Emirates Airline Writes Off $600 Million In Fuel Hedging Costs Due To Coronavirus

Emirates Airline Writes Off $600 Million In Fuel Hedging Costs Due To Coronavirus

A file picture of Emirates planes at Dubai International Airport (Photo: Artur Widak/NurPhoto via ... [+] Getty Images)



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Dubai-based Emirates Airline has written off more than $600 million worth of fuel which it had bought but could not use due to the travel lockdowns this year.

The figure was revealed in financial results (pdf) for the first half of the year released today by Investment Corporation of Dubai (ICD), the government entity which is the sole shareholder of Emirates.

In its financial statement, the Dubai sovereign wealth fund discussed the fuel hedging strategy used by Emirates as part of the airline's risk management strategy. This involves the airline entering into forward contracts for crude oil, based on the amount of jet fuel it thinks it will need.

Unsurprisingly, given the Covid-19 lockdowns that began in March, its estimates proved to be wildly inaccurate this year and ICD said the “hedge ineffectiveness” led to a charge of AED 2.24 billion ($611 million) being included in its results, recorded as net losses from derivative financial instruments.



That figure was partially offset by an AED601 million ($164 million) gain