Airlines hit hard by jet fuel price swings, many cannot hedge, IATA says
IATA's head of fuel says many airlines are struggling with jet fuel price volatility, and not all can hedge, as crack spreads hit record highs.
Many airlines have been hit hard by price swings in the jet fuel market, and some are not in a position to hedge their exposure, the International Air Transport Association's head of fuel said on Wednesday.
Daniel Chereau, speaking at the S&P Global Energy Middle East Petroleum and Gas Conference, noted that airlines with more elaborate hedging strategies get a bit of a cushion. However, the impact of soaring jet fuel refinery profit margins, known as crack spreads, has not been helpful for the airline industry. In North West Europe, the jet fuel crack spread peaked at an all-time high of over $121 per barrel in March, according to LSEG data, compared with around $30 per barrel a year earlier. This surge directly increases operating costs for airlines that cannot lock in prices through hedging. For traders, the widening crack spread signals strong demand for jet fuel relative to crude oil, often reflecting increased travel demand or supply constraints in refining capacity. NowPrice's real-time commodities quotes provide the latest levels for jet fuel and crude oil benchmarks.
Looking ahead, the key question is whether crack spreads will remain elevated as the summer travel season approaches. If demand continues to recover, airlines without hedges may face further margin pressure. Market participants will also watch refinery maintenance schedules and any changes in OPEC+ production policies that could affect crude oil supply and, consequently, jet fuel prices. The IATA official's comments underscore the uneven playing field among carriers, with hedging capability becoming a critical competitive factor.