World Fuel Services 2012 Annual Report Download - page 21

Aviation Segment
We market fuel and related services to major commercial airlines, second and third-tier airlines, cargo
carriers, regional and low-cost carriers, airports, fixed based operators, corporate fleets, fractional
operators, private aircraft, military fleets and to the U.S. and foreign governments. Our aviation-related
services include fuel management, price risk management, arranging ground handling, providing 24/7
global dispatch services and arranging and providing international trip planning, including flight plans,
weather reports and overflight permits. In addition, we offer card payment solutions and related
processing services. Because fuel is a major component of an aircraft’s operating costs, our customers
require cost effective and professional fuel services. We have developed an extensive network of third-
party suppliers and service providers that enables us to provide aviation fuel and related services
throughout the world. We believe the breadth of our service offering combined with our global supplier
network is a strategic differentiator that allows customers to secure fuel and high-quality services in any
location worldwide on short notice.
We purchase our aviation fuel from suppliers worldwide, which is then typically delivered into our
customers’ aircraft or designated storage directly from our suppliers pursuant to arrangements with
them or from our fuel inventory pursuant to contracts with various third parties. Inventory is purchased at
airport locations or shipped via pipelines and held at multiple locations for strategic reasons. We typically
hedge inventory in pipelines in an effort to protect us against price risk. We also engage in both contract
sales, which are sales made pursuant to fuel purchase contracts with customers who commit to
purchasing fuel from us over the contract term, and spot sales, which are sales that do not involve
continuing contractual obligations by our customers to purchase fuel from us. Our cost of fuel is
generally tied to market-based formulas or is government controlled and our suppliers typically extend
unsecured trade credit to us. We may prepay our fuel purchases 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 of certain of our transactions
and to offer our customers fuel pricing alternatives to meet their needs.
During each of the years presented in the accompanying consolidated statements of income and
comprehensive income, none of our aviation customers accounted for more than 10% of total
consolidated revenue.
Marine Segment
We market fuel and related services to a broad base of marine customers, including international
container and tanker fleets, commercial cruise lines, yachts and time-charter operators, as well as to the
U.S. and foreign governments. Through our extensive network of offices, we provide our customers
with real-time global market intelligence and rapid access to quality and competitively priced marine fuel
24 hours a day, every day of the year. In addition, we offer card payment solutions and related processing
services. Our marine fuel related services include management services for the procurement of fuel,
cost control through the use of price hedging instruments, quality control and claims management.
We primarily act as a reseller as we generally take delivery for fuel purchased at the same place and time
as the fuel is sold, mark it up and contemporaneously resell the fuel to our customer. We also sell fuel
from our inventory, which we maintain in certain locations for strategic reasons in storage facilities that
we own or lease and generally hedge in an effort to protect us against price risk. We also act as a broker
and are paid a commission for negotiating the transaction by arranging the fuel purchase contract
between the supplier and the end user and expediting the arrangements for the delivery of fuel. In
addition, we enter into derivative contracts in order to mitigate the risk of market price fluctuations on
certain of our transactions and to offer our customers fuel pricing alternatives to meet their needs. The
majority of our marine segment activity consists of spot sales. Our cost of fuel is generally tied to spot
pricing or market-based formulas or is government controlled, and our suppliers typically extend trade
credit to us. We also contract with third parties to provide various services for our customers, including
fueling of vessels in port and at sea, and transportation and delivery of fuel and fuel products.
During each of the years presented in the accompanying consolidated statements of income and
comprehensive income, none of our marine customers accounted for more than 10% of total
consolidated revenue.
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