RBI approves fuel hedging by Jet Air

In the wake of spiralling ATF (aviation turbine fuel) prices, private airline Jet Airways (India) is planning to enter hedging arrangements for its fuel supply.

ATF expenditure constitutes over 20-25 per cent of airlines' total operating cost.

"Jet Airways has secured in-principle permission from the Reserve Bank of India (RBI) for hedging jet fuel uplift from overseas," Jet Airways Executive Director Saroj K Datta said.

Datta said the airline's exposure of fuel uplift from overseas is over 20 per cent and is expected to go up as it enhances the international operations.

"We have not decided the percentage of hedging for the overseas fuel uplift. We are examining the market scenario and are in the process of finalising other modalities of hedging requirements," Datta said.

Jet Airways will be the first private airline to hedge against the unrelenting jet fuel prices. National flag carrier Air-India has already obtained the RBI's permission and it is all set to hedge early 2006.

Airlines entering fuel hedging need to implement 'risk management' policy in addition to prior approval of the RBI. Moreover, the airlines need to enter into agreement with International Swap Dealers Association (Isda) and should appoint international bankers for hedging transactions.

Datta said the airline is planning to operate more international flights and has applied for operating rights from the government. It also has plans to introduce dedicated cargo freighter. Currently, the cargo division is contributing 5-6 per cent of the airline's bottomline.

Meanwhile, Jet Airways has firmed up plans to launch integrated pilot training academy at an estimated cost of $15 million. Sources said the airline is scouting for land for the academy, which would extend comprehensive training to pilots.

On whether this would be a captive facility, they said the facility would extend its service to other airlines too, after the requirement of Jet Airways.

They pointed out that the airline has recently provided 2,000 hours of training for Air-India and Air Sahara pilots at the Jet Airways Flight Simulator Training Centre in Mumbai.

In addition to this $13 million simulator training centre, Jet Airways is planning to commission its second full flight simulator centre by 2006. For this, the airline has already signed a letter of intent with international flight simulator company CAE Ltd.