World Fuel Services 2008 Annual Report Download - page 11

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Aviation Segment
We market fuel and related services to major commercial airlines, second- and third-tier airlines, cargo
carriers, regional and low-cost carriers, corporate fleets, fractional operators, private aircraft, military fleets and
to the United States and foreign governments. Our aviation-related services include fuel management, price risk
management, arranging ground handling and arranging and providing international trip planning, including flight
plans, weather reports and overflight permits. We also offer a private label charge card to customers in the
general aviation industry. We have developed an extensive network that enables us to provide aviation fuel and
related services throughout most of the world under the following trade names: World Fuel, PetroServicios de
Mexico, Tramp Oil, PetroServicios de Costa Rica, Baseops, Airdata and AVCARD.
In general, the aviation industry is capital intensive and highly leveraged. Recognizing the financial risks of
the airline industry, fuel suppliers generally refrain from extending unsecured lines of credit to airlines and avoid
doing business with certain airlines directly. Consequently, most carriers are required to post a cash collateralized
letter of credit or prepay for fuel purchases. This negatively impacts the airlines’ working capital. We recognize
that the extension of credit is a risk, but believe it is also a significant area of opportunity. Accordingly, we
extend unsecured credit to most of our customers.
We purchase our aviation fuel from suppliers worldwide. Our cost of fuel is generally tied to market-based
formulas or is government controlled. We are usually extended unsecured trade credit from our suppliers for our
fuel purchases. However, certain suppliers require us to provide a letter of credit. We may prepay our fuel
purchases to take advantage of financial discounts or when limited by the amount of credit extended to us by
suppliers, or as required to transact business in certain countries. We also enter into derivative contracts in order
to mitigate the risk of market price fluctuations and to offer our customers fuel pricing alternatives to meet their
needs.
Fuel is typically delivered into our customers’ aircraft or designated storage directly from our suppliers or
from our fuel inventory. Inventory is held at multiple locations for competitive reasons. Inventory is purchased at
airport locations or shipped via pipelines. Inventory in pipelines is hedged in an effort to protect us against price
risk. We have arrangements with our suppliers and other third parties for the storage and delivery of fuel. We
engage in spot sales and contract sales. Spot sales are sales that do not involve continuing contractual obligations
by our customers to purchase fuel from us, whereas contract sales are made pursuant to fuel purchase contracts
with our customers who commit to purchasing specified volume of fuel from us over the contract term.
We utilize subcontractors to provide various services to customers, including into-plane fueling at airports
and transportation and storage of fuel and fuel products.
During each of the years presented in the accompanying consolidated statements of income, none of our
aviation customers accounted for more than 10% of total consolidated revenue.
Land Segment
We market fuel and related services to petroleum distributors operating in the land transportation market;
and through our acquisition of the Texor business in June 2008, we also offer branded and unbranded gasoline
and diesel fuel to retail petroleum operators and industrial, commercial and government customers and operate a
small number of retail gasoline stations. Our land-related services include management services for the
procurement of fuel and price risk management. We provide land fuel and related services throughout most of the
United States as well as parts of Brazil and the United Kingdom under the following trade names: World Fuel,
Tobras and Texor.
In our land segment, we principally act as a reseller. When acting as a reseller, we contemporaneously
purchase fuel from a supplier, mark it up and resell it to our customers through spot sales and contract sales. We
purchase our land fuel from suppliers throughout the United States as well as parts of Brazil and the
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