LONDON/HONG KONG – With jet fuel prices at roughly double their levels before the Iran war, airlines are growing increasingly reluctant to lock in future fuel costs through new hedges, warning instead of steep fare increases to offset higher fuel bills. Hedging allows airlines to lock in future fuel prices, helping shield them from increases and providing greater certainty over costs. But some programs require premiums, collateral or other costs, while airlines that hedge at current elevated prices risk being locked into expensive fuel if geopolitical tensions ease and prices retreat.
As the conflict in the Middle East enters its ninth month, the strategy shift means fliers globally will likely pay far higher air fares as carriers lose their hedging protection, testing consumer willingness to shell out more for travel.
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