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 fuel. Air carriers and travellers are suddenly burdened with higher costs, just as air travel is recovering from COVID-19 restrictions. The price of Brent has jumped 26% 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 and 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 volatile.

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.

Fixed and variable costs

GlobeAir has a dedicated and specialised Procurement department that works closely with Airports, Fixed Base Operators (FBO) and handlers across the European continent. As business aviation is less regulated than commercial aviation, different stakeholders are able to apply additional new fees without concern about competition. The EBAA is starting to play a bigger role and is in the process to apply for regulations to assist the business aviation industry.

As part of the procedure to maintain more fixed costs for fuel, our Procurement team performs an annual tender for the different fuel suppliers across Europe to negotiate a better-fixed cost and decreased volume costs. By applying this procedure, GlobeAir is able to better calculate an average fixed rate to apply to our pricing structure and charge competitive pricing to our passengers. Although GlobeAir tries to bring 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 the delivery of fuel to Aircraft's refuelling.
• Valued Added Tax (VAT) is different per country and destination. VAT rates in Europe are up to 27% and are applied not just to the base price of fuel but also to MOT duties, airport fees and any additional charges like handler fees. For example, the VAT rate on fuel uplifts in Switzerland is 8%, Germany 19%, and Hungary 27%.
• 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. E.g. This can be any between 500Lts - 1000Lts. Not all airports have a fuel uplift fee as the Nice airport does not have this.
• GlobeAir can expect an additional 2-4% to base fuel price as local airport fees. These fees are based on the uplifted fuel volume.
• Additionally, local fixed-base operators (FBOs) may have restrictions in place on who may be able to fuel an aircraft on their ramp and may not fall part of the GlobeAir tender agreement.

So how is GlobeAir going to be able to manage the increased

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 for travelling around Europe, we guarantee maximum efficiency.