Benefit?!? of Fuel Contracts?

[Karl]

I have seen a number of forum entries concerning fuel contracts, but I am still not clear on the benefit or disadvantage.  I understand that much depends on the contract terms, but for a newbie, it is not easy to determine good terms vs. bad terms vs. no terms!

Right now, I have 3 bases with my first and main hub being the biggest.  I also have a contract at each base airport.  Is this good or bad? 

At first glance, it seems silly to pay for the privilege of getting a discount, but a contract adds stability, I suspect.   

Advice?

[Sanabas]

It's very simple to work out good terms vs bad terms. Look at your weekly fuel bill for a particular base. Multiply it by 2.15 (4.3 weeks in a month on average, you only get a discount on half your fuel.) That's your average monthly fuel bill for fuel supplied at that base. Work out if the % discount is more or less than the fee you're paying, and you'll see if it's a good deal or not.

Using my JA airline as an example: My HQ is in Paris. My weekly fuel bill is consistent for the last 3 weeks at 6.2 million. 6.2 x 2.15 = 13.33 million/month spent on fuel in Paris. My discount is 7.8%, I pay 123,700/month for it. 7.8% of 13.33 million is just over 1 million. So I'm saving over 850k per month with that contract.

I have a base at RUN. My income statement is consistent at 2.9 million in fuel there. 2.9 x 2.15 = 6.235 million. I have no contract, and only one offer. The offer is for a 2.5% discount. 2.5% of 6.235 million is 156 thousand. The contract will cost me 115 thousand. So I'd save 50 thousand/month by taking it. Since that would only mean 10k extra profit per week, I haven't bothered, and am waiting for the offer to change, to see if the new one is better.

[Karl]

Thanks.  This helps.