Airlines may get nod to hedge ATF for local flights

New Delhi: The finance ministry is considering a proposal from domestic airlines for permission to hedge aviation turbine fuel (ATF) consumed for domestic flights. While domestic carriers are allowed to hedge ATF for their international operations, the government does not permit them to do so for domestic operations.
Since ATF accounts for almost 40% of airlines’ total costs, airlines could save significantly in their domestic operations if hedging of ATF was allowed. Most airlines are confident that they could at least keep costs under control. Air India, for example, uses hedging to keep a check on fuel costs in the cost of international operations.
The recently-founded Federation of Indian Airlines (FIA), in a letter to the finance ministry, had sought permission for airlines to hedge ATF used for domestic airlines.
Present regulations permit hedging of only those commodities that are physically imported or exported by domestic companies.
06/12/06 Sunny Verma/Economic Times

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