Private jet travel costs rise as fuel prices soar

As the Iran war drives up jet fuel prices, wealthy travelers face steep surcharges for flying privately, sometimes on flights booked months in advance, charter agents and aviation experts told CNBC.

Vimana Private Jets CEO Ameerh Naran said the company recently booked a $520,000 flight from Dubai to London on a boeing business jet for a client. That same trip cost the customer $400,000 in 2023. The difference was entirely due to jet fuel prices, which now average about $4.65 a gallon globally, Naran said.

It's another repercussion in recent disruptions to air travel.

More customers turned to private air travel during the pandemic to avoid crowds. The option remains popular and has become more important for the aviation sector as wealthier households prop up spending in travel and other sectors.

These deep-pocketed travelers are less likely to be priced out as airfares rise, but they do have to contend with unexpected fees as brokers and charters differ in how they pass along 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 data from Argus.

Charter brokers like Vimana arrange flights with aircraft operators, who own the planes and purchase fuel, on behalf of passengers. Naran said Vimana does not renegotiate contracts or change flight prices, but charter flight prices have increased rapidly.

He advised travelers to book as soon as possible, saying any price increases would likely be difficult even if the Iran war ends soon.

Operators of larger aircraft take longer to pass fuel costs on to passengers because they buy fuel in bulk and want to avoid alienating customers, according to Naran. However, operators will likely have to pay more at the pump when they replenish their supplies, and some are suffering losses by not changing flight prices, he said.

“There is a long-term effect, because many companies will now suffer losses,” he said. “They are not going to renegotiate the contract because they do not want to ruin the relationship with the client, but if they have losses today, they have to recover them.”

Charter flight prices have increased between 5% and 15% on average, and some have increased as much as 20%, since the conflict with Iran began, according to the database of charter broker Amalfi Jets.

While some operators have raised prices on flights booked months ago and scheduled to fly in the coming weeks, Amalfi Jets CEO Kolin Jones said his company is swallowing the surcharges for Jet card customers.

Some operators are also passing on higher war risk premiums for flights in the Gulf, although Amalfi Jets has only taken this into account on three flights so far, he said. The charges added between $8,000 and $10,000 per trip, Jones said.

Gregg Brunson-Pitts, of charter broker Advanced Aviation Team, said that while he believes operators should honor the prices of pre-booked flights, repricing is a risk.

In some cases, the fees are relatively insignificant, he said, like a $1,500 surcharge for a flight from Palm Beach, Florida, to Phoenix, Arizona, on a Bombardier Challenger 300, for example. On the other hand, a round trip in a Gulfstream from the East Coast to Asia could generate $20,000 in surcharges for every dollar increase in the price of fuel per gallon, he said.

Some long-haul trips have all-inclusive fuel prices, Brunson-Pitts added.

Almost all charter contracts include a variable fuel expense, allowing suppliers to charge more even if the flight was booked six months ago, according to Amanda Applegate, a partner at Soar Aviation Law.

Fractional aircraft owners, who share overhead costs in exchange for a set number of flying hours, typically pay an hourly fuel rate that adjusts monthly or weekly. Even they may be forced to pay surcharges when fuel prices rise, Applegate said.

Private jet travelers are less price-sensitive than most travelers, and brokers told CNBC they haven't seen surcharges deter demand. Customers who only fly privately once or twice a year for special occasions are more likely to be surprised, they said.

“Realistically, for people who fly private, the need, desire and reason to fly private outweighs the cost,” Jones said. “If you're going to spend $25,000 on a private jet, and let's say the cost is now $30,000, that doesn't necessarily mean people will miss the price.”

Brokers are also working to mitigate costs by refueling in countries where fuel is cheaper, even if that means additional flight time, Jones said.

So far, the business jet market is holding steady, with flights up 5% year-over-year in the week to March 22, according to aviation data and consulting firm WingX.

Flexjet global chief executive Andrew Collins said aircraft utilization by the company's fractional jet owners was up 15% from last year. Typically, customers are billed after flying and the company resets fuel prices toward the end of the month, taking an average for the month, he said.

Even as oil prices rise, travelers looking to avoid long lines at airports may be underpinning demand for private charter flights.

Recent government shutdowns — a major disruption last fall and now a partial, ongoing shutdown — have left key aviation workers without pay and slowed air travel.

More recently, that has led to hours-long lines at major U.S. airports, such as those serving Houston and New York, when Transportation Security Administration officials were left out of work while not receiving regular pay.

In the five weeks after the partial government shutdown began on Feb. 14, commercial aircraft departures increased year-over-year at most metropolitan airports, WingX reported.

Flexjet's Collins said the company saw an increase in what he called “pop-up flights,” or reservations that guaranteed a plane within 10 hours of departure, during the recent chaos at the airport.

That said, Amalfi's Jones said he's noticed some customers opting to fly on smaller planes to spend less.

“Some of them are very upset about it, like, 'Hey, I used to fly the Citation “It's like, well, you're still flying private. You'll arrive maybe three minutes slower than the bigger plane. But overall, it's the same kind of experience.”

Brunson-Pitts encouraged travelers to confirm with their agent if they can expect a fuel surcharge or bill after their trip. Still, he said he hopes the situation is temporary, comparing it to oil's rapid rise and subsequent collapse between 2007 and 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.”