Looking at Jet Fuel Discount Cards

Sometimes A Picture is Worth a Thousand Words.

Of course “biker beans in jet fuel sauce” is an eye-catching alternative to jet fuel. But today let’s talk about jet fuel. What really influences its high price in the wing, and what you can do about it.

Anyone ever wonder why jet fuel is so expensive per gallon? Is it just because 1%ers use jets and are easy prey and simply do not care about money? Or is there something else at play here?

The spot price for a gallon of jet fuel as of this post (from the “Index Mundi”) is $2.37 U.S. The spot price for a gallon of gasoline is $2.29 U.S. There is an eight cent per gallon difference between processing gasoline and jet fuel…a 3.5% difference. The generally accepted belief is refining of Jet fuel, or the lesser number of gallons of jet fuel produced per barrel of crude, is the cause of the huge cost disparity between jet fuel and gasoline. This is clearly incorrect.

Then how does $2.37 a gallon for jet fuel become $5 to $6 dollars or more per gallon when it goes into the wing of a jet or turbo prop aircraft?

Obviously we all understand there are a series of costs involved beyond the spot price of jet fuel…transportation, federal, state and local taxes, fuel flow fees, and profits for the fuel delivery source. Coincidently, these just happen to be the same costs involved in getting gasoline into my car’s gas tank which, as of today, is $3.00 a gallon…an increase of 31% over the spot price.

Jet fuel in Las Vegas, where I live, is on-average (at the three airports) is $6.01 a gallon, a price increase over spot of 154%. At those prices, the delivery price for jet fuel in Las Vegas is 100.25 % higher than the delivery price for gas in my car. Both come from the same place and are subject to the same transportation, federal, state and local taxes and flow fees.

If all the costs are the same for the car gas and the jet fuel, and there is only an eight cent difference in processing the fuels, what is driving up the price of jet fuel? We know it is not “Biker Beans”!

The only component added to jet aircraft fuel that is not added to car fuel is the numerous jet fuel discount cards on the market today. Anyone see any discount fuel cards around for car gas? Why Not?

Of course there are always fuel deals and discounts for car gas, but they are always tied to box stores and grocery stores. Those fuel discounts and promotions are used as a “come on” to get customers into the car gas provider’s primary service which is their retail business. The box stores and grocery stores are using the car fuel discounts as a gimmick to entice customers to come to their stores. Costco comes to mind.

However, in aviation, the FBO sells fuel as part of their primary income, not as an incentive to get pilots and wandering minstrels to use their pilot’s lounge.

FBO’s generally sell jet fuel to clients who are flying into their airports for business, or where a client’s aircraft is based, not because of the FBO’s fuel prices. These aircraft are going to be at that airport with or without the fuel discount. Fuel prices are not influencing where the aircraft is going, only the aircraft owner’s business does.

There is no need to entice them. The only exception would be to attract customers to different FBO’s at the same airport. Although, even at that some FBO’s especially some of the established ones can be just plain greedy.

So how did the fuel discount card get into the mix?jet

Fuel discounters cleverly inserted themselves into the aviation fuel industry sales chain to make a profit for themselves, not to save money for jet aircraft operators.

The fuel discounters created this artificial need for fuel discounts simply by marketing their discount cards to aircraft owners as a way to reduce their fuel costs. Before the discount cards came along, fuel costs were like car gas and only included the transportation costs, taxes, flow fees and FBO’s profit. There was no fuel discounter’s profit as part of a fuel sale…but there is now!

Simultaneously the fuel discounters sold their card idea to the FBO’s as a way to increase traffic to their fuel pumps. This was already discussed, and is not how it works.

The FBO’s went for it, though, and in a very short time the FBO’s raised their prices by $1.50 or more per gallon to be able to provide for the artificial discount to the aircraft owner simply by inflated pricing. This artificial  price also covers the cost of the very real profit to the discount card provider. In the end, the FBO was still making the same profit.

Of course now that the jet fuel discount card exists most jet fuel prices are regularly $1.50 to $2.00 a gallon and more than they need to be.

If all of this seems farfetched next time you are buying fuel for your jet, simply ask the FBO for a discount without the fuel car. In most cases you will get the discount directly from the FBO.

I have talked to several pilots that routinely do this and pay 15% to $1.50 a gallon less just by asking for it. Why is that?

The FBO no longer needs to give the artificial discount and is just giving back the jacked up price to service the faux card discount. Additionally neither the aircraft owner nor the FBO have to pay the card discounter fees.

But owners, understand this. The inflated fuel prices are posted on the walls of every FBO, and if you do not use a card, and if you do not ask for a discount, the FBO will just keep it all.

Basically, in my opinion, by using a fuel discount card the aircraft owner actually increases their own cost per gallon in exact proportion to the fuel card discounter’s profits.

This is not rocket science. Someone has to pay for the increase to provide for the discount and the fuel discounters profits. The FBO is not going to do it, but the artificial  price increase will.

That is how jet fuel gets to theses prices. Granted, there will always be some FBO’s who realize that the aircraft owner is stuck at their location and will charge exorbitant rates when there is no competition on the field. Or there can be greedy counties that add in extraordinarily high fuel flow rates and there is nothing you can do about that except to tanker fuel or go somewhere else.

Fuel discount cards are currently here to stay unless, and until, aircraft operators do something about it…like simply asking the FBO’s for a discount directly. That works!

Erudite Solutions for Business Aviation

Facebooktwittergoogle_plusredditpinterestlinkedinmailby feather

You may also like...