Asia-Pacific airlines are facing a prolonged squeeze from high jet fuel prices as the hedging contracts that shielded them through the worst of the surge begin to expire, leaving carriers exposed to a market that has not returned to pre-war levels.
The spot price of jet fuel is trading at about $148 a barrel, down from nearly $180 at the end of October but still far higher than the roughly $85 it cost before the Iran war began in late February, according to Reuters.
Fuel now makes up about 33 per cent of airlines’ operating costs in the region, said Wong Hong, director general of the Association of Asia Pacific Airlines, which represents 18 of the region’s carriers. The global industry group IATA had pegged the share at 25 per cent last year, before prices surged.
Hedging, Wong said, was a “very, very tricky dilemma”. Airlines that had contracts in place over the past six to eight months had “come out smelling like a rose”, he said, but now faced re-hedging at higher prices — a bet on whether fuel costs will stay elevated.
Executives attending the association’s annual assembly in Kuala Lumpur this week differed on how long the pain would last. Air Astana chief executive Ibrahim Canliel said the Kazakh carrier viewed the current price level as “a new normal”, referring to Brent crude of about $90 to $100 a barrel. Its first-half hedges have expired, and prices were at levels that “did not make sense” to lock in new cover, he said, though the airline plans to rebuild its position and hedge all the fuel it buys outside Kazakhstan, about 30 per cent of its total in a typical year.
Japan Airlines expects fuel prices to fluctuate, senior managing executive officer Ross Leggett told Reuters. “We still think it will be cyclical. It’s going to go up and down,” he said, adding that the airline was budgeting for a “worst-case scenario” of $160 a barrel for jet fuel, the average price it paid from April to September.
All Nippon Airways chief executive Juichi Hirasawa said the airline’s fuel costs would rise by 100 billion yen ($626 million) this fiscal year above initial plans, but expected the market to stabilise in the second half of the financial year ending 31 March.
Both ANA and JAL hedge only domestic fuel consumption and rely on fuel surcharges and ticket price changes to cover international exposure. Neither signalled any change to that approach. Leggett said JAL would introduce a domestic fuel surcharge from April next year, a first for the carrier, after concluding it could no longer rely on government fuel subsidies indefinitely. Hirasawa said a domestic surcharge was “under consideration” at ANA, but competition from bullet trains made the decision difficult.
Ticket prices have climbed as oil prices rose, but not always fast enough to cover the higher fuel costs. “There has to be a breaking point where passengers will say no,” Wong said. Asia-Pacific passenger growth was negative in aggregate from April to August, with September “just above water”, he added, warning that capacity cuts were “clearly a potential risk”.
Singapore Airlines shows how margins have been squeezed even at carriers with substantial hedging. Its fuel bill jumped 56 per cent in the six months to September, to S$3.97 billion ($3.09 billion), cutting operating profit by 29 per cent even as revenue hit a record. The airline paid an average of $171 a barrel before hedging, up 87 per cent year on year. Hedging gains of S$731 million, against a S$75 million loss a year earlier, cut the effective price to $145 a barrel, but chief financial officer JoAnn Tan said hedging “only offers some level of protection”. “No one can predict fuel prices, which is why we hedged,” she said at an earnings briefing on Thursday.
Sources: Reuters — https://www.reuters.com/business/energy/asia-pacific-airlines-brace-prolonged-fuel-pain-hedging-cover-thins-2026-11-13/
