Jet Air begins hedging on ATF

Jet Airways has begun hedging on Aviation Turbine Fuel (ATF) to safeguard itself against the fuel's price fluctuations. The hedging of aviation fuel is limited only to the international operations of the company as the domestic private sector airline firms are not allowed to hedge their aviation fuel price risk against their domestic operations.

"We have started hedging of aviation fuel at a small scale as its allowed only in case of international operations," said Wolfgang Prock-Schauer, chief executive officer, Jet Airways. Since hedging in domestic operations is not allowed, the fluctuation in fuel prices would continue to be passed on to the customers, Prock-Schauer said. The massive fluctuations in fuel prices have compelled many international and domestic airlines to upwardly revise their fuel surcharge in the recent past.

For Jet Airways, the fuel cost in its international operations has jumped 36.3 per cent during the third quarter ended December 2006. In its international operations, the total fuel expenditure during the same quarter touched Rs 611.5 crore compared with Rs 448.7 crore in the year-ago period.

In the same period, the domestic operations experienced nearly 25 per cent jump in fuel cost on quarter to quarter basis. As against fuel expenditure of Rs 376.1 crore during October-December 2005, Jet Airways had to pump in Rs 469.9 crore during the quarter ended in December 2006.

Jet has flights to six international destinations, including London, Kuala Lumpur, Bangkok, Colombo and Katmandu. Its plans to add four new destinations, including Shanghai in China, and launch operations in US and hopes to reduce the impact of volatility in aviation fuel prices further and improve its bottom line. The ATF prices have jumped from $67 per barrel in January this year to $77- $78 per barrel.