Air India starts fuel hedging
Air India has become the first airline in India to hedge its jet fuel price risk, using commodity derivatives contracts at the end of February for the first time.
The carrier chose investment bank Citigroup as the hedging counterparty for its maiden trade.
The price of jet fuel, which averaged $1.14 a gallon in 2003–2004, stood at around $2.01/gallon at the start of March. Since fuel costs constitute almost 30% of Air India’s operating expenses, the carrier says it decided to manage this risk using a combination of contracts such as jet fuel swaps, options and collars.
The airline’s fuel bill in
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