, Hong Kong

Analyst sees fuel hedging price to go up amidst oil hike

Fuel hedging refers to buying oil in the future at a fixed earlier price.

Jet fuel prices keep soaring due to high inflation, which may prompt fuel hedging prices to increase, investment banking firm, Jefferies, reported.

In its report on Cathay Pacific, Jefferies said the airline management reiterated policy “to hedge the percentage of expected fuel consumption.” 

“Based on end-2021, first quarter was 100% hedged at $392 (US$50) Brent with second quarter to fourth quarter hedging ratio from 45% to 43% and Brent price of  $392 (US$50) in 2Q to $470 (US$60),” said Jefferies.

READ MORE: Cathay Pacific’s total passengers skyrocketed by 141.5% YoY in May

Fuel hedging is a type of practice commonly done by airlines to purchase fuel in the future at a fixed earlier price.

Jefferies, meanwhile, sees a “more upbeat tone” for passenger and cargo recovery of Cathay Pacific as the airline increased its number of routes by 64%.

“Passenger headwinds continue to ease as flights resume through this year with a year-end target to 'double' the number of destinations from 29 at the start of 2022 with 45 destinations having resumed by June,” said Jefferies.

$1 = US$0.13

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