A Simplified Alternative to Current Airline Fuel Allocation Models

Abstract

The primary intent of the model, as with all fuel allocation models, was to resolve purchase quantities which will take maximum advantage of existing tankering opportunities. Tankering, the purchase of fuel in excess of that immediately required for the next flight leg, simply means topping off the tanks at the cheaper stations to the extent the increased burn penalty and station supply allow. Evidence was presented affirming that, in 1976, National's computerized fuel allocation model had enabled the company to realize an average drop in fuel costs of 1.922 cents per gallon while the industry overall experienced a 0.628 cents-per-gallon increase. Cost savings the first year of model utilization were estimated in the range of $3 million. The effects of price increases were dispersed and tankering strategies developed to continue normal schedule operations even under conditions of erratic supply. The model proved of great benefit during contract negotiations, enabling officials to easily reallocate purchases away from vendors who insisted on unreasonable terms or could provide only a limited supply.