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Why are charter fees not decreasing as fast as gas prices?

Aircraft fuel, Gasoline and Jet fuel are low volume commodities and are manufactured in batches.  When the refineries produce aviation fuels, they actually stop producing auto fuels and make a 3 or 4 month supply at one time.  They then restart auto fuel production. In the case of Avgas (aviation Gasoline) which contains lead, they have to completly clean out the manufacturing and supply equipment before they can start auto production again.  Because of the lead times involved, aviation fuel does not see the rapid fluctuations in price that you see at your local gas station.  In fact, aviation fuel might totally miss a short term drop in auto gas prices.

This is one reason you will not see the price of airplane charters drop as fast, the other reason is that most operators have been holding the line on price increases to the public, they have taken lower profits in order to keep prices stable.  Many operators also charge a fuel surcharge, if you investigate you will probably see that these surcharges have indeed come down.

At many smaller airports and fixed base operators (aviation gas stations!) the volume of sales are low enough that it may take a month or more to use up their stock of fuel, they will not see a price decrease until the next shipment.  Of course you will also benefit from this same situation when fuel prices go up, most aviation fuel suppliers do not raise prices until they have to order a new shipment (unlike your local gas station!)

At American Business Airways, we do not currently add a fuel surcharge, part of our business plan is simpler pricing and we have indeed dropped our prices from 6 months ago.

Considering the volitility of fuel prices over the last few years, aircraft charter prices although raising modestly, have still not been as volitile as the fluctions in fuel prices.

2 Responses to “Why are charter fees not decreasing as fast as gas prices?”

  1. Private Jet Says:

    Good Article! Thanks.

  2. airways Says:

    Thank You, your welcome to send us any ideas you may have for further articles.

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