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AAG Dailies

Rising Oil Helps Carriers Recoup Fuel Hedge Losses

July 01, 2009

The rapid rise in the price of oil may help some airlines trim losses resulting for from fuel hedging, according to a new story from Bloomberg News. The business-centric newswire said Cathay Pacific, Air China and Singapore Airlines could all trim from paper losses after oil surged more than 40% from lows close to $30 last fall. Philips Securities manager Louis Wong said the rewards from hedging could even help Cathay and help Air China return to profitability. “What has been a negative for airlines may have turned positive with oil prices rising,” he added. “Any write-back will give airlines the breathing space they need during these times.” Another carrier that has been hit hard by hedging losses is Singapore Air (SIA), which reported a $373 million loss on fuel hedging during the first quarter, Bloomberg News added. “The silver lining of rebounding oil prices is that SIA will incur smaller hedging losses and write back some of its previous mark-to-market fair value losses on balance sheet,” JPMorgan Chase analyst Corrine Png noted is recent report, adding rising crude prices could the carrier’s hedging losses by more than US$30 million. 

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