The Price of Oil and Fuelling an Aircraft
A look at the cost of aviation fuel for commercial aircraft
As of January 2020, the price of Jet A1 was approximately $650 per metric tonne. A metric tonne is 1,000 KG or 2,204 lbs. This equates to about $0.65 per KG. Due to collapse in oil price bought about by the Covid-19 pandemic, as of May 2020, Jet A1 was approximately $200 per metric tonne which equates to around $0.20 per KG.
Note: 1 KG = 2.2 LBS
The price of jet fuel (known as Jet A1) is closely aligned the price of oil which varies on a daily basis. In May 2020, the price of Jet A1 was down 69% compared to the previous 12 months.
The price of jet fuel as of January 2015 is as follows:
- 170.8 Cents (US dollars) per Gallon
- 1 litre = 0.3125 pence (pound sterling)
- 1 litre = 0.40 Euros
This does not include delivery of the fuel. At present there is no tax on aviation fuel in Europe.
A jumbo jet (Boeing 747-400) flying from London to New York burns approximately 70,000 kilograms of fuel. Jet fuel has an approximate specific gravity of 0.85 (the measure of its density), which equates to 82,300 litres.
Therefore, the cost of the fuel required to fly from London to New York is approximately £25,500 (€32,500). A jumbo jet carrying 450 passengers, would work out at £57 (€73) per person.
The prices airlines actually pay for their fuel varies substantially depending on what they’ve “hedged” it at. Hedging is where you agree a constant price for fuel for a set period of time into the future. This helps to reduce risk and fixed costs which can be important for airline financial planning. For example, a certain amount of fuel, say 5 million tonnes, might be hedged at $600 per metric tonne for 12 months. The airline will pay $600 per metric tonne regardless of any fluctuation in price of fuel during this time. If the fuel price goes up, the airline is protected from this rise whilst if there is a drop in fuel price, the airline will be paying more for fuel than it might have done.
The hedging is based on a set amount of fuel. If airlines stop flying, such as due to the COVID-19 crisis, airlines still have to pay for the fuel they hedged even if they don’t use it.