21
Jan

Evidence shows significant movements in fuel price have been a key driver in aircraft purchase and retirement decisions this decade

Jet fuel prices have long driven airline profitability and the aviation industry as a whole, representing between 14% and as much as 31% of airline operating costs in the past decade, according to global consulting services company ICF. But it is not the sole driver when it comes to aircraft deals and asset valuations.

The company, the sole provider of aircraft valuations and lease rate data to CAPA – Centre for Aviation’s online Fleet Database, says that history shows that significant movement in fuel price “is a key driver” in aircraft purchase and retirement decisions, given that the comparative operating economics of new versus used aircraft “change dramatically” with a relatively small change in fuel price.

“Airline ordering behaviour has grown reactive to fuel prices, especially since the end of the 2008-09 recession,” explains ICF. When oil prices remained stubbornly high, airlines “were motivated to place new aircraft orders to reduce fuel consumption” and gain operating cost advantage, with the added benefit of reducing emissions and noise.

READ MORE – via The Blue Swan Daily: Evidence shows significant movements in fuel price have been a key driver in aircraft purchase and retirement decisions this decade