Posted on: 08 January 2015 by Mark Howells
Aer Lingus Group has provided an update on its trading and fuel hedging status at the end of the fourth quarter of 2014 (4Q14).
The company noted that as part of its third quarter interim management statement, Aer Lingus Group stated that its full year 2014 operating profit, before exceptional items, would be ahead of the 2013 operating result of €61.1 million. The Group has now confirmed that its trading performance in 4Q14 confirms that stated outlook.
Aer Lingus has recently increased its fuel hedging activity to bring its hedging profile in line with that of peers and to take advantage of favourable jet fuel price trends to support delivery of its 2015 results. This one-time change in hedging activity represents a departure from the Group’s progressive fuel hedging policy and has been approved by the board of directors.
At 30 September 2014, Aer Lingus had hedged 50% of its 2015 fuel requirement at an average price of $937 per metric tonne. Since 30 September 2014, the Group has hedged an additional 40% of its 2015 requirement at an average price of $701 per metric tonne. As a result, Aer Lingus has now hedged 90% of its estimated 2015 fuel requirement at an average price of $830 per metric tonne. This compares to an average hedged fuel price of $954 per metric tonne expected for 2014.
The Group’s 2015 jet fuel consumption is expected to increase to 515,000 metric tonnes (2014: approximately 481,000 metric tonnes). Using an end of year dollar-to-euro exchange rate of 1.22 (2014 average: 1.34), the 2015 fuel costs (using an average fuel price of $830 per metric tonne) would be around €52 million lower than it would have been at the 2014 average hedged fuel price ($954 per metric tonne).
The lower average fuel cost will contribute positively to the Group’s 2015 results. These year-on-year positive effects will be partially offset by the impact of the expected strength of the US dollar compared with the euro relative to the 2014 exchange rate and other cost increases.
The Group has also hedged 24% of its expected 2016 fuel requirement in line with its fuel hedging policy. Management will consider the merits of extended hedging of 2016 fuel demand in the course of the first quarter of 2015.