Europe's airlines cut fuel hedging

 

European airlines have reduced their fuel hedging exposure for next year after suffering from multi-million dollar losses this year.

But analysts said hedging will help airlines to save some costs with a rise in fuel prices expected in 2010.

To hedge or not to hedge is always a big question for airlines. This year many have been scorched by hedging policies born of the period when oil surged to nearly $150 in summer 2008. Crude and jet fuel prices have more than halved since then, pushing up fuel costs for some companies.

Airlines are concerned about any further price falls.

"We would not want to hedge at 100 percent for next year and then be exposed if prices dropped" an official with one airline said, asking not to be named.

British Airways, budget airlines EasyJet and Irish Ryanair are reducing hedging positions significantly, according to their earnings statements and related presentation materials.

British Airways will cut their hedging to 67 percent its fuel consumption for the January-March 2010 quarter and 40 percent for its full business year from April 2010 to March 2011, compared with 74 percent for the current October-December quarter.

Ryanair's hedging will be lowered to 50 percent in April-June next year from 90 percent until March next year.

EasyJet will hedge 72 percent of its fuel use in October-March 2010 and 61 percent in April-September next year.