Fuel costs still represent the main cost driver for airlines. This hasn’t changed over the last decades. Nonetheless, during the last three to five years, cost-saving programs weren’t a top priority — at least for many airlines. Indeed, many airlines ran efficiency programs and aimed to deliver the product at competitive prices. However, the focus for many carriers was about growing and satisfying the sheer endlessly increasing number of passengers.
All of a sudden, in times where COVID-19 dominates the news, many airlines see themselves confronted with declining passenger numbers, a negative financial outlook, and an increasingly challenging future. Accordingly, cost-cutting programs are back on the agenda. And besides other measures, fuel-related cost reduction is extremely essential for airlines once again.
After talks with airlines over the last couple of weeks, it turns out that most of them reduced or even stopped ongoing and planned investments. That, of course, differs from airline to airline. That is quite logical since the impact is different depending on the business model and served world regions.
Nonetheless, many airlines I’ve talked to decided to put technology projects on the touchstone and stopped or paused them
Electronic Fueling Process As A Quick-Win to Reduce An Airline’s Fuel Costs?
Here, the interesting part starts. Conversely, to the above, I observed that airlines intensified their efforts concerning electronic fueling processes. Moreover, I talked to airlines that are planning to kick-off projects in that area right now.
Although that seems confusing at first sight, it turns out to be the right move when thinking twice. Why’s that? Because an electronic fuel process —contrary to many other projects— holds a genuine and practical cost savings potential for airlines.
So let’s have a detailed look at cost savings an electronic fuel process holds for airlines.
Reduced Fuel Costs Due To Minimized Fuel-Related Delays
Moving to an electronic fuel process and getting rid of time-consuming manual processes is always a source for airlines to further improve efficiency. One of our clients, a large European network carrier recently came up with some quantified numbers. In detail, that airline analyzed the reduction of fuel-related delays after introducing an electronic fuel process.
In general, the airline has been able to reduce fuel-related delays — especially at outstations significantly. The most impressive result has been achieved at their outstation in Amsterdam (AMS). Before operating an electronic fuel process, fuel-related delays accounted for 2% of all delays at AMS. When starting an electronic fuel process the airline was able to observe a constant reduction of these delays.
After operating the process for one week, the number of fuel-related delays dropped to 0%. Even more important, the airline was able to maintain this level consistently.
Subsequently, as delay minutes always represent costs the airline calculated the contained financial savings. As a result, they were able to achieve 7-digit savings annually.
Reduced Fuel Costs Due To Reduced Provider Costs
An electronic fuel process actively helps to align processes between involved stakeholders — especially between airlines and the Into Plane Agent (IPA). Many IPAs charge airlines for being available at the on-block gate/position. And they do this regardless of refueling is needed or not. Indeed, from an IPAs perspective that entirely makes sense, since they had the effort to send a fuel truck to the position.
However, with an electronic fuel process, an airline’s cockpit crew can easily send a message that refueling isn’t required. Thus, the IPA does not send a fuel truck to the position. Accordingly, the airline is able to avoid fuel process costs.
At the bottom-line large network carriers can easily achieve 6 to 7 digit fuel savings annually. Compared to the enormous amount of fuel-related expenses an airline has, this probably sounds like peanuts. Nonetheless, you have to bear in mind that almost no additional efforts are necessary to achieve these savings.
Cost Savings Through Improved Data Quality
Increased data quality is an additional driver of direct cost savings that airlines can achieve by utilizing n electronic fuel process. When operating a traditional fueling process, the manual work reflected a massive source for mistakes and errors. This, especially account to invoice and receipts. Regularly these documents reflect wrong uplift figures, wrong flight numbers, etc.
As a result, intensive quality checks were necessary to identify and correct these mistakes. With the implementation of an electronic process, airlines achieve two main benefits:
- Due to an immense rise in data quality, there was no longer a need for additional (extensive) quality checks.
- The risk of wrong invoices and ultimately wrong (too high) payments were eliminated entirely.
What About The Required Investment?
The interesting part when it comes to electronic fuel solutions for airlines is the fact that these systems —most often— do not require a substantial initial effort. Conversely, the IT solutions are offered as subscription models that reduce the initial effort tremendously.
Thereby airlines can reduce fuel savings swiftly and right from the beginning without a long-term ROI.