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The single biggest cost for many airlines is fuel. Given this, I'm sure they work hard to reduce the cost they pay per gallon of fuel as much as possible.

How does that translate to the way fuel is bought at major airports? I know there's a fuel truck that comes and fills up the planes. Does each airport partner with one company to provide fuel? Are the multiple providers on each airport? Does the airport itself sell fuel? Is fuel lumped into the landing fee?

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    $\begingroup$ Airlines are big users of currency and fuel options to hedge against fuel price and currency fluctuations. In the end, the lower risk of price changes is more important than getting the lowest possible price, but risking to be bankrupted by a price change. $\endgroup$ – Peter Kämpf Apr 5 '15 at 14:20
  • $\begingroup$ @PeterKämpf that sounds like some very fancy economics! Does that imply the fuel is physically pumped by airline trucks but that fuel will have been sold and bought on some sort of an open market? $\endgroup$ – raptortech97 Apr 5 '15 at 14:29
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    $\begingroup$ There is no commercial connection between the options and the actual fuel, outside of the general market price. Airlines trade with options which help to compensate them for the fuel price fluctuations. The fuel is still bought in the traditional way, but the airline needs not to worry about the market price of oil. Some are still hit, however, if they do not cover 100% of their needs or if the price changes are outside of their expectations and the range which the options cover. $\endgroup$ – Peter Kämpf Apr 5 '15 at 15:06
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    $\begingroup$ Get a bill from the fuel truck, or the airport, or give the oil company access to your bank accounts. $\endgroup$ – Peter Kämpf Apr 5 '15 at 15:09
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    $\begingroup$ The fuel is not always the biggest cost for the airline, for long haul it is true, but for short range depends strongly on the route. However, it is true that is always a significant cost to be reduced. I would also to stress on point that has been mentioned but not expanded. Fuel is indexed to a dolar reference and many airlines are earning incomes in other currencies. Protection is dual, fuel and currency fluctuations using options and swaps as financial mechanisms. $\endgroup$ – Trebia Project. Apr 5 '15 at 15:25
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Large airlines have standing, negotiated contracts with major airports to buy fuel (and almost always also other services like cleaning, catering, etc). Some times these are fixed-price contracts, sometimes they float in relationship to the spot price of jet fuel, sometimes they are a hybrid. You can think of these as any other complex financial relationships: almost any way you can imagine a contract to be drawn up, someone has likely tried it.

Airlines' operations desks also constantly monitor the price of fuel at different airports and different times - and in some cases airplanes carry enough fuel to make a return trip without refueling because it ends up being cheaper to carry the fuel rather than purchase it at the next stop.

For general aviation, the airport FBO (fixed base operation) generally has one and sometimes multiple fuel vendors on-site, that generally sell at a fixed price -- very much like a gas station for cars. Obviously, airports that have more than one fuel vendor generally have more competitive prices, but even for single-vendor operations they can't make the fuel costs TOO high, or pilots will purchase just enough fuel to take off and go somewhere that gas is cheaper.

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  • $\begingroup$ Not only general aviation, but many small airlines also purchase fuel at FBO and the captain simply pays for it with company credit card. $\endgroup$ – Jan Hudec Apr 7 '15 at 11:59

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