The Price of Jet Fuel and Fuelling an Aircraft

A look at the cost of aviation fuel for commercial aircraft

How Much Does Jet Fuel Cost?

As of January 2021, the price of Jet A1 was approximately  \$450 per metric tonne. With a metric tonne being 1,000 KG or 2,204 lbs, this equates to about \$0.45 / £0.33 per KG.

This price is about 34% lower than one year ago (January 2020) where the price of Jet A1 was approximately \$650 per metric tonne or about \$0.65 per KG.

Due to collapse in oil price bought about by the Covid-19 pandemic, at one point (May 2020), Jet A1 was as low as \$200 per metric tonne which equates to around \$0.20 per KG.

Note:

1 KG (kilograms) = 2.2 LBS (pounds)

1 MT (metric tonne) = 1,000 KGS

Source: IATA

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.

Example Calculations

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

It should be noted that it does not include the delivery of the fuel or the fee to actually refuel the aircraft. Therefore the price airlines actually pay for the fuel per kilogram will be higher than the figures outlined above, subject to the contract details. 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. As jet fuel has an approximate specific gravity of 0.85 (the measure of its density), this therefore equates to 82,300 litres.

Based on these figures, the cost of the fuel required to fly from London to New York being operated by a B747 Jumbo Jet is approximately £25,500 (€32,500), which based on 450 passengers, would work out at £57 (€73) per person.

Fuel Price Hedging

The prices airlines actually pay for their fuel varies substantially depending on what price they’ve “hedged” the fuel at. Hedging is where you agree a constant price for fuel for a set period of time into the future. This helps an airline to reduce risk and fixed costs which can be important for financial planning. For example, a fixed amount of fuel, lets 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 normally based on purchasing a set quantity of fuel. If the airline stops flying, such as due to the COVID-19 crisis and don’t use the fuel they’ve hedged, the airlines still have to pay for the fuel they hedged even if they don’t use it which can result in financial loses.