Fuel Management

[chrisbonfield]

Hey,

Just a quick question regarding fuel management.

If you are hedging your fuel, does this make signing a fuel supplier contract obsolete? So if you hedge your fuel at a certain price AND have a fuel supplier contract, will you:

a) pay the hedged price (no supplier discount); or
b) pay hedged price minus your suppliers discount?

Cheers,

cb

[swiftus27]

I know one thing about this.... you only get the benefit at your home airport.  You do not get the supplier discount at the 'away' airport.

[exchlbg]

As I understood it, the supplier contract at your home counts first. So the hedged price only counts for your off-base tanking.

[Sami]

Manual should have the answers to these. https://www.airwaysim.com/game/Manual/Office/Fuel/

You can have both at the same time.

[chrisbonfield]

Cheers all.

Thanks Sami - hadn't seen bottom paragraph!

cb

[exchlbg]

Likewise. Now I got it.

[FlyTO]

Just wondering what other airlines have chosen to do with the fuel contracts and fuel hedging. This is my first time using it and it seems to be finally helping me to save some money!

Current fuel price: 320 USD /1000kg

I hedged fuel at 249USD for 10months at 80% for a 249USD +4.9%fee.
My fuel contract at my home base 142,200 USD for -5.1% from daily market price.
My airline currently averages 66 910 tonnes (kg) fuel consumption.

My other question is: If my current fuel contract ends in around 2 years, and the termination contract fee is 3.5M, if I were to cancel it and switch to another contract I see right now, will that new contract I currently see will still be there after I cancel my current contract? Or will it immediately change to a higher monthly payment?

The new contract that is really tempting is:
Discount   -8.4% from daily market prices
Monthly fee   1 429 400 USD
Contract length   4 years 1 months

[exchlbg]

All I can see is that you will actually loose money. Don´t forget fuel contracts only are valid for your home base, they don´t include tanking abroad. So it´s only counting for half your fuel. If you deduct 8.4 % off half your fuel bill, it is less than the contract fee. (if given data all count for monthly numbers).

[Sanabas]

Nope, won't lose money. My current fuel bill is about 8 mill/week, using 42k tonnes, and a lower hedged price. So FlyTO's weekly bill should be around 14 mill, at a guess. At that price, an 8.4% discount saves 2.5 million/month, 1 million more than the contract price.

But since the discount is only increasing by 3.3% over the current contract, you'd need a weekly bill of ~18 million to break even. Of course, the new contract lasts 2 more years, and the replacement of the current contract when it ends may be nowhere near as good. So even though the new deal has a one-off 3.5 mill payment, and will leave you 100k/week worse off (which is basically nothing when alliance fees are about 1 million/week), it's probably a good idea to take it.

I'd guess the existing offers will remain if you hit terminate. But I haven't tried it, so it is only a guess.

[brique]

there is also an element of guesswork involved, much like fuel hedging : the monthly fee may be sensible with fuel at $400 but less so if fuel price is $200  : with the fuel price more likely to move up over the contract period it can mean it may not pay now but will in a year or so; and really pay off big if fuel spikes mega-high : -8% when fuel is $800 x 42k tonnes is not small change...

[Sanabas]

More importantly, the contract fee goes up with airline size. If you use 60k tonnes/week now, you could easily use 300k tonnes/week in a couple of years, which makes the contract fee then a little higher.