Wednesday, July 26, 2017

The way prices are quoted for jet cards can vary enormously. Some companies quote an all-inclusive price and guarantee it for say 12 months. Others quote a base price and then add on items such as fuel and FET. Fuel surcharges can add up to quite a bit and can come as a nasty shock if you're not expecting them. Here's a run-down on how they work.

The idea of fuel surcharges is to cover the variable cost of fuel. A basic fuel fee, such as $1.60 per gallon, is built into the basic cost of the jet card and then the fuel surcharge is the amount that the actual fuel price exceeds this built in amount.

Overview Surcharge Calculation

So in very simple terms if the card agreement covers fuel at $1.60 per gallon, and the actual price is $5.60 a gallon then you will pay the additional $4 ($5.6-$1.6) as a "fuel surcharge".

The full amount you end up paying will depend on two other factors i) the aircraft, and more importantly its fuel consumption ii) how long you fly. So for instance if the aircraft is something like a Phenom 300 and consumes say 165 gallons per hour and you fly for 2 hours then you will pay for 330 gallons. At $4 per gallon that comes to a fuel surcharge of $660 per hour or an additional $1,320 on that 2 hour flight.

Practical Examples

So that's the overview, in practice different companies have slightly different ways of calculating the fuel surcharge. The actual amount of fuel you use for any given flight will vary depending on the weather, the number of passengers and the weight of any baggage. Since this is so variable, you rarely pay a fuel surcharge based on the actual fuel you use. Instead companies have various ways of simplifying this.

Some companies simply say that the fuel surcharge is a flat amount per hour for a given aircraft type eg:

Light $625
Midsize $800
Super-Mid $850
Large $925

Others such as NetJets use a fuel consumption factor for each aircraft. In NetJets case they call this the "Fuel Variable Rate". As an example of this calculation the "Fuel Variable Rate" for a Citation XLS is 4.2, and if the price of fuel is $4.79, and the jet card agreement covers fuel at $1.60 per gallon, the calculation is:

[($4.79-$1.60)/ $.01] x 4.20 = $1,339.80

For an hourly fuel surcharge of $1,339.80.

The "Fuel Variable Rate" for other aircraft include:

Hawker 400XP 3.33
Citation X 6.45
Gulfstream G550/ GV 8.33

Fuel Price

We've also seen different calculations of the actual price of fuel used in these computations. For instance, some companies base the calculation on their average cost of fuel and change this on a monthly basis. It may also include an amount for the administration of their fuel program. Other companies charge based on the national average fuel price, even though they may be getting a significant discount through their bulk buying power.

We've also seen the Fuel Surcharge referred to as a "Fuel Cost Adjustment" (FCA). Whatever the name, remember to check whether there is a fuel surcharge and ask how it's calculated the next time you're comparing jet cards.

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