Are We Getting Hosed by Fuel Surcharges?

James Butler Exposes One of the Fractional Industry's Best Kept Secrets

In his August 2005 “Inside Fractionals” contribution to Business Jet Traveler, Shaircraft CEO, James Butler, reveals how fractional providers pass on the pinch of skyrocketing fuel costs to fractional owners. The article asks: “Are we getting hosed by fuel surcharges?” Such surcharges, previously considered a minor annoyance by owners, “now add significantly to the price of fractional flights—as much as $1,100 per hour.” Noting calls from several agitated owners, Butler related comments like, “I know the price of fuel has gone up, but these surcharges are outrageous. Can they charge me like this?” And: “How do they come up with these numbers?” Butler explains that, while fuel costs certainly have risen, providers may be doing more than just recouping these increased costs. Factors that determine these surcharges—”base rate” cost of fuel (determined at the beginning of the contract), “retail cost” currently paid for fuel, and “burn rate” at which the aircraft uses fuel, may be calculated by the provider so as to recoup the increased cost and make a profit. Butler stresses that “what’s needed is transparency. The providers should clearly spell out how they calculate and charge for fuel. If a profit or recoupment of unrelated costs is built into this aspect of the program, they should disclose it.”

Download: “Are We Getting Hosed by Fuel Surcharges?” (PDF)

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