequent communication from the • Insurance and bank accounts separated from the chair on important issues operator • Independent environmental counsel and/or engineering consultants
Fuel Consortium Benefits
For Airports For Airlines • Simplified negotiating process with a single entity • Control to optimize supply chain and ensure access to multiple suppliers • Can lead to better communication • Long-term lease allows for long-term planning on- and off-airport • Step-up provision reduces airports’ counterparty risk • Financing at consortium level advantageous for three reasons: • Transfers responsibility for execution to the consortium • Improved creditworthiness reduces financing costs, due to ability • Infrastructure planning based on airlines’ aggregate business plan to tap markets as infrastructure rather than as airlines • Financing at consortium level does not affect airport credit metrics • Borrowing structure can be customized to match project needs • Common operator promotes improved fuel quality control and inventory • Debt remains off individual airlines’ balance sheets management transparency • Membership changes do not require corporate document amendments or renegotiations • Airline assumption of lease promotes environmental stewardship • Cost-effective management of fuel system helps airport retain and attract air service Ideal Airport Fuel System • Multiple fuel suppliers, one tank farm operator, multiple into-plane providers • A single cost-effective, not-for-profit facility • Airlines hire and oversee the facility operator • Economical, competitive fuel supply and into-plane services