Air France-KLM has led cuts in fuel hedging by Europe’s airlines during the third quarter, fuel prices headed for the first annual decline in six years.
AFI-KLM reduced the value of the jet fuel it hedged by $338 million for the period compared with a year earlier, according to company data.
Jet fuel prices have dropped 7.4% in 2014. Air France-KLM’s hedges locked in fuel contracts at higher costs before oil prices collapsed in the second half of 2008, costing the company €418 million ($600 million) in the third quarter of 2009.
The price of jet fuel cargoes for delivery into northwest Europe fell to $947.25 per metric ton on Wednesday, from $1,023.25 on the last day of 2013.
Air France-KLM hedged 63% of its estimated $2.4bn fuel bill for the third quarter, compared with 74% of its $2.5bn consumption a year earlier. This represents the biggest percentage decrease among the largest European carriers, and AFI-KLM is the only airline to reduce hedging for all periods when it reported half-year earnings on July 25th.
AFI-KLM spokesman Maxime Patula said: “Fuel accounts for a substantial portion of the Air France-KLM group’s fixed costs. While the company gives ‘special consideration’ to managing its fuel-price risk, its strategy to hedge consumption over a rolling two-year period is in line with competitors.”
AFI-KLM leads EU airlines’ cuts to fuel hedging policies
