Wizz Air abandons no fuel hedging policy as oil prices surge

Wizz Air Holdings Plc said it will reinstate its jet-fuel hedging policy as volatile oil prices add to other surging costs for the airline industry and threatens to upend the sector’s recovery from the pandemic. 

Eastern Europe’s biggest discounter will “mirror” the hedging levels of its main peers and put additional jet fuel price caps in place for the second half of 2023, the carrier said in a stock exchange filing Thursday. The airline will also hedge its dollar exposure with regard to jet fuel, a sign of the increasing pressure on oil consumers. 

Wizz became one of the only major carriers in Europe to not hedge oil after a crash in demand at the start of the Covid-19 pandemic led to significant financial loss. Europe’s biggest discounter Ryanair Holdings Plc is 80% hedged at $63 a barrel and has said the policy will help keep costs down and gain an advantage of its rivals.

Ideally, airlines hedge prices before they rise because doing so is then much cheaper. The cost of protecting against Brent crude for December 2023 reaching $130 a barrel has climbed almost fivefold this year as oil prices have surged.

Europe’s airline industry is struggling to cope with the massive rebound in demand as rising inflation is pushing up costs for everything from fuel to staff, after two years of virtually no travel.