CEO says lack of plane fuel is a myth to cut loss-making flights

There is no shortage of jet fuel, according to Greg Raiff, CEO of private jet services company Elevate Jet.

The Strait of Hormuz could be closed, blocking more than 20% of the world’s jet fuel supply. Major airlines have canceled hundreds of flights around the world. And Europe could reach a shortage limit of 23 days in June. But Raiff says he has not seen a shortage of jet fuel.

Also read: Global stock rush intensifies in shadow of Iran war

“These stories are largely politically motivated by government officials who are trying to push for an end to the war, and there is no better way to get people to react than to tell them they won’t be able to travel for the summer vacation,” he told Fortune.

“Not only has demand for private aviation not slowed down since fuel prices rose and the war began, it has even increased slightly,” he said. “Aviation grew this year in terms of total demand, total hours flown and total volume of arrivals and departures, on a global scale.”

According to analytics firm ESGauge, 48.8% of S&P 500 companies now allow their CEOs to use corporate jets for personal purposes, up from just 6% in 2021.

“I’m saying we’re not going to run out of jet fuel. In my professional opinion, after 35 years of working on this, there’s no risk of us running out of jet fuel anytime soon,” Raiff said.

What Raiff says he has seen is price exploitation at private airports and terminals.

The open market price of jet fuel is now above $4 per gallon (3.78 liters). But at a facility in Washington, D.C., Raiff says he saw private jet owners paying $10.42 per gallon.

In addition to the price of fuel, “they are now charging about $1 in taxes and fees and $5 for the privilege of a minimum-wage kid filling up his plane with the fuel truck, so it goes up to $10 per gallon,” he said.

According to Raiff, private aviation passengers are relatively insensitive to price, which is why he fears that airports will not reduce the prices charged when the war is over.

So why are commercial airlines canceling thousands of seats around the world?

Because companies want to escape the obligation to operate less profitable routes, he says.

To maintain their “slots” (schedules) at airports, airlines must contractually commit to operating a minimum number of flights on certain routes.

Normally this is not a problem. But with the price of jet fuel twice what it was before the war, some of these routes were no longer profitable. And many of the canceled flights were to places like Dubai or Riyadh, where no one wants to land anymore.

Thus, airlines were able to declare “force majeure”, which allows them to cut unprofitable flights while maintaining their slots.

The real crunch will come in the fall (September to December) if the United States is still at war with Iran, Raiff said.

This is because aviation fuel and home heating oil are similar products, and refineries can produce both. Extra demand in the heating oil market could pressure the air transport market, he said.

“If this problem continues into the fall, say October, I think we will start to have a contest between heating our homes or flying our planes.”