Katerina Swanson
The price of jet fuel is a significant factor in determining airline ticket prices. As of July 2024, the price of jet fuel per gallon is around $2.39, which is a 42% decrease from its peak in 2022. However, jet fuel prices are still considerably higher than pre-pandemic levels. As of January 2022, jet fuel cost approximately $816 per metric tonne, or $0.82 per kilogram. The cost of filling an A380 aircraft with fuel is approximately £205,000. The varying prices of jet fuel are influenced by factors such as demand, market holidays, and the collapse in oil prices caused by the COVID-19 pandemic.
| Characteristics | Values |
|---|---|
| Price of Jet A1 in January 2022 | $816 per metric tonne or $0.82 per KG |
| Price of Jet A1 in January 2021 | $430 per metric tonne or $0.43 per KG |
| Price of Jet A1 in May 2020 | $200 per metric tonne or $0.20 per KG |
| Average price for a gallon of jet fuel in July 2024 | $2.39 |
| Average price for a gallon of jet fuel in 2019 | $1.80 to $1.90 |
| Average price for a gallon of jet fuel in 2025 | $91.82/bbl |
| Average national price for a gallon of jet fuel | $6.29 |
| Average national price for a gallon of 100LL aircraft fuel | $6.50 |
| Average national price for a gallon of Sustainable Aviation Fuel (SAF) | $8.72 |
| Average price for a gallon of jet fuel in the FAA Alaska region | $8.09 |
| Average price for a gallon of jet fuel in the FAA Central region | $5.61 |
| Cost of fuel for a B747 Jumbo Jet from London to New York | £53,500 or €64,300 |
| Cost of fuel per person for a B747 Jumbo Jet from London to New York with 450 passengers | £118 or €141 or $158 |
| Cost to fill an A380 with fuel | £205,000 |
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What You'll Learn
Jet fuel prices vary across US regions
Regional demand plays a crucial role in price variations. Busier airports with higher demand, such as those in major cities like New York, Chicago, and Los Angeles, may offer more competitive rates due to increased competition among suppliers. Additionally, the overall demand for air travel influences jet fuel prices. As demand for air travel rises, airlines operating more flights will likely face higher jet fuel costs.
Transportation costs also contribute to price differences across US regions. Airports with shorter or more efficient supply chains may have lower fuel prices, while those facing logistical challenges could see higher prices. For example, smaller airports with fewer supply options might charge higher prices to cover their procurement costs.
Taxes and import costs are other factors influencing jet fuel prices. Regions with higher taxes or import duties will likely have more expensive jet fuel. Conversely, regions with abundant domestic crude oil production, like the United States, benefit from lower transportation and import costs, making jet fuel more affordable.
It's worth noting that jet fuel prices are highly volatile and susceptible to external events such as political instability or economic fluctuations. These factors can cause sudden changes in the price of crude oil, which directly impacts jet fuel costs. As a result, airlines must constantly monitor jet fuel price trends and make strategic decisions to manage their fuel expenses effectively.
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Jet fuel prices have surged since the pandemic
The price of jet fuel has been steadily increasing since the pandemic, with global jet fuel prices surging to near 14-year highs. This surge is in line with crude oil's surge due to supply shortfall worries following the Russian invasion of Ukraine. The national average price of jet fuel in the US is $6.29 per gallon, with prices varying across different regions. For instance, the FAA Alaska region is reporting the highest jet fuel price at an average of $8.09, while the FAA Central region has the lowest average price at $5.61.
The increase in jet fuel prices has had a significant impact on the airline industry, which was already struggling to recover from the Covid-19 restrictions. Jet fuel accounts for a large portion of an airline's operating expenses, with some reports estimating it to be as high as 40%. As a result, airlines have been forced to pass on the rising fuel costs to passengers, leading to increased airfares. According to a Singapore-based jet fuel trader, "Travelling (by air) is not going to be cheap from now onwards. With inflation across countries, most people have shallower pockets and less disposable income."
The volatility in oil prices has also affected aviation turbine fuel (ATF) prices, which have surged 63% over the past year to record highs. In India, jet fuel prices were hiked by 5% in May 2022, taking the price to Rs.1.23 lakh per kilolitre in Delhi. This was the ninth hike since January 1, 2022, resulting in a 61.7% increase in jet fuel prices during this period.
The increase in jet fuel prices has been driven by multiple factors, including the uptick in air travel in the Asia Pacific region and the tight oil supply during the Northern summer travel season. Additionally, Saudi Arabia and Russia's crude oil production cuts of 1.3 million barrels per day have contributed to the surge in jet fuel prices. According to the International Air Transport Association (IATA) and S&P Global Commodity Insights data, jet fuel prices averaged $119.82 per barrel for the week ending August 4, 2023, a significant increase from the previous week.
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Jet fuel costs are reflected in airline ticket prices
Jet fuel costs are a primary driver of airline ticket prices. While the price of jet fuel surged in 2022 due to high demand following the pandemic-related slump in air travel, it has since stabilized, with some fluctuations. As of July 2024, the price of jet fuel was around $2.39 per gallon, down 42% compared to its post-2019 peak in 2022. However, jet fuel costs remain significantly higher than pre-pandemic levels, and airline tickets have remained expensive as a result.
The price of jet fuel can vary depending on various factors, including the region and market demand. For example, the national average price for jet fuel in the United States is $6.29 per gallon, while the FAA Alaska region reports the highest jet fuel price at an average of $8.09 per gallon. The price of jet fuel also fluctuates over time, with the Jet A1 fuel price approximately doubling between January 2021 and January 2022, from $0.43 to $0.82 per kilogram, or approximately $816 per metric tonne.
The cost of jet fuel has a direct impact on the operational costs of airlines, which is reflected in ticket prices. For instance, a Jumbo Jet (Boeing 747-400) flying from London to New York burns approximately 70,000 kilograms of fuel, costing around £53,500 (€64,300), or $158 per passenger, based on 450 passengers. Similarly, filling an A380 aircraft with fuel costs approximately £205,000.
Airlines may also engage in fuel hedging to manage their fuel costs, where they purchase a set quantity of fuel in advance to lock in a certain price. However, this can result in financial losses if the airline stops flying and doesn't use the hedged fuel, as was the case for many airlines during the COVID-19 crisis. Ultimately, jet fuel costs are a significant expense for airlines, and these costs are passed on to passengers in the form of higher ticket prices.
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Jumbo jets burn around 70,000kg of fuel on a London-New York trip
The price of jet fuel is a significant concern for airlines, with fuel costs forming a large portion of ticket prices. The price of jet fuel varies, with a national average of $6.29 per gallon in the US. However, prices can be as high as $8.09 in the FAA Alaska region and as low as $5.61 in the FAA Central region.
The amount of fuel burned on a flight depends on several factors, including the aircraft's weight, payload, engine efficiency, flight path, and weather conditions. Jumbo jets, such as the Boeing 747, are four-engine aircraft that burn approximately 10 to 11 tonnes of fuel per hour during cruise flight. On a London-New York trip, a Boeing 747 burns approximately 70,000 kilograms of fuel. This equates to roughly 1 gallon (approximately 4 litres) of fuel every second, with a total fuel capacity of 238,604 litres.
The Airbus A380, the world's largest jet airliner, consumes slightly more fuel than the Boeing 747 due to its higher capacity. It burns 4,600 gallons (11,400 litres) of fuel per hour, totalling 23,000 gallons for a five-hour flight. This is a 20% increase in per-passenger fuel efficiency compared to the Boeing 747.
The fuel efficiency of aircraft has improved over time, with modern twin-engine jets being significantly more efficient than quadjets. For example, the Airbus A350 consumes approximately 17,000 gallons of fuel for a flight between New York and London, a distance of over 3,000 nautical miles. The fuel efficiency of these aircraft contributes to their economic viability, as they burn relatively less fuel per person onboard for every mile travelled.
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Jet fuel prices are subject to hedging contracts
Jet fuel is one of the most significant cost factors for an airline. As such, airlines are susceptible to swings in jet fuel prices, which may decide whether an airline succeeds or fails. Fuel hedging and financial contracts play an important role in helping airlines manage fuel cost risks.
Fuel hedging is a contractual tool that some large fuel-consuming companies, such as airlines, use to reduce their exposure to volatile and potentially rising fuel costs. Airlines enter into hedging contracts to mitigate their exposure to future fuel prices that may be higher than current prices and/or to establish a known fuel cost for budgeting purposes. Fuel hedging services are provided by specialist teams within fuel management companies, large oil companies, and financial services institutions.
Airlines typically use a cross-hedge, where the hedging contracts have commodities that are highly correlated with jet fuel. The most widely used commodities are West Texas Intermediate – Sweet Crude (WTI), Brent North Sea oil (Brent), heating oil, and gasoil. Airlines hedging with futures would create the most effective hedge by using heating oil futures contracts with a 3-month maturity. However, as the gap between crude and jet fuel prices increases, it will significantly hurt those who hedge with WTI futures.
Airlines usually hedge 30–60% of their fuel expenses for the next 6 months with the aim of stabilising fuel expenses. The implementation of hedging strategies varies across different carriers, with a predominant approach being the adoption of short-term contracts typically having a one-year duration.
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Frequently asked questions
The price of jet fuel varies over time and by region. As of July 2024, the price for a gallon of jet fuel was around $2.39, which is lower than the post-2019 peak in 2022 but still higher than pre-pandemic prices.
Fuel costs are a primary driver of airline ticket prices. Prices fluctuate based on demand and supply dynamics, as well as changes in the oil market. For example, the COVID-19 pandemic caused a collapse in oil prices, leading to lower jet fuel prices in 2020.
As of January 2022, a Jumbo Jet (Boeing 747-400) flying from London to New York would burn approximately 70,000 kilograms of fuel, costing approximately £53,500 or $158 per passenger.
The price of jet fuel has generally increased over time. For example, in January 2021, the price of Jet A1 was approximately $430 per metric tonne, and by January 2022, it had doubled to around $816 per metric tonne.
