Friday, August 5, 2011
Airlines at Lambert seek more fuel control
By Ken Leiser
The St. Louis (MO) Post-Dispatch
MAY 18, 2004 - Lambert St. Louis International airport main concourse.
Commercial air carriers at Lambert-St. Louis International Airport are forming a consortium to oversee jet fuel distribution and logistics.
A new, 20-year agreement is being hammered out between Lambert and the airline consortium. The airport currently has an agreement with Lambert Field Fueling Facilities Corp., a wholly owned subsidiary of Allied Aviation.
Under that pact — which dates to 1955 — Allied maintains and operates the fueling system at Lambert. The airlines, not the airport, pay Allied for its services.
Susan Kopinski, deputy director of finance and administration at Lambert, said the proposed fuel system agreement is expected to go to the Airport Commission in September or October.
Kopinski said air carriers using Lambert will be able to reduce their costs by competitively bidding the management of jet fuel distribution.
"It will be a huge cost savings to us," said Southwest Airlines spokeswoman Laurel Moffat.
Southwest Airlines saw its overall fuel costs soar by 64 percent during the last year.
Lambert, which is owned and operated by the city of St. Louis, will benefit from the new agreement because it formally passes some contractual and environmental obligations to the airlines.
Kopinski shared some details of the proposed deal with the Lambert Airport Commission on Wednesday. Among them:
• Rent would be set at $466,000 a year, and the price would generally track the consumer price index. Twenty percent of that would be deposited into an escrow account to make necessary upgrades to fueling facilities, and the rest would be used to offset landing fees at the airport.
• The consortium would have to put up a $500,000 security deposit.
• Environmental remediation for jet fuel and hazardous substances would be provided at no cost to the city. There is no such requirement in the current pact.
Negotiations have been under way for three years.
Allied Aviation officials in St. Louis did not return a phone call seeking comment.
Its website describes Allied as an independently owned and operated company providing fuel services to the commercial aviation industry at airports in the United States, Canada and Latin America.
But aviation experts and airline officials say agreements like the one being proposed are not unusual.
John Heimlich, vice president and chief economist for the Air Transport Association, said these kinds of fuel agreements permit airlines to manage costs, secure the flow of jet fuel and oversee the long-term strategic infrastructure.
Under the model being pursued in St. Louis, he said, airlines could choose by competitive bid which private company gets to compete for a maintenance and operation agreement.
Fuel costs are accounting for a larger share of airline costs. Several years ago, fuel was the third-largest cost for airlines, said Bijan Vasigh, a professor of air transport finance at Embry-Riddle Aeronautical University in Daytona Beach, Fla. Now it is the second-largest cost, trailing only labor.