Kenya Airways plans fuel hedges after prices stabilize

Kenya Airways’ board gave approval for the carrier to hedge prices for more than 35% of its fuel needs and is in talks with the African Airlines Association for bulk fuel purchases in a drive to cut costs. Fuel accounts for at least a quarter of costs for the airline in which the Kenyan government has a 48.9% stake, CEO Allan Kilavuka said. “During the pandemic, even shortly thereafter, there was no need to hedge because hedging is expensive as well,” he said. “We will look for counter parties when the fuel price stabilizes and determine how much of our fuel we want to hedge so that we mitigate against the volatility.” The airline known as KQ last had a fuel hedge during February-July 2020. Direct operating costs advanced 33% last year, driven partly by the global rise in fuel prices, according to the company. Jet fuel climbed more than 1.4 times from a year ago to $161.60 per barrel last week, according to the IATA’s Jet Fuel Price Monitor. The loss-making carrier survived the pandemic through government bailouts and restructuring. It expects another 20b shillings ($173.8m) allocation from a supplementary budget approved by lawmakers this week. The cash will be a loan, although the government could decide to convert it into equity in future, Kilavuka said, without providing the terms of the financing. “A portion of it is to support restructuring of the airline, in terms of renegotiating some of the terms of engagement with our suppliers, part of it is general working-capital support for the business and operational support. Part of it is to help stabilize our balance sheet,” Kilavuka said.<br/>