Determination of fuel surcharges for private jets

It’s not just Joe and Jill Everyperson being hit at the pump with record high prices. Don’t get your fiddle out, but private jet users pay fuel surcharges that run into thousands of dollars per hour. This is in addition to the general price increases. At the end of Q1, the average hourly rate for Jets charters was 21% higher than at the end of 2020. If you’re not flexible, on-demand charter prices can easily be double what they were less than 18 months ago.

“It’s outrageous,” one frequent flyer told me after being hit with a five-figure fuel surcharge more than two months after booking and paying for flights. He had the choice of paying or getting a refund, which meant that if he chose the latter, he had to start from scratch and recalculate the trip. He asked, “Have they a right to?”

Well, the answer is, it depends on who you’re talking to and what’s in your contract

Several brokers I spoke to said they picked up the surcharges for regular customers. They feel that the additional fees are not high but reflect the cost of doing business. Charter flights booked months ago have been charged in good faith based on fuel costs at the time. “We want our operator partners to run a sustainable business. We don’t want them looking for places to cut corners,” said Anthony Tivnan, President of Magellan Jets.

The biggest problem is when the operators wait until a few days before the flight. Andrew VanderPloeg, Senior Vice President, Private Jet Services Group recalls, “We had a remarkable journey on a large cabin aircraft. Four or five days before departure, without any fuel language, (the operator) said, “We need 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 almost a five-digit number.” The company has eaten up the additional costs, he says.

Unity Jets CEO Kevin Diemar says there have been few instances where operators have come back demanding extra money to cover increased fuel costs. He says it’s usually trips booked several months ago. While it’s frustrating when organizers only announce surcharges at short notice, he believes that’s mainly because: “All of a sudden they’re looking at next week’s rides and someone says, ‘That (the price) doesn’t make sense.'”

For jet card program members, many find the fine print in their contracts 30-day clauses that allow the provider to introduce additional fees and change terms with notice, and specific fuel surcharge clauses. These fuel surcharges often indicate when and how much the additional cost will be. In some cases, the fuel surcharges are updated monthly or quarterly, while other providers recalculate the fuel surcharges weekly. The surcharge is based on the price at the time of booking, not at the time of flight, which underscores the complexity of determining the amount to be charged. Some surcharge amounts are based on fuel costs at the time of signing the contract.

FlyExclusive is now building ever-changing fuel costs into its fixed hourly rates. It uses a sliding scale of published prices, with the hourly jet card price fluctuating based on the national jet fuel price for the last two weeks of the previous month. The change gave customers the option to stay with their existing program. These contracts included fuel surcharges that were calculated semi-annually based on the fuel price at the time the contract was signed. That meant some members were facing surcharges of over $2,000 an hour.

However, a member of the original Jet Club said he wasn’t sure what he would do as his contract only had 15 peak days and the current program he would be moving to has 45 peak and high demand days. “If I get the new contract and have to fly on peak days, I might spend more than the fuel surcharge,” he says.

The CEO of a major charter company says of the industry: “Until about a month ago there was no standard as to whether there was language about the ability to add a fuel surcharge.” However, with prices rising, he says: “Every operator I know , added a fuel surcharge clause if it didn’t already have one.”

For operators, the increase in fuel costs causes a variety of problems.

The IATA Jet Fuel Price Monitor last week showed the average price of jet fuel in North America at $4.20 a gallon, up 126% from the same time a year ago. However, a small airline based at Teterboro Airport in New Jersey, across the river from New York City, says most of its flights are between the New York area and south Florida, where prices have reached $10 a gallon, more than double the national average.

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

Larger operators have national rebate programs and try to time their flights to buy fuel from cheaper places, but one CEO says: “It’s more ambitious. We can plan to buy fuel where it’s cheap and tank trucks, but you have to calculate the cost of the extra weight and then when you think you’re saving money, a customer changes their trip and you buy fuel an expensive place because you don’t have a choice.”

Daniel Coetzer, CEO of Titan Aviation Fuels, says the US will be hit harder by multiple tax layers and a business model where selling fuel is a key part of the profit model for FBOs. And while fuel prices can vary between FBOs at the same airport, ironically, fuel is often stored in the same shared storage tank.

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

David Hernandez, a partner at Vedder Price and a former DOT and FAA attorney, says, “Any company today that claims a fuel surcharge is an unforeseen circumstance — Force majeure – preventing them from fulfilling the terms of a charter voyage occupies a risky position. Fuel prices skyrocketed months ago and fuel surcharges are no longer an unpredictable circumstance.”

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

The DOT has an online complaint and comment form if you would like to make your voice heard. Hernandez says, “I wouldn’t be surprised if the DOT took enforcement action against airlines and brokers who ambush charter customers with last-minute fuel surcharges when they have no choice but to pay for the charter or cancel it.”

However, don’t expect to get much compensation. Hernandez says while you can file a complaint, contracts typically contain language that prohibits consequential damages. That means even if you took your provider to court and won, you would not recover the costs associated with securing a replacement charter.

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