What does the Russian invasion mean for fuel and charter prices?


Jet fuel prices could jump by up to 25% with airspace closures forcing re-routing and significant rises in fuel consumption, after the Russian invasion of Ukraine, according to industry insiders consulted by Corporate Jet Investor.

Speaking before Brent crude, the global benchmark for oil prices, reached $112 a barrel today (March 2nd), its highest level since June 2014, Richard Koe, MD at flight analyst WINGX said direct fuel prices and flight re-routing would add to private jet operators’ costs.

“The potential impact on operators is interesting,” said Koe. “They´re now going to get hit with much higher fuel costs, not just the price of kerosene but also the air traffic management complications which will force massive detours. Fuel costs represent about 15% of designated operational coverage, so the hike could take this cost towards 25%.”

The closure of airspace in Russia, Ukraine and Belarus to many operators would add significantly to both flight times and fuel consumption, he said. For example, rerouting flights from London to Delhi will mean an additional 557miles (896km) and an extra hour’s flying time. Last year there were 1,700 arrivals of business jets and scheduled airliners to the UK alone. Yesterday president Biden closed US airspace to Russian aircraft.

WINGX data reveals 80 business jets on the These flew 9,060 sectors in 2021, up 66% on 2020, There are four business jets on the Ukraine Register that flew 852 sectors in 2021, up 61% on 2020. Many more jets, registered around the world, have beneficial owners who carry Russian passports (among other types).

Russian and Ukrainian flagged flights combined represent 4.9% of all inter-EU flights (3.59% and 1.19% respectively for 2021). Germany accounts for the highest percentage of inter-EU flights at 14%. While Russia and Ukraine account for a relatively small portion of EU flight volumes, they have grown significantly in the past two years. Russian flights are up by 21% and Ukraine flights have climbed by 45%. “Of country sectors in Europe in 2021, 7% involved airports in Ukraine and Russia. This was equivalent to 10% of sectors flown” said Koe. He continued  “For the charter market, the exposure is 15%. For some top operators in Central/Eastern Europe, exposure is less than 30%. For heavy jets, exposure is close to 20%.”

Seven days ago when the Russian tanks rolled into Ukraine, the global benchmark of Brent Crude shot up by 8.21%. Last year business jets in Europe used an estimated 30m tons of Jet A1, about 12% of the total uplift in Europe, according to Koe.

Alexey Khokhlov, Jet-A1-Sales, head of sales told CJI that significant fuel prices were likely. “Russia is increasing the output of kerosene,” he said. “The largest player Gazprom sold 3.7m tons in 2021, which is 30% more than in 2020. Our forecast is that Russian companies in difficult geopolitical conditions will be very selective in selling kerosene. Most likely, it will mean fuel prices will rise significantly. In 2021, Jet A1 remained the most demanded of all petroleum products,” said Khokhlov. “We also forecast its shortage in 2022.”

Also, with the EU imposing ever tighter sanctions and western energy companies and markets severing ties with Russia, the supply of kerosene is set to fall further – adding to upward pressure on prices and private jet operational costs.

BP is to shed its 19.75% stake in Russian state-owned oil firm Rosneft after the invasion. Also, Shell has pledged to end all of joint ventures with the Russian energy company Gazprom following the invasion of Ukraine.

Gauging precisely how far and when higher fuel prices will feed back to private jet clients is difficult. But charter operators are highly likely to use fuel price spikes as an opportunity to raise prices to cover operational costs that have been rising over the past 18 months, according to Andy Christie, Air Charter Service private jets director. “From a private jet point of view, the charter market will increase prices. I think it may be used, in some cases, almost as a method of increasing prices.”

Also, he doubts rates rises will be confined to the short term. Christie said “There’s an argument that says there’s always fluctuation in fuel prices and it’s only ever felt with the price going up. The prices are pushed back to the consumer when they go up, but they are never reduced to the benefit of the consumer in our industry when the prices drop.”

This will impact not just charter clients but also private jet flyers on membership and fractional schemes. But, more positively, fuel prices are typically hedged well in advance, he said. “There is quite a bit of give before it is pushed back to the customer.”

But higher fuel prices and charter prices are unlikely to dent demand, according to Christie. “All the points suggest the market is going to continue to grow through H2 [the second half] and perhaps see it decline after the peak summer season. I think the volumes are not going to diminish. I think the market is going to carry on the way it’s been the last 18 months, which is very strong

Also, the Ukraine crisis, alongside the fear of Covid-19, could reinforce the benefits of private jet aviation, according to Koe at WINGX. “This crisis may also underline the ongoing need for personal security and convenience of having access to private jet,” he said.