Lower oil prices mean big holiday savings for Jet Setters
A leading private jet charter company is gearing up for a busy holiday travel season thanks to lower fuel expense, discounted charter rates, and increased demand.
It's common knowledge that fluctuations in energy prices impact the cost of just about everything, albeit with varying degrees. Certain industries such as the trillion dollar global travel & tourism industry are more susceptible to these fluctuations than others. Air travel in particular is an example of an industry that is very sensitive to short term international crude oil price fluctuation. However, over the past two decades commercial airline carriers have begun hedging their future fuel costs in order to minimize the risk associated with jet fuel price volatility. According to Peter Maestrales, CEO of Airstream Jets Inc. (ASJ), the same is not true for private jet operators, a sector still dominated by small businesses. He points out, "Although hedging is indeed a legitimate risk mitigation tool, the typical Business Aviation flight department of today simply does not have the purchasing power, market expertise, or appropriate support infrastructure necessary to utilize this tool." Fuel consumption can account for 50% or more of the direct operating costs on a typical business jet. Without a hedging mechanism, private jet charter operators are forced to adjust their hourly charter rates or implement a fuel surcharge in order to account for the changes in operating cost. In the past oil price movements have often been to the upside and not a positive development for the air charter industry, as the higher operational costs ultimately get passed on to the consumer. Maestrales says, "As peak travel season for 2014 approaches, this year is looking good." He adds, "We compared prices of holiday travel itineraries and realized we have already been quoting out at a 5% to 10% discount compared to the previous two years. Overall, the private jet charter market remains a very small market because costs are affordable only to a limited number of individuals and organizations, so any reduction in pricing will directly result in market expansion as well as demand." The CEO also made it clear that his company was not planning to let this opportunity pass without gaining market share. He said, "My team is gearing up for a significant increase in charter demand this holiday season. With this ultimately comes the real opportunity, which is with the market expansion. In today's world, growth periods seem increasingly rare, so we need to be prepared to show these new customers what we can do for them in terms of adding value, creating solutions, and providing extraordinary service second to none." Prices for jet fuel follow in lock-step with crude oil. Benchmark crude oil prices fell to 15-month lows Monday and are likely to accelerate heading into fall.
