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The High Price of Disruptions

Special Report - SafetyFuel disruptions cause enormous damage to operational efficiency and significantly increase airline costs.

Investing in solutions to these problems could prove far more beneficial than simply dealing with the disruptions as they occur.

There is an urgent need to create awareness of the scale of the problem among airports and fuel suppliers—and even airline management, according to Thorsten Lange, Lufthansa Director for Fuel Procurement.

“Nobody really understands the true cost of fuel disruptions,” says Lange. “The operation is too complex and a complete data set for a specific delay is very difficult to gather. Airlines don’t have the tools to measure the total impact and suppliers are even worse.”

Airlines have shot themselves in the foot somewhat. Because they have become adept at operational juggling thanks to long experience in crises big and small, fuel disruptions are often treated as routine.

Overcoming them is commonplace, so their full effect is disguised. Suppliers can compound the problem by hiding behind warnings without tackling the issue at hand. Buenos Aires Ezeiza International Airport, as an example, continues to challenge accepted practice. Threats of fuel rationing continually hang over the airlines and a new fuel farm is desperately needed.

But disruptions can mean a big red number in the accounts. On 24 March 2010, a fire at a Miami fuel depot upset normal operations for several days. Airlines were told to use maximum uplift on their inbound flights to Miami to mitigate the shortages. Lufthansa calculated this increased fuel burn at 4-5% over a 10-hour flight. The need for tankers caused delays and crew scheduling ran amok. Although the tools to quantify the exact loss aren’t available there is no doubt it adds up to a significant amount—never mind the cost to reputation in an important market.

Such situations are not uncommon. For example winter diesel production, military requirements, and refinery maintenance in the Moscow area have contributed to a jet fuel shortage and subsequent price rise. The Moscow airports are now suffering from fuel shortages.

At London Heathrow, the world’s busiest international hub, the Buncefield oil depot fire in 2005 caused such profound fuel supply problems for airlines that the industry is still trying to resolve them. The event highlighted supply problems at a critical hub: Heathrow desperately needs more storage and supply capacity.

“IATA and the London Fuel Infrastructure Working Group are supporting the site called the Grass Area 17a, which is not only technically more suitable but also the cheapest of the two potential sites, and the quickest to get up and running,” explains Jonathan Pardoe, Head of Fuel Management at Virgin Atlantic. “Heathrow currently has less than two days stock at any one time and, during periods of high demand, this is insufficient to allow fuel to be received, settled, and pumped to the aircraft, which will increasingly cause fuel disruptions and the need for airlines to tanker fuel.”

Pardoe says Heathrow fuel supply causes Virgin a number of routine problems. “The fuel situation is currently calmer than in previous years but this is only due to demand not increasing as previously predicted because of the downturn in the global economy,” he says. “It wasn’t long ago, however, that we were having to tanker fuel from all around the world—then we had the situation where suppliers were unable to tender due to supply restrictions. At the moment, with improved supply and subdued demand, we have still come close on occasions to having to discuss allocations again during the summer.”

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