BIA opts for new way to get fuel

By Eric Russell, BDN Staff
Posted Feb. 26, 2009, at 8:45 p.m.

BANGOR, Maine — For years, Bangor International Airport had an exclusive contract with ExxonMobil to sell jet fuel at the city’s municipal airport.

The relationship was long-standing and profitable for both sides.

Until recently, that is.

Last year, ExxonMobil officials told the city the company wanted to opt out of its contract, largely because of a change in the state’s unitary tax law that required the fuel provider to pay more taxes.

As a parting gift of sorts, ExxonMobil offered the exclusive fuel contract with BIA to one of its suppliers, Western Petroleum. At first, the city saw it as an obvious choice, but after much discussion, BIA decided not to offer the contract to the company.

Airport Director Rebecca Hupp said this week the decision was complicated.

“We had a 30-year relationship with ExxonMobil. You can’t really assign a relationship to someone else,” she said.

The alternative is what’s known as an open-access fuel model, which will allow customers of BIA to find their own fuel at their own negotiated price.

Hupp said the new model, which likely will go into effect this summer when ExxonMobil’s contract officially expires, does not change much for BIA.

“We’ll still store and distribute the fuel as we’ve always done,” she said. “For customers, it should be a seamless transition.”

Airline carriers view an open-access fuel model favorably because it creates competition among fuel suppliers and therefore lowers prices.

“In our view, this allows us to be able to negotiate to some cost savings, and our belief is that we will be able to pass those savings on to customers,” said Tyri Squyres, a spokeswoman for Allegiant Air, one of BIA’s most popular carriers.

Hupp said from her initial discussions with other customers, both commercial carriers and private clients, feedback has been wholly positive.

“It’s a reflection of the desire for competition and the benefits of a free-market economy,” she said.

An open-access model would require some investment on BIA’s part, the director said. First, the airport would need to either purchase or lease refueling trucks. ExxonMobil had its own. Second, Hupp said, the airport would need to upgrade its system of tracking inventory and billing because there are many more customers.

“Any improvements we make would come from the airport’s budget, not taxpayers’,” said Hupp, adding that an open-access fuel model has the potential to create more revenue for BIA. “We’ll still sell fuel on our own and we’re a diversion point for a number of carriers that would refuel here.”

Hupp said airport officials and city staff still are working out how BIA plans to buy and sell its own fuel, but she said it’s entirely possible that ExxonMobil or Western Petroleum could still supply the airport.

One question that Hupp has gotten about an open-access fuel model deals with commingling. For example, does Allegiant want to mix its fuel with Delta’s in one of BIA’s storage tanks?

“The analogy in use is this: If you deposit $20 in cash at your bank, you don’t get that same $20 back when you make a withdrawal a week later,” Hupp said.

Allegiant’s Squyres agreed with that analogy.

“Airports still need to do quality checks on their fuel, so the standard would be the same,” she said. “BIA has been a great partner for us, and we commend them for making this change.”

BIA has enough storage for 3 million gallons of fuel, which Hupp said is more than enough to accommodate its customers and store fuel for sale by the airport. Before the change officially takes places BIA would enter into agreements with customers that want to store fuel at the airport.

Although an open-access fuel model is the preferred course of action, Hupp stressed that a final decision has not be made.

“Western Petroleum was certainly disappointed that they didn’t get the contract, but both sides left the door open,” she said.

http://bangordailynews.com/2009/02/26/business/bia-opts-for-new-way-to-get-fuel/ printed on July 22, 2014