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12 – 13 May 2004, Bahrain
Overlapping Tender Involved in Jet Fuel Purchasing
“AACO’s Experience”
Yasser WehbeHead of Technical - AACO
MEJET 2004 MIDDLE EAST JET FUEL CONFERENCE
Cost Distribution 2001
Direct Expenses Indirect Expenses
0%
2%
4%
6%
8%
10%
12%
14%
16%
Ma
inte
na
nce
Fu
el
De
pre
cia
tion
Pilo
ts
Ove
r fly
ing
Ch
arg
es
Mis
c.
Re
nta
l
La
nd
ing
Ch
arg
e
Insu
ran
ce
Re
serv
atio
n &
Sa
les
Gro
un
d S
erv
ice
s
Ad
min
& G
en
era
l
Mis
c.
Ca
bin
Cre
w
(Source: AACO Database)
(Source: AACO Database)
• Fuel cost is very high: 12%
• Fuel Cost is very volatile
(Source: AACO Database)
• Fuel cost is very high: 12%
• Fuel Cost is very volatile
We Need to Manage
We Need to Manage
AACO’s Mission
“To promote cooperation amongst Arab Airlines and to serve their common interests, through service excellence”
AACO Joint Projects
We Need to Manage
CRS Distribution Ground Handling
Regional Training Center MIDT Analysis
JOINT FUEL PURCHASE
AACO Joint Fuel Purchase
We started in 2000:
– Arab Stations
– Arab Fuel Suppliers
– Bilateral Negotiations
We wanted to grow: JOINT TENDERING
AACO Joint Fuel TenderAACO Joint Fuel TenderFor 2004:
– 300 million gallons
– 90 stations + 250 Adhoc
– 12 Airlines ... Soon to become 13
How to manage??
– Work load
– Maximizing Benefits
– Study Market Change
Two TendersTwo Tenders
AACO Joint Fuel Tenders
• Tender I: 1/1/200x – 31/12/200x
• Tender II: 1/7/200x – 30/6/200x
We opted to overlap Tender I with Tender II
AACO Overlapping Tenders: WHY??
– Study market fluctuation in terms of services rates
– Increase competition level
– Smooth transition from Individual Tenders to Joint Tenders
AACO Tender I
– Majority of Fuel requirements: Now 230 million gallons
– Most of the Far East
– Most of the Arab World
– Some of Europe
– Some of North America
AACO Tender II
70 million gallons in:
– Most of Europe
– Some of North America
– Very few of Arab World
– Very few of the Far East
Overlapping Tender: NOTES & RESULTS
Tender II
1. Test bench for new ideas on pricing mechanism
2. Opportunity to gain market share by Fuel Suppliers
3. Streamlining of Airlines contracts terms
4. Improve supplier – buyer relationship
5. More opportunity for local Fuel Suppliers
... Overlapping Tender: NOTES & RESULTS
6. Tenders volume will increase due to time and work load division.
... Overlapping Tender: NOTES & RESULTS
Tender I Savings: USD Four Million...
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