Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
13 chapter three ORGANIZATIONAL ROLES Fuel facilities and equipment can be owned by the airport, an oil company, fuel consortium, FBO, Specialized Aviation Service Operations (SASO), corporate or business organization, private group or individual, or any mix of the parties involved. This chapter reviews common relationships found at airports. A fueling agent is a person or company that sells fuel products on the airport (14 CFR Part 139). The description is intended to exclude the self-fueling activities of an airline or corporation that con- ducts self-fueling. Part 139 makes a distinction between an airport fueling agent and a tenant fueling agent. An airport fueling agent is an airport operator/certificate holder that sells fuel products on the airport. A tenant fueling agent is a person or company, other than the certificate holder (airport), that sells fuel products on the airport. Although the description of a fueling agent excludes an airline that self-fuels, the airline is to use its own employees. If not, the airline is a tenant fueling agent upon engaging a third party to dispense the fuel (AC 150/5230-4B 2012). MANAGEMENT OF FACILITIES AND EQUIPMENT There are different ownership arrangements of property, fuel tanks, equipment, facilities, and vehicles, and different ways to manage them and deliver fueling services. The following are examples of the different options. In any case, airport management has a right to establish minimum standards, rules, and/or regulations that govern fueling operations on its airport as part of its landlord responsibilities. Airport Management There are various ways to manage and maintain fueling facilities and equipment if the airport orga- nization chooses to do so. The arrangements are: 1. The airport owns the facilities, vehicles, and equipment, and dispenses the fuel to aircraft through its own employees. The airport would have a direct agreement with a fuel supplier. Depending on the volume of fuel, there can be a direct relationship and provision of fuel from the refinery supplier, an independent refinery, a merchant refinery, or a fuel trader. 2. The airport leases any or all storage, facilities, equipment, and vehicles from an oil refinery or intermediary provider and operates as the fuel service provider (dispenser) of fuel using its own personnel. 3. The airport is a fuel distributor and owns any or all of the bulk storage facilities, equipment, and vehicles, and leases them to a contractor to manage the fueling operation. The airport purchases fuel from an oil refinery or trader and resells it. For each of these arrangements, the airport meets the Part 139 designation of an airport fueling agent. Fixed-Base Operator Management A second possibility for fuel facility management is that of an FBO or SASO. The FBO or SASO nor- mally leases property from an airport. This can include the rental of buildings, fueling facilities, and vehicles, or the FBO may seek to construct or own its buildings, facilities, and/or vehicles. The FBO can also lease vehicles and equipment from a fuel supplier. The latter is common for several reasons,
14 the first of which is quality control and branding. The second reason is cost control. For purposes of Part 139, the FBO is known as a tenant fueling agent because it sells fuel and is a tenant of the airport. The FBO or SASO obtains fuel from any fuel provider it chooses. Many FBOs align themselves with a branded fuel supplier as a means to distinguish themselves from others and obtain pilot loyalty. Pilots flying across the country are inclined to frequent one particular brand as a result of known quality processes, loyalty programs, or discounted fuel agreements. The integrity and consistency of the fueling process is vital to the branding effort. Different arrangements can exist with branded fuel suppliers for the provision of vehicles and equipment, from leasing to outright ownership. A fuel supplier might own the vehicles and equipment and lease them to the FBO or SASO to help ensure proper maintenance and safety oversight of the fuel delivery process. Through a lease agreement with the fuel supplier, FBOs are able to benefit from a fixed lease rate and regular vehicle and equipment maintenance. Airline or Investment Organization Management Financial, economic development, or investment considerations may result in an airline, aviation, or nonaviation entity owning and leasing the fuel facilities. To serve as an attraction for aviation business, a private investor, an economic development agency, or an airline may undertake the con- struction and ownership of a fuel tank system with the intent to use, lease, or resell the facilities. Any such arrangement would involve a lease or operating agreement with the airport. The owners would become a fueling agent for Part 139 purposes. An airline can own bulk storage and distribution equipment on leased airport property or own or lease property or facilities off airport. An airline will not normally staff the facilities, preferring to contract a third-party operator to deliver the fuel to the airlineâs aircraft. The third party can be a dedicated fuel service provider or an airport FBO. Each company would need access rights onto the airport granted by the airport organization. Fuel Consortium Management A fuel consortium is an arrangement in which several airlines at an airport join to form a separate organization for the purpose of managing and operating fuel facilities at a particular airport. The consortium operates the fueling system under an agreement that spells out the various rights, duties, and obligations of each airline. A typical fuel consortium is organized as a limited liability corporation (LLC) or as a nonprofit organization owned by member airlines at a particular airport. A governing board made up of individu- als from each participating airline guides the consortium. Usually, the airline member with the greatest fuel volume chairs the consortium. In a 2009 presentation, the Air Transport Association, now called A4A (Airlines for America), identified 27 of 30 large hub airports, 18 of 37 medium hub airports, and six of 70 small hub airports in the United States as having fuel consortium or advisory committees on the airport (Heimlich 2009). At that time, none of the 248 nonhub airports in the United States had any such arrangements. A fuel consortium is not involved in the actual buying, selling, or owning of jet fuel. A consortium is formed to obtain economy of scale in the financing and use of infrastructure, reduce overall costs, gain operational efficiencies, and share risk among member airlines. With a consortium arrangement, fuel is purchased and owned by an individual airline, an oil company, or a fuel trader, and is delivered to a fuel storage facility owned or leased by the fuel consortium. The costs of operating a consortiumâs fuel storage facility are shared by the member airlines using a predetermined member rate. The stor- age facility can be located on or near an airport. The consortium governing board contracts with a third-party firm to provide the professional expertise and capability to manage the consortiumâs fuel farm operation, maintenance, fuel delivery, and records management. The third-party company can manage one or all aspects of the process. It is not uncommon to have one company manage the storage
15 facility and another company provide into-plane services. Often, the fueling equipment and vehicles are owned by the airlines and leased to the consortium or fuel management company. An airline in need of fuel that is not a member of the consortium or is itinerant would need to acquire fuel independently or make arrangements through the consortium to pay nonmember rates. For its member airlines, a consortium has responsibilities similar to those identified for the Vancouver Airport Fuel Facility Corporation (Fact Sheet) in their agreement: â¢ Operate and maintain the fuel facility system; â¢ Comply with regulations; â¢ Direct new investment, maintain insurance, and structure debt; â¢ Plan, construct, and operate a safe, reliable, and cost-effective fuel infrastructure to meet near- and long-term demand projections; and â¢ Obtain regulatory permits, approvals, and authorizations as they relate to fuel system operation and expansion. At medium, small, and nonhub airports, there may be reasons to not form a fuel consortium and share risks among member airlines, although the airlines do seek to cooperate with each other and form fuel or advisory committees. The committees work with airport management, fuel providers, and into-plane agents to address the same issues as would be addressed by a consortium. Corporate Aviation Management For the same reasons as the airlines, a corporate entity that owns aircraft located on an airport may seek to install its own tanks and service equipment. The airport may allow the installation through a lease or operating agreement. Fueling can be provided only by the companyâs own personnel and to its own aircraft. Fueling facilities, equipment, and vehicles located or used on airport property are subject to the requirements of local codes, ordinances, or agreements. If the airport is certificated under Part 139, the fueling facilities, equipment, and vehicles are subject to airport inspection under Part 139.321. Individual, Flying Club, Flight School Management Some airports, primarily GA, have allowed for the installation of a fuel tank and pumping equipment for a private individual, flying club, or flight school. An airport can allow the individual or group management option under the self-fueling allowance, provided fueling is restricted to those individuals. A common clause specified in a lease includes a fuel flowage fee and for the facilities to revert to the airport at a future date. Department of Defense Management On shared-use airports, where the airport owns the property and leases land to the Department of Defense (DoD), the military installation most likely will operate its own fuel storage and supply. Similar to other arrangements noted previously, because the facilities will be on airport property, a lease agreement will identify ownership or management relationships. Military standards for instal- lation, operation, and maintenance can vary from civilian standards. RELATIONSHIP OF PARTIES There are a number of legal, financial, and operational relationships involved in the delivery of fuel onto airport property. Of major concern to an airport are the possibilities for environmental damage and the responsibility for mitigation and cleanup. With several parties involved in the fuel-handling process, it was explained in interviews how important it is for an airport to identify and delineate the various relationships through written agreements and approvals.
16 Parties that may be involved in the delivery of fuel to the airport can be any of the following: â¢ Major oil refineryâAn oil-producing company that is global or national in scope that produces and delivers fuel. â¢ Independent oil refineryâA specialized oil company with national or regional operation that produces and delivers fuel. â¢ Merchant oil refineryâA company that purchases and processes crude oil produced by others and then produces and delivers fuel. â¢ Wholesale or trade sellerâA company that purchases processed fuel and resells to others. â¢ Transport delivererâA company engaged in moving fuel from the refinery to the intermediate storage facility and/or to the airport. â¢ Airport organizationâThe owner of the property where fuel facilities are located and into-plane deliveries are made. â¢ Fuel consortiumâAn airline organization designed to manage and facilitate fuel purchased for its member airlines. â¢ Airline, cargo, charter, or air taxi operatorâCompanies that purchase fuel for their own use. â¢ Fuel farm depot operatorâA company responsible for oversight of fuel storage facilities. â¢ Into-airplane service providerâA company responsible for delivering fuel from storage depot to the aircraft. â¢ Maintenance providerâA fuel facility, equipment, and vehicle maintenance provider. â¢ FBO or SASOâA company that purchases fuel from others, stores fuel in a separate tank, and provides into-plane services. â¢ Corporate operatorâA company that purchases fuel from others, stores fuel in a separate tank, and services its own aircraft. â¢ Private individual/flight school/flying clubâIndividuals or nonprofits that purchase fuel from others, store fuel in a separate tank, and service their own aircraft. PARTIES INVOLVED IN FUEL HANDLING A number of parties are involved in the acquisition of fuel from refineries (Figure 2). The pri- mary parties responsible for getting fuel from the refineries to the airport are oil refinery traders and schedulers, fuel or energy traders, schedulers and/or dispatchers, and airline fuel department personnel. FIGURE 2 Schematic of various relationships for fuel delivery to an airport. NOC = national oil company; IOC = independent oil company. (Courtesy: Shell Oil Company.) Used with permission.
17 Depending on where the processed fuel is coming from, U.S. Customs, custom brokers, marine agents, and certified gaugers may be involved before the fuel goes into the pipeline, figuratively and literally. For truck and barge deliveries, the same brokers, agents, and gaugers can be involved, as well as depot/terminal schedulers and trucking/rail/barge company dispatchers. The legal, risk management, and financial aspects of fuel delivery to an airport normally are worked out among various legal counselors, risk and environmental managers, and financial and accounting officers of each respective party. Two of the larger airports interviewed engaged outside firms with expertise to assist in their negotiations with a consortium. FUEL ORDERING As fuel comes onto the airport, fuel inventory control is important, especially for a fuel consor- tium arrangement in which fuel from different sources is commingled and distributed. Fuel facility operators, maintenance mechanics, fuel accounting staff, and departmental managers are involved. Depending upon the arrangement at any one airport, the into-plane disbursements can include fuel- ing personnel and managers, calibration technicians (calibration of into-wing meters and load racks), and maintenance personnel. Individuals within each airline, FBO, and airport organization have responsibility for ordering the processed fuel. If a third party is to manage the fuel, that party is informed of the fuel order purchase so it can reconcile and keep track of the fuel allocation. ATA Specification 123 provides procedures for the accounting of jet fuel inventory (Procedures for the Accounting of Jet Fuel Inventory 2014). FUEL AUDITING The following organizations or individuals can provide auditing oversight of one or more steps in the fuel-handling process: city/county fire department, airport authority, airline compliance auditors, fuel handler company internal auditors, independent financial auditing firms, professional trade organiza- tions, federal and state environmental agencies, Internal Revenue Service, and state tax auditors. Challenges can exist in the process to obtain permits for the installation of fuel facilities, as evidenced by the case example for one airport (see chapter seven).