Abby's Ramp Ramble — Buy Low, Sell High, Pray Often

My previous ramble, Fuel Price Crisis, generated quite a bit of FBO feedback. So much so that it made sense to continue our fuel discussion this month. To keep things fresh, this time I want to focus on actual fuel purchasing and procurement strategies.Not every FBO will make a regular profit on fuel — that possibility depends on daily operations. While FBOs with less traffic tend to focus on ramp or hangar fees, this piece will cater to those who stay competitive (or want to be) in the fuel market.Fuel purchasing and procurement reinforce just how diverse the FBO industry can be. Some FBOs have substantial freedom in purchasing decisions, while others face significant limiting factors. Does your FBO purchase fuel proactively or reactively? Whether you work with supplier agreements, into-plane contracts or spot purchasing, every operator can agree that the fuel market will make your head spin.Hedge your fuel betsAviation fuel profitability comes down to how cheaply and smartly you buy.FBOs at scale like Atlantic or Signature Aviation have the bandwidth and capital to hedge fuel purchases using futures and options. For many independent operators, this approach can feel above their pay grade. However, fiscal literacy pays for itself, and there are ways independent operators can informally hedge their bets when purchasing fuel.I spoke with an FBO manager in the New England region whose rates are set by the New York Barge Mid. To stay competitive in a volatile market, this manager purchases only what he expects to sell in a week. When wholesale rates drop, losses are limited to a short window. When rates rise, he moves inventory purchased at a lower price while competitors are forced to buy at a premium.While this may not be practical for lower-traffic airports, many FBOs in mid- to high-traffic areas take a similar approach.The more traditional approach is the classic ‘buy low, sell high’ mentality. Aviation fuel is a volume-based business, leading some operators to stock up when prices are favorable, betting they will hold before the next purchasing cycle. This favors market reactivity over predictive decision-making.Omitting locations that purely price for pilots over profit, I know several FBOs who purchase a tank of fuel every six months. If they buy low, they can sit pretty. If they buy high, they could be sitting on a tank of $8/gal 100LL or taking a loss until they move it. Clearly, they are not seeing enough traffic to justify that volume over a smaller period — however, purchasing in smaller quantities carries its own costs, and it is time-consuming to receive fuel shipments (which, as we know, isn’t just a “drop it off over there” kind of thing). For some locations, sometimes a bulk gamble is simply unavoidable.Leverage for small independent FBOs is genuinely limited. That said, managers at such FBOs have shared a few viable angles: prioritizing volume consistency over volume size, keeping supplier alternatives on your radar, treating contract renewals as negotiations rather than formalities, or even building stronger relationships within your fuel network.Other informal hedging strategies include negotiating fixed-price contracts and price caps, both of which often require more leverage to pursue. I’ll touch on these more in the coming sections. Fuel consortiums and youFBOs assume considerable risk when entering the fuel market. Forming or joining a fuel-buying group can help spread that risk — though it may dilute your independence.Like everything, there are tradeoffs. Pooling funds across multiple operators increases purchasing volume and leverage when negotiating discounts. However, sustaining a working agreement with outside parties adds complexity, and some FBOs are simply unwilling to give up that autonomy.Chain FBOs benefit from this same mentality. Because they supply multiple locations, they carry more weight when establishing fixed prices, price caps or supplier agreements at the corporate level.FBO acquisitions and ownership transfers have been active over the past year, and chains are not the only ones expanding. I’ve seen increased activity directly between airports and through airport management companies. If you’ve been on the decline for a while, market consolidation might be something to consider.A Western U.S. manager recently described a situation where a branded fuel supplier partnered with nearly all nearby FBOs, setting local prices at a uniform rate and effectively eliminating price competition within the network. While this may bring relief to FBOs under that umbrella, those on the outside are left to compete without the advantage of a coordinated network. On the flip side, if they can beat the other brand’s rates, they end up in a pretty desirable spot.As always, every FBO is different. Whether forming a fuel-buying group makes sense depends on your operations and environment. I can think of two FBOs out of the same Indiana airport that would never dream of partnering this way, yet I’m seeing regional airport networks emerge across the country. Your mileage may vary. To agree, or not to agree, on supplier dealsMost branded suppliers offer incentives to support marketing, stabilize pricing and offer additional loyalty benefits, though these programs often come with a price premium that makes them a better fit for higher-volume operators.A quick note: I’ve found that many FBO managers are unfamiliar with co-op dollars. Cooperative advertising funds are set budgets that branded suppliers offer to operators who carry their products. Agreements can include marketing compensation tied to fuel volume, approved spend categories or annual marketing contracts. Many of the FBOs I work with use co-op dollars on GlobalAir.com to promote their facilities.Supplier agreements can bring price consistency that benefits both FBO and pilot. While signing away full independence over purchasing and pricing is a real consideration, predictable pricing can be a meaningful operational advantage — similar to what a fuel-buying group offers. It never hurts to speak with your fuel representative to review your options.Organizations like Paragon Aviation Group provide special rates to in-network pilots and flight departments and assist Paragon Preferred FBOs with fuel purchasing decisions — including bulk buying power or best practice sharing. The Corporate Aircraft Association offers a similar network. Becoming Paragon Preferred or CAA Preferred can help maintain fuel sales, although both designations carry requirements. Paragon Preferred FBOs must complete an extensive vetting process covering safety, quality, reliability, service and value — then pass bi-annual evaluations to maintain their status. If you can get approved, the upside is twofold: your operation becomes more desirable to in-network pilots, and you gain access to resources that would otherwise be out of reach. Full disclosure — GlobalAir.com has become a Strategic Partner with Paragon Aviation Group in order to better support FBOs. If you would like to learn more, please reach out to fbo@globalair.com.When markets tighten, having large and recognizable brands in your corner can help keep your beacon on. Pilot incentives like loyalty programs and fuel cards give your location an additional draw that can translate to reliable fuel sales.Most FBOs have built a fuel purchasing strategy through years of trial and error. By exhausting your resources and considering your local market, you may discover economic advantages you hadn’t previously considered. Take a moment to review your FBO’s fuel procurement approach. If nothing else, it’s good to confirm that what you are doing is working. As always, safe fueling!RELATED STORIES:Abby’s Ramp Ramble – Fuel Price CrisisAbby’s Ramp Ramble – Fee’d your FacilitiesHigh aviation fuel prices suggest a plateau, operators prepare for a long summerGlobalAir.com Joins Paragon Aviation Group as Strategic PartnerAbby’s Ramp Ramble is a monthly news and opinion column that serves the FBO industry. Abigail Sheets maintains the GlobalAir.com Airport Resource Center and serves as its Director. Her background is in aviation maintenance and management. She graduated from Purdue University with a BS in Aeronautical Engineering Technology, an MS in Aviation and Aerospace Management and a certificate in Data Sciences.