European airlines are holding back on renewing fuel hedges as oil prices remain elevated due to tensions in the Middle East, with Ryanair confirming it is among those taking a wait-and-see approach.
The Irish low-cost carrier told Airline Economics it is currently hedged through to March 2027 and typically locks in fuel prices around 12 months in advance. However, it is not seeking additional hedges at current price levels and may delay further activity for up to three months, depending on how the conflict evolves.
This comes down to whether Iran allows shipping to pass freely through the Strait of Hormuz, a critical route for around 20% of global oil flows.
Most European carriers entered the recent crisis with substantial hedging in place, around 80% of fuel needs for the year, giving them the flexibility to wait for lower prices. Lufthansa and EasyJet are among those reported to be adopting a similar stance, with many analysts expecting oil prices to fall once the conflict subsides, which they expect to happen relatively soon.
U.S. airlines brace for higher costs
By contrast, U.S. airlines, which typically do not hedge fuel exposure, are preparing for sustained price pressure.
United Airlines chief executive Scott Kirby has warned staff the airline is bracing for oil prices to reach $175 a barrel and remain above $100 for the rest of the year, potentially adding $11bn to fuel costs. As of 25 March, WTI crude was trading around $88 a barrel, up from the mid-$60s before the conflict.
Meanwhile, major U.S. carriers including Delta, American Airlines and JetBlue have raised first-quarter revenue forecasts, citing robust demand. American said higher fuel prices partly contributed to a $400m increase in first-quarter expenses, though stronger-than-expected demand is helping offset the impact, with earnings now projected to rise around 10% beating market expectations of a 7%-10% increase.
U.S. airlines are widely expected to try and pass on higher fuel costs through fare increases, while some are already trimming certain flights to reduce fuel consumption.
Jet fuel prices surge
Fuel markets have tightened sharply since the conflict erupted on 28 February. Jet fuel prices have climbed from around $2.40–$2.50 per gallon just before the conflict to approximately $4.50 as of 24 March, according to the Argus US Jet Fuel Index. Meanwhile, weekly average crack spreads have surged from $27.88 a barrel in late February to $86.22 by 20 March, based on Platts data.
Among refined products, jet fuel has seen some of the steepest price increases, reflecting the key role of Gulf exporters in global supplies. Additional pressure has come from China, a major refining hub, which has restricted exports of refined petroleum products.