Wed. Feb 1st, 2023

It’s not just Joe and Jill Everyperson who are getting whacked with record-high prices at the gas pump. Don’t get your violin out, but private jet users are paying fuel surcharges that range into thousands of dollars per hour. That’s on top of general price increases. At the end of the first quarter, the average hourly rate for jets cards was 21% higher than the end of 2020. If you’re not flexible, on-demand charter prices can easily be double what you were paying less than 18 months ago.

“It’s outrageous,” one frequent private flyer told me after being hit with a five-figure fuel surcharge invoked more than two months after he booked and paid for flights. His choice was to pay up, or he could get a refund, which in choosing the latter meant he would have to start at square one and price out the trip again. He asked, “Do they have a right to do this?”

Well, the answer is it depends on who you talk to, and of course, what’s in your contract

Several brokers I spoke with said they have been absorbing the surcharges for regular customers. They believe the extra charges aren’t gouging but reflect the cost of doing business. Charter flights booked months ago were priced in good faith based on fuel costs at the time. “We want our operator partners to have a sustainable business. We don’t want them looking for places to cut corners,” says Anthony Tivnan, President of Magellan Jets.

The biggest problem is when operators wait until a few days before the flight. Andrew VanderPloeg, Senior Vice President of Private Jet Services Group, recalls, “We had a notable trip on a large-cabin aircraft. Four or five days before the departure, without any fuel language, (the operator) said, ‘We have to add (a fuel surcharge) to the trip.’ It was a significant sum of money, and they just said take it or leave it. It was nearly a five-figure number.” The company ate the extra cost, he says.

Kevin Diemar, CEO of Unity Jets, says there have only been a few instances of operators coming back and demanding extra money to cover increased fuel costs. He says it’s generally trips that were booked several months ago. While it’s frustrating when operators only give short notice about surcharges, he believes it is mainly because, “All of a sudden they are looking at next week’s trips and somebody says, ‘That (price) doesn’t make sense.’”

For members of jet card programs, many are finding the fine print in their contracts carry 30-day clauses, which allow the provider to implement extra fees and change terms with notice, and specific fuel surcharge clauses. Those fuel surcharges often specify when and how much the extra costs will be. In some cases, the fuel surcharges are updated on a monthly or quarterly basis, while other providers recalculate fuel surcharges weekly. The surcharge is based on the price when you book, not when you fly, underscoring the complexity of figuring out what to charge. Some surcharge amounts are based on the cost of fuel when you signed the contract.

FlyExclusive is now building ever-changing fuel costs into its fixed hourly rates. It uses a sliding scale of published pricing whereby the hourly jet card rate fluctuates based on jet fuel’s national price for the previous month’s last two weeks. In making the change, it gave customers the option to stay with their existing program. Those contracts included fuel surcharges calculated in six-month intervals based on the price of fuel when the contract was signed. That meant some members were facing surcharges of over $2,000 per hour.

That said, one member of its original Jet Club said he was unsure what he would do since his contract only had 15 peak days, and the current program he would be switching to has 45 peak and high-demand days. “If I go to the new contract and need to fly on peak days, I might end up spending more than the fuel surcharges,” he says.

The CEO of one large charter operator says about the industry, “Until a month or so ago, there was no standard as to whether there was language about the ability to add a fuel surcharge.” However, he says with prices spiking, “Every operator I know, if they didn’t have one, they’ve added a fuel surcharge clause.”

For operators, the spike in fuel cost is causing a host of issues.

As of last week, the IATA Jet Fuel Price Monitor had the average price of jet fuel in North America at $4.20 per gallon, up 126% from the same time a year ago. However, one small operator based at Teterboro Airport in New Jersey across the river from New York City says most of her flights are between the New York area and South Florida, where prices have been hitting $10 per gallon, more than double the national average.

At that price, the fuel cost for a Bombardier Global 5000 would run $5,060 per hour, according to Conklin & deDecker, some $4,048 more per hour than when jet fuel was at $2 per gallon.

Larger operators have national discount programs and try to plan their flights to buy fuel at lower-cost venues, but one CEO says, “It’s more aspirational. We can plan to buy fuel where it’s cheap and tanker, but you must calculate the cost of the extra weight, and then when you think you are saving money, a client changes his trip, and you are buying fuel someplace that’s expensive because you don’t have a choice.”

Titan Aviation Fuels CEO Daniel Coetzer says the U.S. is getting hit harder with multiple layers of taxes and a business model where selling fuel is an important part of the profit model for FBOs. And while fuel prices can vary between FBOs at the same airport, ironically, the fuel is often held in the same shared storage tank.

If your contract doesn’t have a fuel surcharge clause, can your provider still impose a surcharge?

David Hernandez, a Partner in Vedder Price and former DOT and FAA attorney, says, “Any company who today claims that a fuel surcharge is an unforeseeable circumstance – force majeure – that prevents them from fulfilling the terms of a charter trip is taking a risky position. Fuel prices spiked months ago, and fuel surcharges are no longer an unforeseeable circumstance.”

He says Transportation Department charter regulations require brokers and air charter operators to disclose fuel surcharges, and the failure to do so likely constitutes a misrepresentation regarding the charges, which he says would be considered “unfair or deceptive practice in violation of DOT regulations.”

The DOT has an online complaint and comment form if you want to make your voice heard. Hernandez says, “I would not be surprised if the DOT pursues enforcement actions against air carriers and brokers who ambush charter customers with last-minute fuel surcharges when they have no option but to pay or cancel the charter.”

Still, don’t expect to get much in terms of compensation. Hernandez says while you can file a complaint, contracts typically contain language that bars consequential damages. That means even if you took your provider to court and won, you would not recover costs related to securing a replacement charter.

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