With aircraft operators experiencing extreme volatility in the fuel market, Avfuel (Booth D67) is promoting its price risk management program at EBACE as a hedge to provide some certainty.
The program was introduced in 2020 when the industry was experiencing unprecedented lows in fuel pricing. Avfuel realized those prices were unnaturally depressed due to the Covid-induced decline in travel. During this time, some petroleum refiners altered their output to produce higher-demand products such as diesel fuel. Since then, fuel costs have risen steadily, a function of both the resurgence of commercial and private aviation as well as the current geopolitical concerns. Recent predictions have called for crude oil pricing to exceed $125 a barrel over the coming months.
Using the company’s fixed forward pricing agreement, customers can contract for a fixed monthly quantity of fuel at a set price over a specified period, allowing them to ensure margins and provide accuracy in budgeting, with price stability for 12 to 36 months.
“It is expected to take a number of years for significant capacity to come online, relieving the strain on oil prices,” said Muneeb Ahmed, Avfuel’s director of trading and logistics, adding that while prices are high now, he anticipates further increases. “With a one-year fixed forward price agreement, Avfuel can actually offer its customers a fixed price that is below current market values, saving customers money while providing stability.”
The company also offers capped pricing agreements with no minimum volume commitments for one or two years. Under this model, customers will never pay more than their maximum agreed fuel price, even when the market surpasses it, and should the price dip below that, they will pay the lower amount.
Both programs can be extended to include carbon offsetting and sustainable aviation fuel to help operators satisfy their emissions reduction goals.