Airlines Strategically Hedge to Counteract Fuel Price Surges

The ongoing conflict in Iran has led to rising oil prices, significantly impacting jet fuel costs. Brent crude oil prices approached $100 per barrel recently, raising concerns about supply disruption. Consequently, spot prices for Northwest European jet fuel peaked at $1,536 per metric tonne, nearing a record high of $1,633.

To mitigate the impact of fuel price surges, many airlines are employing strategic hedging techniques. This practice helps them manage the fluctuations in fuel costs and currency values related to the US dollar. U.S. airlines, having largely discontinued their hedging practices, may face the most significant challenges if the conflict persists.

Airline Hedging Strategies

Here’s an overview of how some prominent airlines are hedging against fuel price surges:

• Air France-KLM: Adjusted its hedging policy to cover 87% of its fuel needs for one year, up from 68%, with a hedging horizon of eight quarters.
• Air New Zealand: Currently hedging 83% of fuel for the second half of its financial year, and 46% for the first half of the 2027 financial year.
• Cathay Pacific: Plans to hedge fuel costs into the second quarter of 2027, covering 30% of costs until the second quarter of 2026.
• China Eastern Airlines: Did not engage in any hedging transactions in the first half of 2025.
• easyJet: Has hedged 84% of fuel for the first half of 2026 at an average cost of $715 per metric tonne.
• Finnair: Extended its hedging horizon to 24 months, covering 834 tonnes of fuel at an average price of $697 per tonne.
• International Airlines Group: Reports a decrease in hedging compared to the previous year, with a policy that includes up to 75% near-term hedging.
• Icelandair: Plans to hedge 20% to 50% of fuel consumption six months forward, with a projected impact of $11.6 million for a 10% fuel price increase.
• Lufthansa: Currently hedges about 76% of its forecasted 2025 fuel requirements.
• Norwegian Air: Hedged 45% of jet fuel consumption for 2026.
• Qantas: Covers 81% of its fuel needs for the second half of the financial year ending June 30, 2026.
• Ryanair: Locked in around 77% of its fuel requirements for the fiscal year ending March 2026.
• SAS: Recently adjusted its hedging policy and has no fuel hedged for the next 12 months.
• Singapore Airlines: Hedges fuel for up to five years, with various coverage percentages through 2027.
• Virgin Australia: Is hedging 85% of fuel and 94% of foreign exchange for the second half of its financial year.
• Wizz Air: Covers 83% of jet-fuel needs at prices ranging from $681 to $749 per metric tonne.

These strategic hedging practices reveal how airlines are adapting to an unpredictable economic landscape. By locking in prices for their fuel needs, they aim to buffer against rising costs triggered by geopolitical tensions and market volatility.