The Hindu Business Line : Jet gets nod to hedge fuel purchase abroad

TRAINING FOR COCKPIT CREW: Mr Saroj K. Datta, Executive Director, Jet Airways, inside a flight simulator in Mumbai on Thursday. Jet Airways has set up a flight simulator-training centre as part of its ongoing initiative to augment its in-house training facility for cockpit crew. — Paul Noronha

Mumbai , Dec. 22

JET Airways has become the second airline in the country to receive in-principle approval from the Government to hedge the fuel it buys abroad.

Mr Saroj K. Datta, Executive Director, Jet Airways, said the airline is in talks with hedging experts to finalise its strategy. In the absence of any prior experience in this field, the airline would enter the hedging market gradually, initially hedging around 10 per cent of the total fuel requirement.

Currently, about 20 per cent of the airline's fuel requirement is uplifted abroad. The volume is expected to rise as the airline expands its international services, Mr Datta said at a press conference here on Thursday.

AI's plans: Air India, which has received approval to hedge its fuel requirement, plans to commence hedging from January 1. According to an official spokesperson, Air India's fuel bill stood at Rs 2,000 crore last year, around 60 per cent of which was bought abroad.

ISDA pact: The airline has entered into an International Swap Dealers' Agreement (ISDA) with Citibank, which is one of its counter-parties for the hedging agreement. The counter-party provides quotes to the buyer in a hedging deal. In other words, the counter-party agrees to pay the difference if the price moves above an agreed rate.

Jet Airways, which recently signed an agreement to buy a second flight-training simulator for 737-NG aircraft from a Canadian firm at an investment of $13 million, also plans to acquire simulators for wide-body aircraft as it adds these aircraft to its fleet.

The airline has signed agreements with Airbus for the purchase of ten A330-200 aircraft. Deliveries of the A330s will begin in the first quarter of 2007. It has also signed a purchase agreement for 10 Boeing-777 aircraft with Boeing.