Falling Fuel Prices Favor Used-Jet Buyers and Owners

The surprising plunge in oil and fuel prices made news in late 2014 and has continued to make headlines into the new year. Prices for fuel, including jet fuel, have been on the decline and are anticipated to continue to drop in 2015. With crude oil prices dropping 40% since June — from more than $115 a barrel to less than $50 a barrel — the resulting reduction in jet fuel costs is good news for private jet owners and business aviation.

Older jets get a boost

Fuel prices can make up 30 to 40% of total operating costs. As a result, many businesses favor newer, more fuel-efficient (and more expensive) aircraft models during times of higher oil prices. Current fuel prices give owners of older jets more incentive to keep flying their aircraft longer, rather than replace their planes with newer fuel-efficient aircraft.

The decline of oil prices is also making used aircraft more attractive to buyers. In addition to their considerably lower cost, used jets can be delivered and put into service much more quickly than new models can — especially considering enormously backlogged orders for new jets.

A good time for pre-owned aircraft buyers

Aircraft buyers may find good deals on jets owned by oil industry execs whose net worth is falling in the wake of low oil prices. Such is the case particularly in Russia, where many private jet owners are motivated to sell their aircraft to pocket on-the-rise U.S. dollars.

And for first-time jet buyers in particular, the fuel-price decline makes private jet ownership more of a bargain than ever compared with the cost of commercial airlines for business travel. Lower fuel costs have not been reflected in the price of commercial flights. Some airlines are pocketing the profits rather than passing along cost savings to customers, either to avoid having to raise ticket prices again when fuel costs increase or because they have little incentive to cut ticket prices given the high demand for business travel. Other airlines are actually losing money as an unforeseen consequence of agreeing upon set jet fuel prices with suppliers before the cost of fuel dropped so significantly.

Although the lower fuel prices are having a mixed effect on the aviation market as a whole, as long as prices remain suppressed, owners of older jets or those in the market for a pre-owned plane will continue to reap the blessings of the worldwide oil glut.