Asia airlines raise hedging volumes on oil price fall

Airlines in Asia are stepping up jet fuel hedge volumes after oil prices fell below $100 a barrel this month, with some locking in fuel purchases as far out as 2016, suggesting airlines see oil prices bottoming. Jet fuel can account for anywhere between 20 and 50 percent of an airline's operating costs, so swings in oil prices can hit their bottom line and have an influence on fare prices. Airlines have different hedging policies with Australia's Qantas Airways (QAN.AX) hedging as much as 94 per cent of its fuel needs for the first half of next year, while Singapore Airlines (SIAL.SI) is hedged at around 52 per cent for its 2014-2015 financial year. The amount of hedging eased after the 2008 crisis but has picked up pace recently with prices on a downward trend. Brent crude oil prices LCOc1 fell below $100 a barrel on Sept. 8 before sliding to a 26-month low of $95.60 a barrel on Wednesday due to a soft global economic outlook. Singapore jet fuel prices – widely used as a regional benchmark – have fallen from around $125 a barrel in late June to about $109 currently, and have averaged $119.44 a barrel so far this year, down from last year's average of $122.86, according to Reuters.