Airline are hedging and adding surcharges worldwide due to high oil prices

The price of oil has surged to its highest since 2008 after Russia’s invasion of Ukraine, adding to airline costs at a time when carriers have been struggling to recover from a pandemic-related collapse in demand.

Oil prices were already strong because of tight global supplies, but the conflict in Ukraine has sent prices into overdrive and the northwest European jet fuel price in the spot market has soared by 50% since Feb. 25 to $1,341 a tonne on Monday.

Malaysia’s AirAsia on Saturday introduced fuel surcharges on tickets for the first time since 2015. Chinese airlines, meanwhile, raised fuel surcharges on domestic routes and Emirates, Japan Airlines and ANA Holdings have also raised surcharges recently.

Some airlines have oil hedges that will help to offset some of the price increase, but other carriers are fully unhedged, including U.S. majors United Airlines, American Airlines and Delta Air Lines, though the latter does own an oil refinery.

Many carriers are also being squeezed by the need to fly longer routes to avoid Russian and Ukrainian airspace.

Air France KLM
The airline has hedged 72% of oil consumption for the first quarter and 63% for the second quarter at $90 a barrel, with smaller amounts hedged in the second half, it said in a results presentation on Feb. 17.

Air New Zealand
The airline has hedged 1.34 million barrels of oil in the six months to June 30 and 707,500 barrels in the following half-year period, it said in a results presentation on Feb. 24. In late February it raised international fares by about 5%, citing rising oil prices and general cost inflation.

Cathay Pacific Airways
The Hong Kong airline had hedged more than 60% of its expected first-quarter consumption and about half of its second-quarter consumption by the time of its interim results last August, as well as lower amounts in future quarters through 2023. Cathay will release full-year results on Wednesday.

EasyJet
The European airline 60% hedged for fuel in the financial year to Sept. 30 at about $504 per metric tonne, it said on Jan. 27.

IAG
The British Airways owner is hedged against volatile crude prices for two years, Chief Executive Luis Gallego said on Feb. 25. It has covered about 60% for the whole of 2022.

Based on a fuel price scenario of $900 a tonne, the company would be paying $690 a tonne in the first quarter after hedging 70% of its fuel and foreign exchange, a Feb. 25 results presentation shows.

In the second quarter the price would rise to $750 after hedging 65% of fuel and foreign exchange, to $775 in the third quarter with 56% of its fuel and foreign exchange hedged and $795 in the final quarter with a little less than half of its fuel and foreign exchange hedged.

Lufthansa
The German airline is 63% hedged in 2022 at a break-even price of $74 a barrel, it said in a results presentation on March 3.

Qantas Airways
The Australian airline has more than 90% of its fuel hedged for the six months to June 30, it said in a results presentation on Feb. 24. It also has a lower level of hedges in place for the following half-year period.

Ryanair
The budget carrier is 80% hedged on fuel out to 2023, but rising prices will still cost the group about 50 million euros ($54.2 million) over the next 12 months, Chief Executive Michael O’Leary said on March 2, adding that Ryanair would not introduce fuel charges for the summer.

Singapore Airlines
The airline hedged 30% of its oil needs at an average Brent crude price of $57 a barrel for the six months to March 31, it said in a results presentation in November. It had also hedged 40% of its needs at an average price of $60 for the following five quarters. It said on Monday that it had no updates from guidance in November.

Wizz Air
The European budget airline on Monday said it has covered its fuel costs for the next four months with zero-cost hedges.

For March, it has covered half its needs with a price ceiling of $1,172 a tonne and 40% of its needs for the first quarter to end-June at $1,142 a tonne. Its financial year ends on March 31, 2023. ($1 = 0.9223 euros)

Reuters.com by Jamie Freed in SydneyAdditional reporting by Stella Qiu in Beijing and Kate Holton and Paul Sandle in LondonEditing by Gerry Doyle, Josephine Mason and David Goodman