New Delhi, Nov 2: IndiGo CEO Willie Walsh on Monday said the airline is not considering fuel hedging as of now and might go for such an option once the airline starts expanding its long-haul operations.
The remarks from the chief of the country’s largest airline comes at a time when the surging fuel costs are pushing up operational expenses of carriers, and IndiGo itself recorded a loss in the September quarter due to high fuel prices and rupee depreciation.
Fuel prices have remained elevated in recent months due to the West Asia crisis and persisting geopolitical uncertainties.
In his first in-person briefing after taking charge as CEO in August, Walsh, an aviation industry veteran, on Monday said hedging is a very difficult decision to make.
“Hedging is about managing risk; it’s not about taking a bet on what the fuel price will be; it is about giving you stability and managing risk.
“… today, it is quite easy that none of the airlines of the Indian domestic market is hedged,” Walsh said.
If IndiGo was to hedge fuel prices given that the competitors in the domestic market aren’t hedged, then an additional risk is being introduced, he said and added that such a scenario goes against the whole principle of hedging.
Fuel costs account for nearly 40 per cent of an airline’s operational expenses.
“I think we do need to look at what we would do in the context of long-haul expansions given that most of the airlines that we are likely to compete with tend to be hedged at different levels…,” Walsh said.
Globally, he said there are no uniform fuel price hedging policies adopted by airlines and cited the example of European carriers, some of which have 70-80 per cent hedging.
“I think the long haul expansion does give us an opportunity to review our hedging policies,” Walsh said, adding that the matter was discussed at the recent board meeting. It will be discussed after a more detailed review, he added.
Hedging is not something that IndiGo does today.
“I think that is the right decision for IndiGo. It may be something we do in the future… at the moment we’re not hedging, and we are not planning to hedge until we’ve completed our comprehensive review,” he said.
IndiGo will expand its long-haul international operations with its wide-body A350 aircraft expected to join the fleet from the second quarter of 2028.
The aircraft will have a three-class configuration with 16 flat beds in business class, premium economy and economy class seats.
Against the backdrop of rising fuel costs roiling the profitability of airlines, Walsh said the situation is challenging for the industry, and IndiGo will navigate through the challenges.
In the September quarter, IndiGo reported a loss of Rs 1,879.1 crore as higher fuel costs and rupee depreciation roiled profitability. (PTI)
