Mumbai: National carrier Air India will hedge a fifth of its jet fuel for this quarter and all of next year, as it aims to take advantage of the fall in its prices, a senior executive said Monday. The executive said Air India had stopped hedging fuel but of the volatility in prices of crude and consequently jet fuel, but will start it again now. He didn't reveal the band at which it will be hedged.
Hedging means locking-in future purchase of a commodity at a particular price. The customer -in this case the airline -gains if the market price of the fuel rises below the level at which it has hedged and loses if market prices fall below the locked-in price band.ATF accounts for the biggest chunk -more than 40% --of an Indian airline's costs and has been one the major reasons for their losses.
The fuel is costliest in India, because of various state taxes levied on it. ATF prices fell 11% Friday, February 1 to Rs 46,513 per kilolitre at Delhi. ATF prices are revised at the beginning of every month. In January, it fell by 13%. Between January and December last. 59,943 per kilolitre.year, it fell 21% to ATF has followed crude which has rap idly fallen since September due to a variety of reasons including tapering demand, shift to other forms of fuel and the US becoming the world's largest oil producer, which means it imports less and creates spare supply.
04/02/15 Anirban Chowdhury/Economic Times
Hedging means locking-in future purchase of a commodity at a particular price. The customer -in this case the airline -gains if the market price of the fuel rises below the level at which it has hedged and loses if market prices fall below the locked-in price band.ATF accounts for the biggest chunk -more than 40% --of an Indian airline's costs and has been one the major reasons for their losses.
The fuel is costliest in India, because of various state taxes levied on it. ATF prices fell 11% Friday, February 1 to Rs 46,513 per kilolitre at Delhi. ATF prices are revised at the beginning of every month. In January, it fell by 13%. Between January and December last. 59,943 per kilolitre.year, it fell 21% to ATF has followed crude which has rap idly fallen since September due to a variety of reasons including tapering demand, shift to other forms of fuel and the US becoming the world's largest oil producer, which means it imports less and creates spare supply.
04/02/15 Anirban Chowdhury/Economic Times
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