Question about fuel credit policies/expectations

SC96

SC96

Filing Flight Plan
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SC96
I was recently appointed to our local airport authority board. The airport is going through a lot of changes, most notably going from a private FBO to county-operated. I have been assigned the task of developing a policy surrounding extending credit for fuel purchases. I am a relatively new private pilot with limited exposure to other FBOs and zero experience with credit at the FBOs. I’ve always paid at the time of fueling.
Currently we have full-service fueling only. We’re working on self-serve pay-at-the-pump for AVgas, but jet fuel will remain full-service. We have requests for credit extensions for both fuels. We accept all major credit cards.
Now, in seeing that we are not open 24/7, I do understand the need for calling in fuel requests or other paid services. I would think a credit card on file would be sufficient, but it is my understanding that some individuals and corporations prefer other terms.
What kind of terms do you see that are successful and common/expected?
Thanks in advance!
 
I think a policy for tenants that extended them "current month" credit with a month end invoice created and submitted to them for timely payment along with their monthly rent fees is a fairly common setup when the airport operator (be it the county in your case or other entity) manages both the hangars and fuel sales. In my experience, the fuel invoices went out far enough in advance of the end of month to have both that and the hangar rent payable together at the end of month due date. This could be extended to regular transient customers that purchase a significant amount of fuel each month to justify the arrangement.

Of course, a credit check on the individuals/entities seeking the credit arrangement is reasonable, and you have to decide if the cash flow of the operation can cover the 30ish day average float on the deal.

I've had this arrangement in place at a variety of airports/FBOs and would frankly find it highly inconvenient if I was a tenant and had to fork over the credit card (or even have a charge against the "card on file") every single transaction versus the fuel going on my account.
 
I have a separate credit card just for airplane and travel expenses. It’s on file at the airport where I’m a tenant. Hangar is paid first of the month, automatically on the card. Same for fuel purchases...charged at time of transaction. County emails me a receipt after each transaction. I pay the credit card bill when it shows up. To me, makes life simple.

The flight schools on the field use the monthly billing due to the many transactions, along with a bulk fuel discount. Don’t know if the credit check was done on the company or on specific individuals, but I can check with one of the schools if you’d like.
 
Thanks for the replies. I supposed I would be fine with either option. For me, keep the card on file and charge me, but I realize other pilots have different thoughts than I do. I think we’ll need to offer a couple options, for sure. Any other thoughts, please send. Thanks
 
Would it be an idea to visit of call up other (county operated if that seems to make a difference) and just ask them what they do? Maybe also if they’ve had any problems?
 
murphey said:
I have a separate credit card just for airplane and travel expenses. It’s on file at the airport where I’m a tenant. Hangar is paid first of the month, automatically on the card. Same for fuel purchases...charged at time of transaction. County emails me a receipt after each transaction. I pay the credit card bill when it shows up. To me, makes life simple..
Click to expand...

We operate 2 airplanes and have almost the same setup at our home base and another airport that we go to a lot, works well. At our home base they put the credit card invoice in my mailbox at the airport.
 
Airport tenants at our airport are billed for fuel with their monthly hangar bills. Works well for us. We also tie fuel purchases to lower monthly hangar rental fees. Tenants can earn up to $980 per year of hangar credits by purchasing fuel. (Helps encourage non flying aircraft to consider vacating for aircraft that actually fly.)
 
I would not extend credit for fuel unless your airport manager enjoys A/R. Pay at the pump or card on file.
 
I would also suggest you check with a knowledgable attorney. In some states, local governments are not allowed to extend any form of credit. In those states, it’s considered a gift of public funds (the gift being either the interest on the credit for the credit period or the cost of money), and its made worse by a default in repayment. Washington is one such state but there may be others.
 
There is no way that I would extend uncollateralized terms. Aviation margins are just too slim. The odds of getting stuck with an uncollectable A/R is nearly 100%.

Your based tenants will need to buy fuel from you. There is no need to 'woo' them with perks and potentially large losses. It is costly and annoying to buy fuel from a place other than your home base.

A savvy and healthy tenant will arrange to prepurchase fuel from you at a discount. Our fuel system would allow issue of private magstripe cards that could be preloaded with gallons or dollars credit. Offer to sell tenants a portion of a fuel load (some large fraction of 8,800 gallons) and charge them a small margin over your net cost ($0.25/gal say), plus a fixed monthly access ($50/mo or so) to cover the fuel storage. This way you're helping out healthy operators, and mitigating risk from the operators who live paycheck to paycheck and will drag you into their drama. It also frees capital for other projects.
 
Very good responses. Definitely some things here that I’ve not considered. I appreciate the feedback!
 
Jumpmaster said:
I would also suggest you check with a knowledgable attorney. In some states, local governments are not allowed to extend any form of credit. In those states, it’s considered a gift of public funds (the gift being either the interest on the credit for the credit period or the cost of money), and its made worse by a default in repayment. Washington is one such state but there may be others.
Click to expand...
Good point. We do have an attorney so any policies will be vetted by him prior to implementation. Thanks
 
I would not extend credit to individuals for fuel unless you have a valid credit card on file.
Now those jet fuel customers, either they pay with a cc too or if you do give them credit the terms have to be say 10 days, they will want 30 day terms or longer sometimes.

The issue is the plane might be connected to ABC company that may have good credit, how will you find out? D & B reports are terrible anymore, they will most likely not give you financials if a privately held company and forget those "here are my credit references type sheets that companies send out", so it is a dilemma in assessing credit risk.

A credit risk is this, the plane is held in an LLC, XYZ LLC, but the ABC is the the company that you think really is the credit, "oh that's ABC that owns that plane", they are big and good for it" thinking.

Not so fast, ABC can sell and dissolve the LLC or bankrupt the LLC and the LLC is who you really sold the fuel to not ABC, ABC can say it wasn't us that bought the fuel it was the LLC.

Know who you are invoicing, do not assume, you do not really know how they have things set up.

If you have a small operation get a credit card for these Jet fuel customers they have them, do not give unsecured credit.

If you have a lot of jet fuel sales like millions of dollars each year to good businesses, where open terms are given, and not to individuals, there is what is called commercial credit insurance that insures against credit losses for customers that do not pay or go insolvent. PM me if that is something of interest, it might or might not work for you.I can tell you more.
 
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