Hedging Fuel Costs

Air India, which is in the process of turning around its fortunes, had posted a net loss of Rs 5,859.91 crore in the last financial year.

As it looks to turnaround, Air India plans to hike the limit for hedging fuel costs to 25 per cent amid oil prices hovering at low levels.

Fuel hedging is a contractual tool large fuel-consuming companies like airlines use to reduce their exposure to volatile and potentially rising fuel costs. A fuel hedge contract allows such a company to establish a fixed or capped cost through a commodity swap or option.

Air India, which is in the process of turning around its fortunes, had posted a net loss of Rs 5,859.91 crore in the last financial year.

As it looks to turnaround, Air India plans to hike the limit for hedging fuel costs to 25 per cent amid oil prices hovering at low levels.

Fuel hedging is a contractual tool large fuel-consuming companies like airlines use to reduce their exposure to volatile and potentially rising fuel costs. A fuel hedge contract allows such a company to establish a fixed or capped cost through a commodity swap or option.