Jet fuel price surge and its effects on Private Aviation

GlobeAir takes action to meet demand

Private aviation battered again just as recovery picks up

Rising crude oil prices have led to a surge in the cost of jet A1 fuel and in recent times, the current fuel and oil prices are significantly volatile and unpredictable. Air carriers and travellers are suddenly burdened with higher costs, just as air travel is recovering from COVID-19 restrictions. As per the International Air Transport Association (IATA) flight price monitor, in the last 12 months, the fuel price in Europe has increased by over 115% and in a period of 3 weeks, the fuel price index has risen from 303,8 to 383,4 (dated 18 March).

The price of Brent has jumped over 26% to $140 a barrel since Russia invaded Ukraine on Feb. 24th, leading importers to scramble for alternatives. Oil prices soared to near 14-year highs earlier this month due to supply lagging demand with the U.S. and U.K. banning Russian imports following Moscow's invasion into Ukraine.

Jet fuel prices in Europe and the United States have risen quickly, meaning that global carriers who were already battered by COVID-19 over the last two years will now be forced to pass on higher costs via fuel surcharges and increased fares.

Since Q3 and Q4 of 2021, GlobeAir has been monitoring the situation very closely and the trend of higher jet fuel prices started to climb steeply before the war on Ukraine. However, since 24 February 2022, jet fuel prices have been exasperated, and the situation has become significantly volatile. The European Business Aviation Association (EBAA) is playing a more significant role as they push for pricing regulations to assist the business aviation industry.

In the future, we will be able to eliminate our dependence on fossil fuels and jet fuel by addressing climate change with initiatives that cut aviation's carbon emissions. We need investments for sustainable options in order for the business aviation industry to move towards a more sustainable future.

This means moving towards alternative fuels such as biofuels or synthetic substitutes made through chemical processes, though the cost is an issue at this point in time.

Below you will find our learnings and how we can meet the demands of suppliers while also providing a premium service and pricing structure to our passengers.

GlobeAir is dedicated to minimising pricing

Fixed and variable costs affecting fuel prices

GlobeAir has a dedicated, specialised Procurement Department that works closely with airports and fixed-base operators in Europe.As part of our procedure to regulate the fixed costs for jet A1 fuel, we conduct an annual tender for different fuel suppliers in Europe to negotiate better-fixed rates and decreased volume prices.

This way, GlobeAir can set a more accurate average fixed rate, which can be applied across our pricing structure, enabling us to offer competitive fares on flights.

Although GlobeAir tries to regulate the fixed cost down as much as possible, most fixed fees are being passed on from the airport or the fueler and cannot be managed.

Unfortunately, there are also certain fixed costs which we have no control over. Some of these costs include:

• Mineral Oil Tax (MOT) is an Excise Duty levied on fuel delivery to aircraft's refuelling.
• Minimum Fuel uplift means the measurement of fuel provided by the fuel supplier. This is the minimum amount of fuel an aircraft carrier has to fill the aircraft. Usually, either 500Lts or 1000Lts where this is relevant for GlobeAir operations, as for such size of an aircraft as is the Cessna Citation Mustang 510 the max fuel tank volume is no more than 1200Lts. Not all airports have a fuel uplift fee as the Nice airport does not have this. Another factor affecting the fuel uplift costs is the fuel volume required for what is expected to be used from departure to destination.
  
• Additionally, local fixed-base operators (FBOs) may have restrictions on who may be able to fuel an aircraft on their ramp and may not fall part of the GlobeAir tender agreement.
  

Premium service and competitive pricing

How GlobeAir is able to curb the benchmark

GlobeAir is aware the fuel increase and volatility will affect pricing across the whole aviation industry globally, and these costs are passed down to the traveller. Our expert and committed Digital department has developed a pricing dashboard and process, taking into account fixed average prices and the variable differential and uplift costs.

This process has provided a pricing structure to calculate the average fuel costs per hour, and our pricing is automatically updated accordingly. The oil prices are volatile and difficult to predict and due to GlobeAir's flexible schedule and last-minute business and leisure bookings we receive, these costs must be calculated automatically to provide an unforgettable first-class service to our clients.

Not all travellers are the same, and many passengers are already booking their Summer destinations to exclusive destinations with GlobeAir. Should the price of oil and fuel costs decrease later in the year with an additional decrease in operational expenses, this too will be taken into account. We will be able to offer a discounted benefit to our passengers through premium catering or luxury ground transfer options.

GlobeAir is a company that focuses on ensuring its customers and passengers are constantly informed and provided with a premium service. The GlobeAir dedicated sales and customer experience team will be happy to answer any of your questions 24/7 or explain more in detail should you need it.

GlobeAir provides a smart way for travelling around Europe with maximum efficiency and flexibility; at very short notice and with the world's largest fleet of Cessna Citation Mustang Jets, we guarantee maximum efficiency.