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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