Falling oil prices remain sky high: Turbulence stays for airlines

Oil prices have been falling slightly recently, a delight to all airlines as it helps relieve the financial stress a little. However, this does not translate to airlines’ exit of financial turbulence caused by high oil prices, since prices remain at historically high rates. This extremely unfavorable situation has resulted in high operating costs for airlines, leading to lower or even negative profits.

Recently, I have read so many articles about how different airlines in Asia and Europe have been struggling with the fuel price war. Many have lost, for instance Singapore Airlines which surprising reported a January-March net loss of S$38.2 million ($30.58 million), a swing from a net profit of S$171 million a year ago, and many are struggling to not get pushed into the deep red. It seems like this turbulence for airlines will stay for quite a while before things may possibly pick up.

One way airlines can fight possible increases in fuel prices is to hedge a percentage of its fuel needs. This can protect them against the rising oil prices, but serves to backfire if prices start to fall. Qantas and Lufthansa are among the airlines which have made use of this method. Further elaborations about struggling airlines and hedging fuel requirements can be read here.

How will airlines mitigate the impact fuel price risk or optimise their fuel management strategy? Come to the 5th Annual Aviation Outlook Asia to find out more!