How Airlines Hedge Against Jet Fuel Price Increases and Volatility
By Gianluca Lo Nostro
Airline Strategies for Managing Jet Fuel Price Risks
Sept 3 (Reuters) - Higher oil prices due to the Iran war are increasing prices of jet fuel, which accounts for a big portion of airlines' costs.
Brent crude oil prices hit six-week highs at $97 per barrel on Thursday, after U.S. strikes on Iran and renewed Israeli threats against Tehran raised concerns about disruptions to Middle East supplies.
Spot Northwest European jet fuel prices were at their highest levels since May, trading at $1,476 per metric ton on Thursday.
Hedging Tools and Practices
Some airlines use futures and options to hedge against price increases. They also try to hedge against value changes in the U.S. dollar, in which jet fuel is priced.
U.S. airlines, which abandoned the practice of hedging against fuel costs, could be the hardest hit if the war is prolonged.
Overview of Major Airlines' Hedging Positions
Below is a summary of how some of the world's largest airlines are hedged:
AIR FRANCE-KLM
The Franco-Dutch group has stopped adding hedges for 2026 because its existing portfolio already covered about 67% of expected fuel consumption, close to its hedging policy of 70%, finance chief Steven Zaat said in July.
Air France-KLM resumed its hedging strategy in June and was 40% hedged for 2027, up from 33% at the end of the first quarter, according to Zaat. The company acted every time there was a drop in jet fuel or oil prices, he said.
CATHAY PACIFIC
Hong Kong's flagship carrier said in August it had covered 50% of fuel cost increases in the second quarter through its hedging program and the levying of surcharges. Chief financial officer Rebecca Sharpe said in March the company was hedging 30% of its fuel at around $70 per barrel or slightly below.
CHINA EASTERN AIRLINES
The state-owned airline said it made careful assessments based on the derivatives market conditions and did not carry out any jet fuel hedging transactions in the first half of 2025. As of 30 June 2025, it had no outstanding jet fuel hedging contracts.
EASYJET
The British budget airline said in July it had hedged 62% of its jet fuel requirements for the first half of 2027 and 37% for the second half at, respectively, $754 and $777 per metric ton. It said 79% was covered for the fourth quarter of 2026. The company reported an annual increase of 105 million British pounds in fuel costs.
IAG
The owner of British Airways and Iberia said in February its fuel and currency hedging was down about 9% in 2025 compared to a year before.
It said its policy includes hedging on a three-year rolling basis, with hedging of up to 75% of expected near-term requirements, and up to 80% for low-cost airlines.
CEO Luis Gallego told analysts in July the group continued to expect to recover around 60% of the increase in the fuel price through revenue and cost initiatives.
LUFTHANSA
The German carrier said last year its fuel hedging has a horizon up to 24 months. Finance chief Till Streichert told analysts in August the group's fuel hedge ratio for 2026 was 86% and a bit more than 50% in 2027.
QANTAS
The Australian airline reported in August an 85% hedging position for the first half of next year.
RYANAIR
The airline had covered about 77% of its estimated fuel needs for its fiscal year to the end of March 2026 at an average price of about $761 per metric ton.
For the upcoming year, it said in July it had locked in about 80% of its jet fuel requirements based on a crude oil price of $67 per barrel. For 2028, Ryanair has covered 15% at $85 per barrel.
SAS
The biggest Scandinavian airline said last year it had temporarily adjusted its fuel hedging policy due to uncertain market conditions and that it had 0% of fuel consumption hedged for the following 12 months.
The company's hedging policy targets between 40% and 80% of anticipated volumes for the coming 12 months, and allows hedging up to 50% for the following six months.
SINGAPORE AIRLINES
The company said in November it was hedging fuel for up to five years, with 49% of fuel covered in the quarter to December, 47% in the quarter to March reducing to 24% in the second half of the full-year to 2027 and 7% in the following years.
It said it was paying between $66 and $69 per barrel of Brent hedged, and between $79 and $87 per barrel of MOPS.
WIZZ AIR
The Hungarian budget carrier said in August it had hedged 76% of its fuel requirements for fiscal 2027 at an average floor price of $750 per metric ton.
It said it had coverage of 39% for the first half of 2028 in the range of $776 to $864 per metric ton.
(Reporting by Alessandro Parodi, Gianluca Lo Nostro; Editing by Matt Scuffham)
