Rising fuel prices raise private jet travel costs

With the price of jet fuel soaring amid the Iran war, wealthy travelers are facing hefty surcharges to fly privately, sometimes on flights booked months in advance, charter brokers and aviation officials told CNBC.

Vimana Private Jets CEO Ameer Narang said his company recently booked a flight from Dubai to London for $520,000. boeing Business jet for clients. In 2023, the same trip cost the client $400,000. The difference was due solely to the price of jet fuel, with the current global average price being about $4.65 per gallon, Narang said.

This is yet another ripple in the recent disruption to air travel.

During the pandemic, more customers have turned to private air travel to avoid crowds. This option continues to be popular and has become increasingly important to the airline industry as wealthy households support their spending in travel and other areas.

These deep-pocketed travelers are less likely to see prices soar as airfares rise, but they must avoid unexpected fees because brokers and charter companies vary in how they pass on fuel costs. Jet fuel prices in major U.S. cities rose more than 80% last month, industry group Airlines for America said, citing Argus data.

Jet charter brokers like Vimana arrange flights on behalf of passengers with jet operators who own the planes and buy the fuel. Narang said Vimana has not renegotiated contracts or changed ticket prices, but charter rates have been rising rapidly.

He advised travelers to book early, saying that even if the Iran war were to end soon, price increases would likely be long-term.

Narang said major jet companies are slow to pass on fuel costs to passengers because they buy fuel in bulk and want to avoid alienating customers. But he said airlines will likely have to pay more at the pump to replenish supplies, and some are losing money by not revising prices for flights.

“There will be a long-term impact because many businesses will suffer losses,” he said. “They’re not going to renegotiate the contract because they don’t want to damage their relationship with the client, but if they’re losing money today, they have to make it back.”

Jet charter prices have increased by an average of 5% to 15% since the Iran conflict began, with some increasing by up to 20%, according to a database from charter broker Amalfi Jets.

While some airlines are raising prices for flights booked months in advance and scheduled to fly in the coming weeks, Amalfi Jets CEO Colin Jones said the company is eating up the extra fees for jet card customers.

Some airlines are passing on war risk premiums for Gulf flights, but Amalfi Jets has only encountered this on three flights so far, he said. The fee added about $8,000 to $10,000 per trip, Jones said.

Greg Branson Pitts of the charter broker’s Advanced Aviation team said he believes airlines should honor previously booked flight prices, but changing prices is a risk.

In some cases, the fees are relatively small, such as the $1,500 surcharge on a Bombardier Challenger 300 flight from Palm Beach, Fla., to Phoenix, Ariz., he said. On the other hand, a Gulfstream round trip from the East Coast to Asia could incur an additional $20,000 in fees for every $1 increase in the price of fuel per gallon, he said.

Branson-Pitts added that some long-haul trips include fuel in the price.

Amanda Applegate, a partner at Soar Aviation Law, said nearly all charter contracts include variable fuel costs, and providers can charge extra even if flights are booked six months in advance.

Split jet owners who pay overhead costs in exchange for a certain amount of flight time typically pay hourly rates for fuel that are adjusted monthly or weekly. Applegate said they too could be charged extra if fuel prices go up.

Private jet travelers aren’t as price-sensitive as most air travelers, and brokers told CNBC they haven’t seen surcharges hinder demand. Customers who fly privately only once or twice a year for special occasions are most likely to experience sticker shock, they said.

“Realistically, for individuals who fly privately, their need or desire or reason to fly privately outweighs the cost,” Jones said. “Let’s say you’re going to spend $25,000 on a private jet and it costs $30,000 today. That doesn’t necessarily break people.”

Jones said brokers are also trying to reduce costs by refueling in countries where fuel is cheaper, even if the flights are longer.

The business jet market has remained strong so far, with flight numbers up 5% year-on-year in the week ending March 22, according to aviation data and consulting firm WingX.

FlexJet global CEO Andrew Collins said jet usage among some of the company’s aircraft owners was up 15% compared to last year. He said customers are typically billed after they fly, and the company resets fuel prices toward the end of the month by taking a monthly average.

Despite high oil prices, demand for private charters may be supported by travelers looking to avoid long lines at airports.

The recent government shutdown (which began with widespread disruption last fall and is now a partial, ongoing shutdown) has left key airline industry employees without pay and brought air travel to a standstill.

Most recently, hours-long lines formed at major U.S. airports serving Houston and New York as Transportation Security Administration employees were said to be absent from work despite not receiving their regular paychecks.

In the five weeks since the partial government shutdown began on February 14, business jet departures at most major metropolitan airports have increased year over year, WingX reported.

FlexJet’s Collins said that amid recent airport disruptions, the company has seen an increase in what it calls “pop-up flights,” bookings that guarantee aircraft departures within 10 hours.

That said, Amalfi’s Jones said he has noticed that some customers choose to fly in smaller aircraft to save money.

“Some of them are very upset about that. They’re like, ‘I used to drive a Citation X, and the prices were so high, and now I drive a Hawker 800,'” Jones said. “It’s like, well, you’re still flying private. You’ll probably arrive three minutes later than a big plane. But overall, it’s the same kind of experience.”

Branson-Pitts advised travelers to check with their intermediaries to see if they will receive a fuel surcharge or bill after their trip. Still, he said he expected the situation to be temporary, comparing it to the 2007-2008 oil boom and subsequent crash.

“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.”