IAG to change fuel reserve criteria

After such a turbulent period and huge variations in the price of oil. Many highly exposed consumers such as airlines in the aviation sector have been forced to rethink their reserve strategies in an effort to mitigate their financial risk and prevent themselves from becoming susceptible to sometimes devastating fluctuations. That’s exactly what IAG is planning to do, with many other airlines set to follow suit.

As numerous carriers begin the process of recovering from the sharpest decrease in passenger demand in the last ten years. With inflation rates skyrocketing in recent months, largely due to abrupt supply and demand unbalances. Airlines around the world are taking a more prudent approach when it comes to managing their fuel stock level projections.

In the case of IAG, just before the pandemic began, the multinational airline holding company provisioned up to 78% of their fuel needs for the first quarter of 2020. A decision that played a leading role when the company announced a €1.7 billion loss for that same fiscal quarter. At the time, total expenditure on fuel, oil costs and emission charges accounted for 40% of the company’s total quarterly expenditure.

elConfindencial.com.

The report also notes that IAG’s Chief Financial Officer’s Steve Gunning is “comfortable” with the company’s recently adopted protective stance on new measures that were discussed last week. The CFO of IAG added that he “didn’t want to start building their (fuel) coverage too early as long as demand and capacity levels are relatively stable” for the company.

He admitted that the situation had changed in recent months as border restrictions have been eased, but still want to keep a rather cautious position adding that there is still a good chance of experiencing “ups and downs and unforeseen circumstances” in the short and medium-term.

Source: https://aeronewsx.com/iag-to-change-fuel-reserve-criteria/