Recently, I asked Clive Jackson, Founder and CEO of private jet charter outfit FlyVictor his thoughts as to why - with oil at less than $50 a barrel (some markets say less than $45) - businessmen and women are not returning to Business Aviation in droves?
“Fuel typically accounts for 20% of a charter flight,” Jackson explains. “For example, a 30% drop in fuel price may only account for a 6% savings on the overall cost of a trip. In the 2015 spot market, we’re finding that operators have not increased their prices over the last year when, of course, other cost will have increased. Some operators also hedge their fuel prices and are therefore locked into contracts.”
The weak Euro has provided further savings on the oil price for European operators, specifically, he notes.
When Victor sees better/lower operator prices due to lower oil costs it looks to pass the savings onto the customer.
A broker, on the other hand, may choose to use any savings to increase profit margins, thus reducing the incentive for more people to return to Business Aviation.
It’s worth noting this if you are looking for a private charter flight any time soon.
Jackson notes that overall, UK traffic was up circa 4% year-on-year for the month of February whilst some European routes are down significantly, most notably Russian traffic, which has fallen by as much as 60%.
“In the US, we’re hearing that more fuel is being pumped by the FBOs indicating an increase in the momentum of Business Aviation. It’s too early to alter the modest predictions of growth, but I am optimistic that by year-end, we will have exceeded expectations,” Jackson projects.
“I expect that the price of oil will remain at these levels, or lower, for some time as the Saudis continue to pump a surplus into the markets and the US increases production by 1.2 million barrels per day in 2014 to 8.7 million barrels, which is the biggest increase in US crude oil production since records began in 1900.”
The old adage of ‘follow the money’, (in this case where and how it is spent) is a good indicator of where the recovery is starting to gain ground. That said, the adage can be misleading… “Victor’s growth (last year 260% in booking revenue) is a reflection of how we are disrupting the market with a consumer proposition that guarantees transparency through the quote compare and buying process,” Jackson concluded.