Airline losses from hedging against oil price fluctuations amount to over $4.7 billion

Airline losses from hedging against oil price fluctuations amount to over $4.7 billion

European airlines have lost more than $4.7 billion as a result of fuel hedging, almost a year after the International Air Travel Association (IATA) warned the practice could bring down profits.

The affected airlines are Lufthansa, IAG, Ryanair, and Air France, according to La Información.

The airlines had protected themselves to varying degrees against future fluctuations in oil costs and suffered proportional losses.

IAG was the most affected airline, losing over $2 billion.

Meanwhile, Air France was less affected with a loss of almost $708 million as it relied less on fuel hedging.

Lufthansa lost almost $1.4 billion “” the loss comes after reports last year revealed the German airline was losing $1 million a minute due to the pandemic and was given a $10 billion bailout from the German government.

Meanwhile, Ryanair announced it would cut 3,000 jobs in May 2020.

The losses have been largely related to the coronavirus pandemic as airlines have been unable to use their fuel due to travel restrictions and so excess fuel has piled up even further.

To manage how much they are affected by oil price fluctuations, airlines with long-term contracts of up to 24 months purchase fuel at low prices on the futures market.

In this way, they manage to