ATF hedging is a close call for domestic airlines now

During the past financial year, oil spike has been the number one worry for airlines around the world.
While many went into bankruptcy, the crème de la crème of international aviation during the same period churned hefty profits running into billions of dollars. These included Air France-KLM, Cathay Pacific, Singapore Airlines, Qantas, Emirates and even British Airways.
While they faced similar challenges from zooming oil, aviation experts say the biggest reason for the positive showing was aggressive hedging of fuel needs.
Take the case of US-based Southwest Airlines, which some people jokingly refer to as a hedging firm rather than an airline. Southwest is believed to have hedged oil at $51 a barrel for 75% of its requirement. With oil peaking at $142, the amount of money saved enables Southwest to keep fares low, helping its load factors.
While aviation firms around the world have taken to hedging to insulate themselves from the high oil prices, Indian carriers have generally shied away from it. In 2007 when the government allowed hedging, Air India was the first airline in the county to hedge but soon backed out after it saw losses.
02/06/08 Nirmal John/DNA MONEY/Sify

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Categories: Indian Aviation- In General Jul 2008