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Fuel Demand Forecasting Articlea

Air operations, Financial investments, Industry trends

Navigate aviation fuel demand volatility with effective forecasting

April 13, 2022

As fluctuating demand for jet fuel creates significant disruption, accurate forecasting is the key to unlocking efficiencies and opportunities for airlines and fuel providers.

While the cost of jet fuel has been rising since the beginning of the COVID-19 pandemic, the outbreak of the conflict between Russia and Ukraine has taken prices to new heights. In the first week of April 2022, the price of Jet A-1 peaked at over $160 per barrel, and increased volatility now appears to be a long-term trend.

For airlines, aviation fuel generally makes up 22-24% of the operating costs. Any disruption to delivery, slow responses to industry dynamics and even small variations to demand can cost fuel providers billions of dollars and significantly impact an airline’s ability to manage operating costs.

Source: IATA Jet Fuel Monitor, Platts/ Datastream

To maximize efficiency, it’s critical to remove friction in the market throughout the entire fuel supply chain. Accurate and timely information on airline operations will help fuel producers, traders and distributors to ensure that global supply and distribution networks can better respond to volatility. Access to both historical and forward-looking data also makes it easier to anticipate demand, set mutually beneficial prices and avoid unexpected costs or disruptions.

Effective volatility planning and management through data

Utilizing the right data sets is the first step in effectively planning, benchmarking and spotting opportunities to implement best-practices around the management of fuel demand volatility.

For instance, Cirium’s gate-to-gate air operational data enables fuel providers to investigate and identify conditions that impact fuel usage. These include ‘in-air’ delays triggered by heavy traffic on runways and unscheduled aircraft.

Everyday occurrences such as weather delays, turnaround times, and time on the runway are tracked at an airport and flight level. This data can enhance the understanding of fuel efficiency and demand trends by airport, airline or region to enhance data modelling.

Fuel and Emissions Data which monitors fuelburn and aircraft efficiency is also vital. This allows providers to go deeper than broad estimates with granular aircraft and passenger data to improve accuracy, add context and identify trends.

Schedules Data is also needed to track the active schedule of every airline. To help counter volatility it is important to be aware of schedule changes, new routes or even flight patterns. All of these factors can impact demand at individual locations or even at the global level.

Fleet and Status Data will allow users to monitor equipment, fleet evolution and fuel efficiency. This is crucial for keeping track of what is flying, what is grounded and where aircraft are likely to need refueling.

Cirium Fuel Demand Forecasting

By applying the industry’s most accurate fuel burn modelling to comprehensive datasets spanning physical aircraft, flight operations, and passenger information, Cirium is uniquely positioned to forecast global fuel demand and predict jet fuel pricing.

Our experts combine these datasets to produce tailored forecasts for fuel providers, allowing them to anticipate changes to end user demand, optimize supply chain management and identify commercial opportunities.

To schedule a discussion about fuel demand forecasting and Cirium solutions, use the Contact Us form.

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