Air India to increase fuel hedging

Globally crude price fell below $ 90 a barrel and is expected to be bearish for next few months

Air India (AI) will step up fuel-hedging against volatility in crude oil prices. Globally, these have fallen below $90 a barrel and it is expected the scenario will be bearish for the next few months.

“We plan to hedge about 100,000 barrels a month of our next year’s requirement,” said an AI spokesperson, adding, “Our hedging quantity is small.”

The airline began fuel-hedging in 2002, but discontinued it within a few years. Last year, the airline’s board approved hedging about 500,000 barrels of jet fuel every quarter, about 20 per cent of its total consumption. But in 2013-14, it hedged only 70,000 barrels.

The AI management has been cautious on hedging. Globally, airlines hedge 50-60 per cent of their fuel requirements. According to a Reuters report, Australian airline Qantas hedged 94 per cent of its requirement in the first half of this year. The report added many airlines were locking in contracts for as far ahead as 2015 and 2016. It said Thai Airways hedges 63 per cent of its fuel needs, against 53 per cent earlier. Daily, AI lifts about 5,100 kilolitres of aviation turbine fuel and about 70 per cent of this is purchased in India. A rise in crude oil prices, as well as the rupee’s depreciation, had led to an increase in fuel bills. An increase in capacity and addition of new long-haul flights to Australia, Moscow and Rome-Milan contributed to the rise.

“We have initiated various steps and have been able to save fuel, following implementation of IATA (International Air Transport Association)’s fuel efficiency gap analysis. The measures included carrying lighter cutlery, less water and fewer magazines on board and implementing fuel-efficient procedures during the landing and taxi stages,” the spokesperson said.