AirAsia completes Fuel-Hedging for Second Half FY2006

AirAsia has completed a fuel-hedge transaction for its second-half FY2006 requirements. Prior to this transaction, AirAsia had 50% of its second half FY2006 fuel requirement hedged. With the new fuel-hedge in place, AirAsia’s fuel requirement for FY2006 is effectively fully hedge.

This fuel hedge structure is similar to the current fuel hedge in place; i.e based on WTI crude oil. The pricing band for the new hedging structure is between US$48 to US$60 per barrel, AirAsia effectively pays US$48/bbl within this pricing band. In the event WTI exceeds US$60/bbl, AirAsia will receive a US$$12/bbl discount to WTI market price.

Mr Tony Fernandes, Group CEO, AirAsia said, “Fuel cost is the single largest cost item of the business; it constitutes approximately 60% of our total operating cost. It is crucial to mitigate and manage fuel price volatility in order to successfully operate the business. We took advantage of the recent dip in oil prices, in light that there might be more risk on the downside going forward.

It is part of our business model to hedge our fuel requirements and we’ve always done so in the past, and will continue to do so. We are very risk adverse and believe in protecting risk on the downside. I’m very reassured with this transaction and confident that we will be able to continue giving low fares for our guests to enjoy.”

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