By Jessica Jaganathan
SINGAPORE (Reuters) - Asian airlines are preparing to hedge more jet fuel in a bid to lock in profits, betting that a recent slide in crude prices to five-month lows will taper off near $50 a barrel.
Hedging activity is picking up after a lull in the first six months when a 50 percent jump in Brent, from a six-year low of $45.19 in January, made such purchases unattractive.
An $11 drop in July to below $53 on global glut worries has revived hedging interest, traders said.
"Some airlines are popping in and hedging bits and pieces daily at a Brent price of $55 and down to $50," said a trader with a bank that handles hedging for many Asian airlines.
"Most airlines think oil prices are cheap and have hit their (bottom)," he added, declining to be named due to rules on talking to media.
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Indonesia's PT Garuda Indonesia Tbk, which has hedged 45 percent of its 2015 jet fuel needs, is now looking to raise that to at least 50 percent, versus 10 percent in 2014.
Garuda's hedging strategy, together with cost cuts, helped it swing to a first-half net profit this year.
Air New Zealand too has raised its hedging ratio, to 57 percent for the fourth quarter from 10 percent a year ago.
South Korea's Asiana Airlines, which had stopped hedging at the end of 2014 to escape oil market volatility, has increased its third-quarter jet fuel hedge ratio slightly versus the previous two quarters.
Jet fuel accounts for anywhere between 20 and 50 percent of an airline's operating costs. Low oil prices have driven global airlines to forecast 2015 industry profits of $29.3 billion, almost double from last year.
SOME STILL WARY
Certain airlines, however, are cautious about hedging after a bitter experience in 2008, when carriers scrambled to lock in fuel costs as crude surged above $100 for the first time only to see prices plummet to less than $40 before year-end.
With jet fuel prices down around 16 percent this month, some airlines see spot purchases as a better option.
For 2015, Thai Airways International Pcl has hedged about 80 percent and plans to buy the rest from the spot market, a senior official said. The airline expects to save costs of about 16 billion baht ($455.45 million) this year due to its hedging strategy and lower oil prices, he added.
Japan's ANA Holdings Inc and Japan Airlines have hedged 40 percent and plan to keep it at that.
The cost of hedging crude has dropped to the lowest in a decade, said Maybank analysts, as caution caps hedging volumes.
"It is ironic that whilst the cost of protection is cheap and fuel hedging strategy is best adopted now, many airlines are choosing not do so," they added.
($1 = 35.1300 baht)
(Additional reporting by Manunphattr Dhanananphorn in BANGKOK, Cindy Silviana and Eveline Danubrata in JAKARTA, Gyles Beckford in WELLINGTON, Swati Pandey in SYDNEY, Joyce Lee in SEOUL, Timothy Kelly in TOKYO, Siva Govindasamy and Anshuman Daga in SINGAPORE and Aisling Curtis in NEW DELHI; Editing by Himani Sarkar)