How Airlines Actually Hedge Higher Fuel Prices

Airline fuel hedging serves as a critical financial risk management tool, as fuel often constitutes between 25% and 44% of an airline's operating expenses. Because the jet fuel market is thin and opaque, carriers frequently use Brent crude as a liquid proxy for hedging. David Kang, former group treasurer at Qatar Airways, highlights that airlines can move beyond simple consumption hedging by identifying their structural "long oil" position created by fuel surcharges. By correlating these surcharges with market prices, airlines can implement sophisticated derivative strategies—such as selling strangles—to offset costs without taking naked directional bets. This proactive approach allows carriers to secure competitive advantages, such as the ability to lower fares during market volatility, while avoiding the pitfalls of traditional, reactive hedging that often leads to significant balance sheet losses.