San Fransisco // Etihad Airways has ended a hedging programme with lenders to mitigate risks on jet fuel after oil prices dropped at the fastest pace in two years.
Fuel hedging has been a common practice among airlines in recent years in light of rising energy prices. Typically, carriers get into contracts to buy fuel at a specific price range to protect themselves from excessive rises or declines in oil prices.
“As an airline, we have to consider a number of shocks, whether its economic, war or pandemic such as Ebola, and of course, fuel,” said James Hogan, the chief executive at Etihad. “So yes, the price of fuel has gone down. We hedge on a three-year rolling programme, so the first year is typically about 80 per cent, the second year is 50 per cent and the third year is at 25 per cent.
“We have collar targets [an option trade that guarantees a set price range] and we’re comfortable where it is at the moment. But now we’ve stopped hedging because fuel has come down.”
As of last Friday, jet fuel sold at a global average of US$85 per barrel, a decline of 32.9 per cent from last year, according to data from the energy firm Platts published on the International Air Transportation Association website.
“We’re comfortable where it sits because it helps us with our performance,” Mr Hogan said.
Jet fuel typically makes up 25 to 40 per cent of operating costs for airlines.
Brent crude has declined more than 40 per cent since its peak in June, hovering around $66 per barrel amid a battle for market share that involves Opec member countries pressuring US shale oil and gas producers.
A decline in oil prices is generally favourable for the airline industry, which has adopted fuel surcharges in light of rising costs on energy since the early 2000s.
Jet fuel demand in the Arabian Gulf has been growing because of the rapid expansion of Etihad, Emirates Airline and Qatar Airways.
Etihad over the past three years has been acquiring equity stakes in struggling carriers to boost its geographic footprint and connectivity.
This year, Etihad has grown its equity partnership to eight, comprising Air Seychelles, airberlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways, while Etihad Regional (formerly known as Darwin Airline) and Italy’s Alitalia are awaiting final regulatory approval.
Mr Hogan categorically denied that it was in talks to buy a minority stake in South African Airways.
Nico Bezuidenhout, the acting chief executive at the African carrier, was quoted on Tuesday by Bloomberg News as saying that Etihad was looking at the carrier as a potential investment target.
“I’m quite surprised,” Mr Hogan said. “We haven’t had talks on this matter. We launched a codeshare agreement but there have not been discussions over an equity stake. Not sure where that article came from.”
After an aggressive expansion in recent years, Mr Hogan said the carrier will focus on consolidation next year.
“It’s a business maturing. We have gone from a start-up phase to a developing phase, and now we are entering into a maturing phase of the business.
“By rule of thumb, consolidating is making sure the network flows, so that when you arrive in Abu Dhabi you can connect within two hours, ideally on to your next flight. It’s about frequency and timing.”halsayegh@thenational.ae
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MATCH INFO
Hoffenheim v Liverpool
Uefa Champions League play-off, first leg
Location: Rhein-Neckar-Arena, Sinsheim
Kick-off: Tuesday, 10.45pm (UAE)
Company%20Profile
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UAE currency: the story behind the money in your pockets
Armies of Sand
By Kenneth Pollack (Oxford University Press)
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
Company%20Profile
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Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
The specs
Engine: 3.6 V6
Transmission: 8-speed auto
Power: 295bhp
Torque: 353Nm
Price: Dh155,000
On sale: now
COMPANY%20PROFILE
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
COMPANY PROFILE
Founders: Sebastian Stefan, Sebastian Morar and Claudia Pacurar
Based: Dubai, UAE
Founded: 2014
Number of employees: 36
Sector: Logistics
Raised: $2.5 million
Investors: DP World, Prime Venture Partners and family offices in Saudi Arabia and the UAE
Emirates exiles
Will Wilson is not the first player to have attained high-class representative honours after first learning to play rugby on the playing fields of UAE.
Jonny Macdonald
Abu Dhabi-born and raised, the current Jebel Ali Dragons assistant coach was selected to play for Scotland at the Hong Kong Sevens in 2011.
Jordan Onojaife
Having started rugby by chance when the Jumeirah College team were short of players, he later won the World Under 20 Championship with England.
Devante Onojaife
Followed older brother Jordan into England age-group rugby, as well as the pro game at Northampton Saints, but recently switched allegiance to Scotland.
UAE gold medallists:
Omar Al Suweidi (46kg), Khaled Al Shehhi (50kg), Khalifa Humaid Al Kaabi (60kg), Omar Al Fadhli (62kg), Mohammed Ali Al Suweidi (66kg), Omar Ahmed Al Hosani (73), all in the U18’s, and Khalid Eskandar Al Blooshi (56kg) in the U21s.
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
