Jet Fuel Consortiums

Jet fuel has traditionally been the airlines' second-highest operating expense, exceeded only by labor costs. As a result of recent oil price hikes, jet fuel is the single largest expense at many airlines. Fuel Consortiums, which typically control and operate the distribution system providing the jet fuel at the airport, operate at most major U.S. airports. Although the Fuel Consortiums do not buy, sell or own any jet fuel, they assist their member airlines in controlling the cost of delivering the fuel to their member airlines’ aircraft. In a highly competitive business, the Fuel Consortiums stand out as an example of cooperation among the consortium member airlines. The airline members of the Fuel Consortium work together and pool resources to operate the jet fuel distribution system in a cost-effective manner.

The Fuel Consortium may be a legal entity, such as a corporation or limited liability company, or it may merely be a committee comprised of the member airlines. The chair of the Fuel Consortium is typically an employee of the airline with the greatest jet fuel use at the airport. The chair works closely with the operator to assure the distribution system is operated safely and efficiently. The Fuel Consortium allows the airlines to assure safe, timely and adequate delivery of their member airlines’ jet fuel. Quarles and Brady is one of very few elite law firms in the country that provide services in this legal arena. Our attorneys represent the fuel consortium entities at more than a dozen major U.S. airports, and we have over 20 years of experience in the field. We have formed a special Client Service Team to serve our Fuel Consortium clients. That team is headed by Daniel L. Muchow, resident in our Phoenix office; he is listed in The Best Lawyers in America, selected for inclusion in Southwest Super Lawyers, and is listed in Chambers USA.

Representative Engagements / Experience:

• Assisting airline representatives in forming new entities for the fuel consortium group, negotiating and educating airport authorities on the role of the consortium and its interaction with the airport authority. Startups often occur when new facilities are planned for the airport (i.e., new terminal building or new fuel facilities), and this requires negotiation with airport authority on the design of new facilities, perhaps involving third-party financing of new facilities; negotiating and drafting agreements with the airport authority and/or third parties for leases and other use rights for the fuel facilities; preparing and drafting standard forms of agreements used for the consortium: Interline Agreement (governing the relationship, duties and obligations of the member airlines), Maintenance and Operations Agreements (between the airline fuel consortium and the third party that operates the fuel facilities — setting forth respective rights and obligations of the parties); Non-Contracting User Agreements (allows access to the fuel system by airlines and other parties that are not members of the fuel consortium group).
  
  
• Providing advice regarding the structure of the Fuel Consortium entity, entity formation, drafting organizational documents, serving as corporate secretary, providing corporate housekeeping and advice on securities law issues; issuing stock in C corporations, general corporate advice, attending annual meetings and generally operating as general counsel to the Fuel Consortium.
  
  
• Assisting with financing for construction of new fuel facilities to serve the airport, expansion of existing facilities, or retrofit or upgrade of existing facilities to comply with new regulatory requirements. We assist in identifying sources of capital, negotiating and documenting financing transactions (loan, secured notes, etc.), working with member airlines to obtain financing consents and opinion letters, and assisting client in complying with post-closing covenants, reports and other requirements.
  
  
• Negotiating and documenting all real estate transactions, and providing advice on general real estate, land use and zoning issues that may arise.
  
  
• Working on remediation of fuel releases; negotiating consent decrees with environmental authorities; providing compliance counseling on wide variety of environmental issues (air quality, hazardous waste disposal, release reporting), environmental permitting and environmental audits.
  
  
• Providing expert legal advice to the Fuel Consortium when it is threatened with litigation. Typically, this includes contractual disputes, often involved with new facility construction. Fuel Consortiums initiate litigation on some occasions to obtain cost of damage to facilities or when threatened with litigation in connection with improper operation of fuel facilities equipment. Litigation skills are sometimes needed to resolve development conflicts with fuel facilities where third parties propose construction that could hinder safe operation of the fuel distribution system.
  
  
• Providing state and local legal advice on property taxation issues, in addition to that associated with occasional issues with federal excise tax that affects the airlines’ owning the fuel; the manner in which fuel facilities are operated may impact individual airlines’ tax liability.

Representative Clients:

• Argo Fuel Committee
  
• Arizona Fueling Facilities Corporation
  
• Atlecon Fuel Corporation
  
• Charlotte Fuel Committee
  
• DCA Fuel Committee
  
• Ft. Lauderdale Fuel Committee
  
• Hookers Point Fuel Facilities LLC
  
• Indianapolis Fuel Facilities LLC
  
• LASfuel Corporation
  
• Midway Fuel Committee
  
• Ontfuel Corporation
  
• Orlando Fuel Facilities LLC
  
• PHL Fuel Facilities LLC
  
• Pittsburgh Fuel Committee
  
• Reno Fueling Facilities Corporation
  
• Tampa Fuel Committee

For more information on how our Jet Fuel Consortium team can help you address issues related to jet fuel consortiums, please contact Daniel L. Muchow at (602) 230-5508 / or your local Quarles & Brady attorney.