Private jet travel costs rise as fuel prices soar
A Gulfstream G-IV private jet approaches Washington’s Reagan National Airport in Arlington, Virginia, on June 12, 2024.
J. David Ake | Getty Images
As the Iran war drives up jet fuel prices, well-off travelers face hefty surcharges to fly private, sometimes on flights booked months in advance, charter brokers and aviation industry insiders told CNBC.
Vimana Private Jets CEO Ameerh Naran said the firm recently booked a $520,000 flight from Dubai to London. Boeing’s Business jet for a client. The same trip cost the customer $400,000 in 2023. The difference was entirely due to jet fuel prices. average Worldwide, it’s about $4.65 per gallon, Naran said.
This is another wave of recent disruptions to air travel.
To avoid crowds during the pandemic, more customers have turned to private plane travel. This option remains popular and has become more important for the aviation industry as more affluent households support spending in travel and other sectors.
These budget-constrained travelers are less likely to be priced out as airfares increase, but they do have to deal with unexpected fees because brokers and charter companies differ in how they pass on fuel costs. Jet fuel prices in major U.S. cities rose more than 80% last month, according to Airlines for America, an industry group citing Argus data.
Jet charter agencies such as Vimana operate flights with jet operators who own aircraft and purchase fuel on behalf of passengers. Naran said Vimana did not renegotiate contracts or reprice flights, but charter prices increased rapidly.
He advised travelers to book as soon as possible, saying price increases will likely be permanent even if the Iran war ends soon.
According to Naran, large jet operators have been slower to pass on fuel costs to passengers because they buy fuel in bulk and want to avoid alienating customers. But operators will likely have to pay more at the pump when they replenish their supplies, he said, and some are losing money by not repricing flights.
“It has a long-term impact because many companies will now make losses,” he said. “They won’t renegotiate the contract because they don’t want to ruin relations with the customer, but if they’re making a loss today, they need to make up for it.”
Jet charter prices have risen an average of 5% to 15% since the start of the Iran war, with some rising as much as 20%, according to charter broker Amalfi Jets’ database.
Transferring expenses to passengers
While some operators are increasing prices for flights booked months ago and scheduled to fly in the coming weeks, Amalfi Jets CEO Kolin Jones said his company was eating into the surcharges for jet card customers.
He said some operators had also cited increased war risk premiums for flights in the Gulf, but Amalfi Jets had encountered this on only three flights so far. Fares have increased by about $8,000 to $10,000 per trip, Jones said.
Gregg Brunson-Pitts of charter broker Advanced Aviation Team said he believes operators should consider prices for pre-booked flights, but repricing is a risk.
In some cases, he said, the fees are relatively insignificant; such as the $1,500 surcharge on a Bombardier Challenger 300 flight from Palm Beach, Florida to Phoenix, Arizona. On the other hand, round-trip travel from the East Coast to Asia on a Gulfstream could incur a $20,000 surcharge for every dollar-per-gallon increase in fuel prices, he said.
All-inclusive fuel pricing is available for some long-haul trips, Brunson-Pitts added.
Nearly all charter contracts include a fuel variable charge, allowing providers to charge more even if the flight was booked six months in advance, according to Amanda Applegate, partner at Soar Aviation Law.
Fractional jet owners, who share overhead costs in exchange for a set number of flight hours, pay an hourly fuel fee, usually set monthly or weekly. Even when fuel prices rise, they may incur surcharges, Applegate said.
Private jet travelers are less price sensitive than most flyers, and brokers told CNBC they don’t see the surcharges deterring demand. Customers who only fly private once or twice a year for special occasions are likely experiencing sticker shock, they said.
“Realistically, for individuals who fly privately, the needs, wants and reasons for flying private outweigh the cost,” Jones said. “If you’re going to spend $25,000 on a private jet and let’s say it costs $30,000 now, that doesn’t necessarily put a price on people.”
Jones said brokers are also working to reduce costs by refueling in countries where fuel is cheaper, even if it means additional flight time.
Request for private flight
The business jet market has been stable so far, with flights up 5% year-on-year in the week to March 22, according to aviation data and consultancy WingX.
Flexjet global CEO Andrew Collins said jet use by the company’s fractional owners had increased by 15% compared to last year. He said customers are usually billed after they fly, and the company averages fuel prices for the month and resets them towards the end of the month.
Even if oil prices rise, travelers want to stay away Long queues at airports may be increasing demand for private flights.
Recent government shutdowns — a major blackout last fall and now an ongoing partial shutdown — have left key aviation workers without pay and caused air travel to slow.
Recently, this has led to hours-long queues at major US airports serving Houston and New York as Transportation Security Administration officials were laid off for not receiving regular salaries.
In the five weeks after the partial government shutdown began on Feb. 14, business jet departures increased year over year at most metropolitan airports, WingX reported.
Flexjet’s Collins said the company has seen a surge in bookings for what he calls “pop-up flights,” or bookings that guarantee the flight 10 hours after departure, during the recent airport chaos.
However, Amalfi’s Jones said he has noticed some customers choosing to fly on smaller planes to spend less.
“Some people get very upset about it, ‘Hey, I used to fly Citation Xs. The pricing is too expensive and now I fly the Hawker 800,'” Jones said. “It’s like you’re still flying private. You’ll get there maybe three minutes slower than the big plane. But ultimately it’s the same kind of experience.”
Brunson-Pitts encouraged flyers to confirm with their brokers whether they can expect a fuel surcharge or bill after the trip. Still, he said he expected the situation to be temporary, comparing it to oil’s rapid rise and subsequent crash from 2007 to 2008.
“This too shall pass,” he said. “That doesn’t mean it’s not painful, but the price of jet fuel goes up and then goes down again.”
