FBO Success: The Finer Points of a Favorable Fuel Supplier Agreement Can Pay Dividends

/
Fueling aircraft

Credit: BanksPhotos

Details, details, details. It’s often humdrum, but paying attention of the subtler points of a fuel supplier agreement can pay dividends in the long run.

For this blog post, we’ll discuss the finer points of a favorable fuel supplier agreement. This includes taxes (federal, state, local, LUST and flowage fees), in addition to quality control, training and marketing support.

Taxes: Federal, State, Local, LUST & Flowage Fees

For every gallon of fuel FBOs pump, the tax man is there, waiting to collect. There’s no way around it. Whether it’s a federal, state or a local tax levied, it’s the cost of doing business.  Included is the Leaking Underground Storage Tank (LUST)  tax, levied on every gallon sold which goes into a national trust fund.

We list flowage fees as a tax because it is imposed by the local airport authority. Although FBOs can attempt to negotiate the flowage fee rate with the airport authority, in many cases it is set by the local government and passed on to the customers.

There are basically two methods of payment for flowage fees. The first, and most common is paid based upon the amount of fuel delivered into storage. The second method is when the airport authority levies a fee based on the amount of fuel pumped into wing.

Quality Control & Training

In negotiating an advantageous fuel supplier agreement, don’t overlook the aspects of establishing a quality control and training program. It’s in the best interest of both parties to put safety at the forefront of all operations when delivering fuel to your customers aircraft.

Most fuel suppliers will have the resources to assist in training employees in all aspects of the fuel delivery process. The fuel supplier agreement should detail the type of training provided, whether it’s their own proprietary training program or one to supplement an existing program (such as NATA’s Safety 1st).

In addition, include details of how the training will be delivered. Will the fuel supplier perform on-site comprehensive training or conduct an audit, or both? Will the supplier complete quality assurance seminars/training and at whose expense?

Marketing Support

The spirit of a mutually agreeable fuel supplier agreement is to become partners in the business of selling fuel. It’s a symbiotic relationship that operates interdependently.

To that end, the fuel supplier should assist the FBO in marketing the facility alongside their brand of fuel. Often times this entails establishing a marketing co-op program funded by fuel volume. Like many parts of the fuel agreement, the terms or percentage of fuel sales put into the co-op fund is somewhat negotiable.

In our next blog post, we’ll examine additional components in developing a favorable fuel supplier agreement.

ABOUT THE BLOGGERS: John Enticknap (404-867-5518) has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson (972-979-6566) is co-founder of Aviation Business Strategies Group (ABSG) and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training.

SUBSCRIBE:

Subscribe to the AC-U-KWIK FBO Connection Newsletter    

© 2023 ABSG