Fuel hedging by airlines back in spotlight as oil prices surge on back of sanctions against Russia

Airlines that have continued to hedge fuel now have some buffer against the impact of soaring oil prices. They had previously suffered massive hedging losses when oil prices sank at the beginning of the Covid-19 pandemic two years ago. They include Singapore Airlines and Qantas, which had earlier locked in part of their future fuel needs at lower prices. Meanwhile, some airlines that have not hedged fuel are instead turning to fuel surcharges to cushion the increased costs. But experts have said that the continually rising prices triggered by Russia's invasion of Ukraine will leave all airlines in a pickle moving forward. So carriers that have said they would boost capacity may have to scale back their plans. Russia, a major oil and natural gas producer, has been hit by tough sanctions since late last month. Independent aviation analyst Brendan Sobie from Sobie Aviation said the high fuel prices will bump up the variable costs, or the additional cost of a plane taking to the skies. "Some airlines that were generally keen to add back capacity as international travel recovers will now have to think more carefully about adding back capacity, as it will be harder to cover variable costs," said Sobie.<br/>