Asia-Pacific airlines brace for prolonged fuel pain as hedging cover thins
Fuel now makes up about 33 per cent of airlines' operating costs, says director general of the Association of Asia Pacific Airlines Wong Hong.
Asia-Pacific airlines face mounting pressures from surging jet fuel costs as hedging contracts near expiration, industry experts warn. Fuel now accounts for approximately one-third of airlines' operating expenses, a share that has grown since last year, according to Wong Hong, director general of the Association of Asia Pacific Airlines.
The spot price of jet fuel currently sits at around $148 per barrel, down from nearly $180 at the end of October but still significantly higher than the pre-Iran war levels in late February.
Wong emphasizes that hedging presents a complex dilemma, as airlines must decide whether to lock in new hedging contracts at elevated rates amid uncertainty about fuel price trajectories. Some industry leaders, like Air Astana CEO Ibrahim Canliel, foresee a new normal where high fuel prices become the status quo, while others, such as Japan Airlines CEO Ross Leggett, expect fuel prices to fluctuate cyclically.
Several airlines, including ANA and Japan Airlines, plan to hedge international fuel consumption but rely on fuel surcharges and ticket price adjustments to offset higher domestic fuel costs. Despite the financial strain, analysts caution that passenger growth in the region has been negative, and capacity cuts could exacerbate the challenges faced by airlines grappling with high fuel expenses.
Written by urgent.news from Channel News Asia's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
