THAI hedging falls slightly
Published: 14/03/2011 at 12:00 AM
Thai Airways International will continue to heavily hedge jet fuel prices in the second quarter in anticipation that global oil prices, triggered by turmoil in the Arab world, will remain high.
However, the hedged volume for the second quarter would be marginally lower than in the first quarter as the flag carrier adopts a more cautious approach in light of greater uncertainties.
The airline's management told the THAI board on Friday that hedging volume in the second quarter would be reduced to 44% of its consumption, now at about 1.7 million barrels a month, from 48% in the first quarter.
The hedging contracts THAI has taken for the second quarter are in the range of US$100 to $130 a barrel, versus a range of $90-120 in the first quarter, a company source said.
Jet fuel on the Singapore spot market is currently trading around $130 a barrel.
Similar to other airlines, THAI has taken short-term hedging contracts, of around three months, as current uncertainties, especially resulting from the situation in Libya, have blurred the price outlook in the longer term.
THAI has been actively using hedging to manager risk at the urging of president Piyasvasti Amranand, a former energy minister, since he took office just over a year ago. The airline reportedly made gains of "a few hundred million baht" from hedging in the first quarter of this year, the source said.
The board on Friday approved the purchase of 44.69 million gallons of aviation fuel for a contractual period of one year, from April 1 this year to March 31 next year, for its operations in Bangkok, Jakarta, Denpasar, Hong Kong, Kuala Lumpur, Penang, Manila, Phnom Penh, Singapore and Taipei.
Fuel accounts for about a third of THAI's operating costs and the airline normally passes on the incremental oil expenses to consumers in the form of fuel surcharges.
Credit: Bangkok Post (www.bangkokpost.com)
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