Aviation fuel futures promise better hedging for Indian carriers

Mumbai: Airlines in India are looking to hedge their exposure to aviation turbine fuel (ATF) on local commodity exchanges to offset price volatility and currency fluctuations, company officials told Reuters.
The Forward Markets Commission, the commodity markets regulator, in April permitted Multi-Commodity Exchange of India to offer ATF futures and trade could start by July.
“We would be looking at hedging in a domestic contract. If we can bring some certainty in our fuel bill, that will be of advantage to us,” said Ajay Singh, director of budget airline SpiceJet.
Skyrocketing fuel prices have hit profitability of domestic carriers, an industry that expanded by a fourth over last 2-3 years, where burgeoning demand has led carriers to order 453 planes for $28 billion.
Indian jet fuel, which is almost three-fourths costlier than international benchmarks, accounts for 40% of the operating cost of an Indian airline.
India’s top carriers such as Jet Airways and Deccan Aviation have posted losses due to high oil prices.
14/05/08 Aniruddha Basu and Sourav Mishra/Reuters/Livemint

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Categories: Indian Aviation- In General May 2008