There are several different types of consortia in place at airports around the world. They have been convened in order to operate and develop fuel facilities for the benefit of the whole. The underlying reason for joint venturing in this way is for the users to benefit from cost-effective and operationally-efficient fuel infrastructure. (While there are specific examples for specific historic reasons, in general it makes little sense for there to be more than one fuel farm at an airport, each competing with the other).
The airline fuel consortium is a common model, especially in the USA. This model may offer some distinct advantages to the airport compared with the oil company model:
- Opens competition for supply of fuel to the airport which can reduce price and encourage uplift and routes.
- Aligns fuel operations with the demand side, thereby encouraging maximum cost efficiencies.
The Fuel Supplier / Oil Company consortium is a common model in other parts of the world, and has generally evolved over time as separate oil company fuel farms merged when hydrant systems became common place at the dawn of the widebody aircraft age in the early 1970s.
Consortia may be incorporated (e.g. LLP) or unincorporated joint ventures; each has its own characteristics often specific to the location in question.
Often the home-based carrier is a member of the fuel consortium. It may be a silent partner or actively involved in self-supply of some of its own fuel slate, or coordinating supply on behalf of airlines in an alliance.
Sometimes the airport authority or airport operator may be involved in a consortium, either as a member or as owner of the infrastructure and therefore taking on a landlord role.
Consortia may operate the fuel infrastructure directly, or they may contract out day to day operations to a third party operating company and then oversee the operations and capital development of the facilities.
The experience of eJet
eJet has great experience in advising airports and airport operators on the pros and cons of committing to various types of consortium. We will look at the airport in detail, and advise you on the suitability of the model for your circumstances.
We can also be involved in forming consortia – finding interested parties and negotiating terms with the consortium members themselves, whether for a new structure at an airport or new memberships of existing structures.
Our related activities can include:
- technical and commercial due diligence – assessment of fitness for purpose and valuation of aviation fuel assets (e.g. in the case of transfer of infrastructure from one entity to another)
- implementation of Open Access fuel supply (e.g. when the entities wishing to supply fuel into an airport may not necessarily be the same entities which in the form of a consortium own/operate the aviation fuel infrastructure)
- advising on aircraft refuelling liabilities, how to mitigate risk and how to ensure that liabilities are properly covered by agreement (e.g. the Tarbox set of agreements).