Regan Brown
The cost of aviation fuel is a significant expense for airlines, accounting for 20-40% of their total expenditure. The price of jet fuel is influenced by several factors, including global politics, market demand, and the price of oil, which can lead to volatile price fluctuations. Additionally, the type of aircraft, sector length, cargo weight, weather conditions, and jet stream direction impact the amount of fuel required for each flight. As of January 2022, the price of Jet A1 fuel was approximately $816 per metric tonne, or $0.82 per kilogram, but prices vary across regions and suppliers.
| Characteristics | Values |
|---|---|
| Price of Jet A1 in January 2022 | $816 per metric tonne |
| Price of Jet A1 in January 2021 | $430 per metric tonne |
| Price of Jet A1 in May 2020 | $200 per metric tonne |
| Global average jet fuel price | $90.21/bbl |
| Price of Sustainable Aviation Fuel (SAF) | $8.69 per gallon |
| Highest jet fuel price (Region) | FAA Alaska ($8.08) |
| Lowest jet fuel price (Region) | FAA Central ($5.52) |
| Highest 100LL price (Region) | FAA Alaska ($10.28) |
| Lowest 100LL price (Region) | FAA Central ($5.93) |
| Approximate cost of fuel for a B747 Jumbo Jet flying from London to New York | £53,500 |
| Approximate cost of fuel for a B747 Jumbo Jet flying from London to New York per person (450 passengers) | £118 |
| Approximate cost to fill an A380 with fuel | £205,000 |
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What You'll Learn
Fluctuating oil prices
The price of aviation fuel fluctuates according to the volatile nature of oil prices. As oil prices fluctuate daily, so too does the price of jet fuel. For instance, the price of Jet A1 aviation fuel in January 2022 was approximately $816 per metric tonne, or $0.82 per kilogram. This was around double the price from January 2021, where the price of Jet A1 was approximately $430 per metric tonne or about $0.43 per kilogram. At one point in May 2020, due to the collapse in oil prices brought about by the Covid-19 pandemic, Jet A1 prices fell to around $200 per metric tonne, or $0.20 per kilogram.
Airlines can also implement a collar hedge, which requires the purchase of both a call option and a put option. A put option allows an investor to sell a stock or commodity at a future date for a price agreed upon today. A collar hedge uses a put option to protect an airline from a decline in the price of oil if the airline expects oil prices to increase. If fuel prices increase, the airline would lose money on the call option contract. Another strategy is a swap, which is similar to a call option but with more stringent guidelines. A swap locks in the purchase of oil at a future price and on a specified date.
The price of jet fuel also varies by region, with the FAA Alaska region reporting the highest jet fuel price at an average of $8.08 per gallon, while the FAA Central region reports the lowest price at an average of $5.52 per gallon.
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Hedging fuel costs
The price of jet fuel, also known as Jet A1, fluctuates daily and is closely aligned with the price of oil. As of January 2022, the price of Jet A1 was approximately $816 per metric tonne, which equates to about $0.82 per kilogram or £0.61 per kilogram. This was around double the price from the year before.
Hedging is a strategy used by some airlines to protect themselves from rising fuel costs. It involves agreeing on a constant price for fuel for a set period into the future. This gives the airline a more predictable outlay for fuel, as it knows in advance what its fuel costs will be for the next season. For example, an airline might hedge 5 million tonnes of fuel at $600 per metric tonne for 12 months. The airline will then pay $600 per metric tonne regardless of any fluctuations in fuel price during that time.
Hedging is a gamble, as fuel prices can also fall. If the price of fuel decreases, the airline will be paying more for fuel than necessary. Additionally, if an airline has to stop flying, such as during the COVID-19 crisis, it will still have to pay for the fuel it has hedged, even if it doesn't use it, which can result in financial losses.
The cost of fuel hedging depends on the predicted future price of fuel. Airlines may base their hedges on future prices of jet fuel or crude oil, as the two are normally correlated. However, factors such as refinery capacity may cause unusual divergences in their trends. Hedging is a common strategy, with airlines like Southwest and Air France-KLM saving around $1 billion each through fuel hedging as fuel prices surge.
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Varying aircraft fuel efficiency
Fuel efficiency in aviation is a critical topic, with ambitious targets set to reduce the environmental impact of commercial air travel. Aircraft fuel efficiency is a measure of how effectively an aircraft uses fuel to cover a certain distance. It is typically calculated using the formula "Fuel Burn per Passenger Mile", which helps airlines understand how much fuel is consumed for each mile travelled by each passenger.
Fuel efficiency improvements are essential for reducing average fuel burn and lowering costs. Airlines must reduce their jet fuel consumption, and newer aircraft like the Boeing 787 Dreamliner, Airbus A350, Bombardier CSeries, Airbus A220, Boeing 737 MAX, and Airbus A321neo are 20% more fuel-efficient per passenger kilometre than previous generations.
The price of aviation fuel is constantly changing, and airlines may have to increase the ratio of expensive Sustainable Aviation Fuel (SAF) in their fuel mix. The cost of jet fuel is closely tied to the price of oil, which fluctuates daily. As of January 2022, the price of Jet A1 was approximately $816 per metric tonne, or $0.82 per kilogram. This price is around double what it was a year before.
The cost of jet fuel also varies by region, with the FAA Alaska region reporting the highest jet fuel price at an average of $8.08 per gallon, while the FAA Central region reports the lowest price at an average of $5.52 per gallon.
To improve fuel efficiency, airlines can focus on aircraft design, flight operations, and weather conditions. Enhancements in aircraft design, such as the development of fuel-efficient engines, the use of advanced materials, and the incorporation of wingtip devices to reduce drag, can all contribute to lower fuel consumption. Additionally, improving engine brake-specific fuel consumption, propulsive efficiency, and thrust-specific fuel consumption can increase fuel efficiency.
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Global politics influencing fuel prices
The price of jet fuel, or Jet A1, is closely aligned with the price of oil, which varies daily. As of January 2022, the price of Jet A1 was approximately $816 per metric tonne, or $0.82 per kilogram. This was about double the price from a year prior, in January 2021, when it was approximately $430 per metric tonne, or $0.43 per kilogram.
Global politics can influence fuel prices in several ways. Firstly, oil reserves are often concentrated in politically volatile regions, such as the Middle East, making oil prices vulnerable to instability. The Organisation of the Petroleum Exporting Countries (OPEC), a group of oil-producing nations, can significantly impact global oil supply and prices by increasing or decreasing production in response to political or economic circumstances. For example, when OPEC decides to cut production due to oversupply or falling prices, it can lead to a rise in global energy costs.
Maritime routes are crucial for transporting oil and liquefied natural gas, and these paths are susceptible to geopolitical tensions, war, piracy, or sanctions, potentially resulting in restricted energy resources and significant price volatility. Additionally, when oil-exporting nations with subsidies encounter budgetary constraints, they may cut these subsidies, leading to increased domestic fuel prices and reduced global demand, influencing international energy prices.
Government policies promoting renewable energy can also lead to short-term market volatility. For instance, Germany's decision to phase out nuclear power after the Fukushima disaster increased the demand for fossil fuels or renewable energy, affecting global prices.
The complex interplay between global politics and fuel prices was evident in the context of the Biden administration's energy policies. While President Biden aimed to increase short-term oil supply and decrease long-term demand, critics from both political spectrums characterized the approach as incoherent, navigating the challenge of managing current energy needs while transitioning to greener alternatives.
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Regional price differences
For instance, in the United States, the FAA Alaska region typically reports higher jet fuel prices compared to other regions. As of July 2025, the average jet fuel price in Alaska was $8.08 per gallon, while the national average was $6.25 per gallon. Conversely, the FAA Central region reported the lowest jet fuel price at $5.52 per gallon.
Demand plays a crucial role in regional price differences. Regions with higher demand for jet fuel, such as those with busier airports or more air traffic, may experience higher fuel prices. For example, the Asia-Pacific region, particularly China, is projected to become the world's largest aviation market by 2024, driving up fuel demand and potentially impacting regional fuel prices.
Market dynamics, including fluctuations in oil prices and hedging practices, also contribute to regional price differences. Jet fuel prices are closely aligned with oil prices, which can vary daily. Additionally, airlines may engage in hedging, where they agree on a fixed fuel price for a set period, insulating them from price increases but potentially resulting in higher costs if prices drop.
Taxation policies can also significantly impact regional price differences. Currently, the UK and Europe have no tax on aviation fuel, which can make fuel prices in these regions more competitive compared to regions with fuel taxes.
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Frequently asked questions
The price of airplane fuel varies depending on various factors, including the type of aircraft, sector length, cargo weight, weather, and jet stream direction. As of January 2022, the price of Jet A1 fuel was approximately $816 per metric tonne, which equates to about $0.82 per KG.
The cost of airplane fuel is influenced by global politics, leading to a volatile market. Additionally, the direction of travel also plays a role, as aircraft flying eastward can take advantage of the jet stream, resulting in lower fuel costs compared to the reverse direction.
Airlines use a strategy called fuel hedging to protect themselves from market fluctuations. Hedging involves agreeing on a constant price for fuel for a set period, regardless of market fluctuations. While this can help mitigate risks and control costs, it can also result in financial losses if the market price drops or if the airline's operations are disrupted, as seen during the COVID-19 crisis.
The amount of fuel used by a commercial aircraft depends on several factors, including the size and efficiency of the aircraft, sector length, taxi time, cargo weight, and weather conditions. Aircraft typically do not fill their tanks to maximum capacity due to engineering inefficiencies, and some airlines opt for enough fuel for a round trip to avoid refuelling delays during turnarounds.
