AOPA Pilot Magazine - January 2015 - 16

WAYPOINTS

Flying versus the
Kardashians

BY THOMAS B. HAINES
Editor in Chief

A perspective on avgas prices

EDITOR IN CHIEF

Thomas B. Haines
keeps a credit card
on file at the FBO
and tries to ignore
the numbers on the
fuel bill.

16 | AOPA PILOT January 2015

RECENT HEADLINES noting gasoline prices dipping
below $3 a gallon have caused many pilots to wonder
why avgas prices-which stubbornly remain above $6
a gallon in many locations-aren't also declining as the
price of crude oil frequently settles below $80 a barrel.
According to Airnav, the average national price of avgas
was $5.82 in mid-November.
There are many reasons why the price of avgas is
higher than gasoline, and why avgas prices don't respond
the same way to market changes as gasoline. Volume-
or the lack of it-is the primary reason for both. A few
years ago, the annual volume of avgas consumed was
about equal to one day's worth of gasoline production;
it's probably less now. FBOs generally pay for fuel when
it is delivered and it may take weeks or months to sell a
load of avgas. Any price declines won't be reflected until
the next load is delivered. Your local convenience store
probably goes through multiple tankers of fuel a week.
The presence of lead in avgas complicates and limits delivery options, further increasing costs. Thanks to
a lot of work by AOPA and others, by 2018 we will know
what new unleaded fuels will be available to us and can
begin what everyone hopes is a relatively seamless transition to a lead-free future.
In the meantime, we're faced with eye-watering
avgas prices. The surge in avgas prices over the past couple of years is painful for two reasons. One, you feel it at
every flight. You're handed a receipt with a big number
on it. Can't avoid noting how much it costs. And two, the
price of avgas has risen significantly faster than other
day-to-day aviation costs-an exception being the price
of new airplanes. Stated another way, the cost of fuel as
a percentage of overall costs has risen significantly in
recent years, while other costs have remained relatively
stable. Premiums for aviation insurance, for example,
have been steady to sometimes even declining, for several years. The hourly cost of maintenance-at least in
the form of the price paid to the maintenance technician-has been relatively steady for the better part of a
decade. Hangar fees in most locations have been relatively stable. Insurance, maintenance, and hangar fees
are generally paid monthly or annually-well removed
from the experience of flight itself-whereas fuel prices
are usually paid on the spot after a flight, making it easy
to consider whether the experience was worth it.

At the behest of Congress, the Government
Accountability Office in September released a new study
relating the cost of fuel-for the airlines and general aviation-to changes in aviation activity. The study noted
that the cost of fuel to the airlines quadrupled between
2002 and 2013, whereas the wholesale price of avgas
tripled from $1.29 to $3.93 during the same period. The
study's goal was to understand the impact of fuel pricing on future contributions to the Aviation Trust Fund.
Looking at general aviation, the study found that
increased fuel prices definitely correlate to a reduction
in activity. Not surprisingly, as fuel prices tripled during
the decade, general aviation activity at towered airports
declined by 31 percent.
The GAO study notes several other reasons for the
decline in GA activity-based on reports from other
studies, including increased hassles related to security,
the dour economic times of the past half decade, the
decline in the pilot population, reduction in number of
student pilots, the aging of the GA fleet, and the declining number of airplanes.
The impact of the reduced operations ripples
across the economic pond. Airport activity declines.
Business at FBOs also declined, leading to layoffs and
consolidations in the FBO market-with FBO chains
becoming more prevalent. According to the National
Air Transportation Association, the number of FBOs
fell from 3,400 in 2007 to 2,900 in 2012.
So where's the pony in the room? Energy experts
are suggesting that gasoline prices should remain flat
or perhaps slightly decline in 2015, mostly as a result of
flat crude oil prices. The leveling of oil prices is in part
driven by increased U.S. production. With that we can
expect little pressure to further increase avgas prices,
and might even expect slight declines.
One technique for dealing with avgas prices: Fold
the receipt and put it in your wallet without looking at
it until the credit card bill is due at the end of the month.
Buried in with the mortgage, car loan, cable bill, and
tuition payments, it doesn't look so bad. And flying is a
whole lot more fun than watching TV anyhow. AOPA
EMAIL thomas.haines@aopa.org

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AOPA Pilot Magazine - January 2015

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