How Do Rising Fuel Costs Affect Aircraft Prices?


Quick Answer

Rising fuel prices have increased the price of aircraft as aircraft manufacturers innovate to produce newer aircraft that are quieter, offer more capacity and have greater fuel efficiency, and as airlines replace their older and less fuel-efficient aircraft with the new, more fuel-efficient models. Airbus announced a 3.27 percent price increase in 2015. As of January 2015, Airbus and Boeing have a combined production backlog of more than 12,000 aircraft, enough to keep production lines busy until at least 2023.

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Full Answer

About half of Boeing's new aircraft sales are for replacement aircraft. Despite a dip in the price of oil to $50 per barrel in 2015, analysts do not expect this to last forever, and over the long term, they see the price of oil reverting back to the $80 to $100 per barrel range as early as 2016. With new orders of aircraft taking up to eight years to deliver, it remains hard to predict what oil prices would be like by then. However, airlines continue to place orders for new aircraft, which they see as important to their future profitability as newer jets are not only more fuel-efficient, but also have higher reliability, have less downtime and are cheaper to maintain.

Another major factor that has spurred orders for aircraft and thus keeps aircraft prices at a premium is the increasing demand for air travel, especially in new markets such as China and the rest of the Asia-Pacific region.

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