SIA least exposed to fuel price risks in Asia: HSBC

Half of the carrier’s fuel requirements are hedged.

Oil prices and fuel price risks are rising in the region, but Singapore Airlines may fly freely as relief is provided by its hedges, particularly those linked to Brent.

The report, released this morning, revealed that Air Asia X and Thai Airways are the most at risk carriers, while Cathay Pacific is well placed as SIA.

Here’s more from the report:

The Brent price is now about 8% higher than the y-t-d lowest point and up about 4% from a week ago on escalating tensions in Iraq. For a short period, there was a divergence in the trends of Brent and jet fuel price as shrinking refining margins (down to about USD7/bbl at one point) kept jet fuel price levels relatively stable while Brent continued to rise. However, this was clearly too good to last and jet fuel prices are now ticking up.

If we assume jet fuel starts to move in line with Brent, factor in reported hedging levels for 2014e and assume passenger/cargo fuel surcharges cover about 50% of the move in fuel prices, the chart below shows the impact on 2014e/FY15e forecasts of every USD5/bbl rise in jet fuel prices (above the level we assume of USD120/bbl).