The Hindu Business Line : AI hikes hedging in fuel limit

Air India (AI) has increased the hedging limit on the fuel that it uplifts abroad to 25 per cent from September 18. Official sources told Business Line that the airline board had cleared a proposal allowing AI to hedge on 25 per cent of the fuel that it uplifts abroad from a 10 per cent level allowed earlier.

The airline started hedging on the prices of the fuel it uplifts abroad from January 1 this year. Several international airlines hedge on aviation turbine fuel, which basically is forward selling and buying of aviation fuel, to guard against fluctuating fuel prices. The move should help AI as in the past few months the global price of fuel has been fluctuating forcing several airlines to increase the fuel surcharge being imposed. Fuel constitutes almost one-third of the total costs incurred by the airline. "AI will now be able to hedge on up to 75,000 barrels a day up from 30,000 barrels a day that it was allowed to hedge on earlier. It is difficult to put a figure on how much we would save by the increase in hedging. However, the airline managed to save close to $400,000 during the eight months that it has been allowed to hedge. The airline will be cautious when it goes in for hedging as the price of oil is volatile," sources said.

The airlines paid more than Rs 3,134 crore during 2005-06 towards fuel costs.

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