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Airlines may hedge a big portion of the fuel purchases during the times they believe oil prices will be firm.

New York (USAsian Network Business & Industry News) Tue, Apr 15, 2014 - Consulting firm Energy Aspects estimates Asia's overall availability of jet fuel at 2.412 million barrels per day (bpd) in the fourth quarter of 2014 versus demand of 2.491 million bpd. The last quarter of a year is typically the busiest for airlines due to holiday travel. Brent crude has averaged USD$108 a barrel so far this year against 2013's average of USD$109. And jet fuel has averaged USD$121.20 a barrel this year compared to USD$126.62 last year and USD$125.95 the year before. Airlines may hedge a big portion of the fuel purchases during the times they believe oil prices will be firm but they'll refrain from boosting hedging volumes substantially. A drop in prices, though, will draw them out as they will seek to protect against future rises in prices. Cathay Pacific Airways, which consumed 39.5 million barrels of fuel in 2013, did just that in April 2013 when it took advantage of a brief drop in fuel prices to extend fuel hedging into 2016, the Hong Kong airline disclosed with its earnings in March this year. "We are currently about 25 percent covered for 2014 and the first half of 2015 at Brent prices of more than USD$94 to USD$95 a barrel, and about 11 percent for the second half of 2015 and the first half of 2016," its spokesman said. "Our hedging coverage changes over time and depends on different levels of Brent oil prices," he said, adding that the airline's hedging coverage ranges from 10 to 60 percent for the next 12 months. Singapore Airlines, Asia's biggest airline by market value, which hedges between 20 and 60 percent of its fuel requirements, went for the cap of 60 percent for the second half of its financial year that ended in March at USD$118 a barrel of jet fuel prices, a spokesman said. The airline will provide guidance on its hedging strategy for the 2014 financial year when it releases annual results on May 8, the spokesman added. Australia's Qantas Airways, Indonesia's Garuda, Malaysian Airline and Thai Airways did not comment on their hedging positions when contacted. Chinese carriers, among the biggest in Asia by revenue, haven't hedged their fuel buys for the past several years after suffering losses on their hedges from extreme oil price volatility in 2008, said Kelvin Lau, analyst at Daiwa Capital Markets. China Eastern Airlines confirmed it is not undertaking fuel hedging currently. China Southern Airlines could not be reached for comment.


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Publication:USAsian Network News & Business & Industry News
Geographic Code:90ASI
Date:Apr 21, 2014
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