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Now that pilots are able to operate however they want, and buy fuel wherever they want. Won't this lead to abuses, such as people inflating their fuel expenses?

No reimbursement plan, fixed rate or not, is a substitute for good program management and oversight. Pilots will still be expected to operate prudently. However, many pilots have little choice as to where they must buy fuel, or the rate at which they burn it. Different aircraft burn fuel at different rates depending on many circumstances. Some operations require higher power settings than at other times. This plan will accommodate all of that. And yes, this plan trusts that pilots will report expenses honestly. The old fixed rate schedule relied on pilots to report their hours honestly, too, didn't it? After all, there were no "Hobbs meter police" who came out to verify that the number entered on the orders was the actual number of hours flown. Auxiliarists are always expected to be honest.
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