The country’s second-largest carrier by market share, Jet Airways, will not hedge aviation turbine fuel (ATF) despite the fuel’s prices falling over 33% in the last six months, the airline’s top officials said on Monday, leading analysts to debate whether speculating prices is a good or bad strategy.

Speaking to analysts, the airline’s chief executive Cramer Ball said that Jet has benefited by not hedging fuel prices as several others — including many international carriers — had hedged at prices higher than the prevailing rates.

“We are not considering hedging fuel price,” Raj Sivakumar, Jet Airways’ senior vice-president, alliances and planning, told analysts.

Crude prices have fallen over 60% from $115 a barrel in June to about $45 in January, despite rallying back as much as 30% to $58 a barrel on Monday.

Jet fuel prices, as a result, have fallen 39% since January 1, 2014. On February 2, 2015, jet fuel price in New Delhi stood at Rs 46,513.03 per kilolitre. The fall in price recently led Air India to hedge its fuel prices. The government-run airline has hedged a fifth of its fuel requirements, 2 million barrels of ATF annually, at $75 per barrel.

The national carrier expects to save Rs 2,000 crore during FY16 as a result of the hedging move.

Other Indian airlines, like IndiGo, SpiceJet, AirAsia India and GoAir, do not hedge their fuel prices. FE couldn’t ascertain whether these were planning to hedge prices in near future.

However, several international carriers, like Singapore Airlines, have reportedly hedged teir fuel prices at an average of $116 a barrel, losing out significantly due to the fall in ATF prices in the recent past.

However, according to banks and rating agencies, crude is expected to rise to $70-$80 a barrel in 2016, up from the current levels of $58. ATF prices, similarly, are expected to rise during this period.

Goldman Sachs expects brent at the $70 level in 2016.

A January report by Nomura stated that about half the world’s oil-producing projects aren’t economical if prices remain below $50 a barrel and falling production levels will likely help restore the balance in oil markets by 2016.

Jet Airways’ decision to not hedge its fuel prices has led to questions as to whether the airline has missed the bus on saving money at a time when ATF costs stand at their lowest levels in several years.

Jet Airways reported a profit of Rs63 crore for the December quarter on the back of a Rs 70-crore receivable it got from lessors for maintenance of its ATR and Boeing 777 aircraft fleet.

“Unhedged profits that are earned are opportunistic in nature and are not sustainable. If the unhedged position moves the other way round, as it happens frequently, profit made in one period gets wiped out in another reporting period,” said Deep Narayan Mukherjee, senior director at India ratings & research, a Fitch group company, who tracks the aviation sector closely.

Considering that Jet Airways has not hedged jet fuel prices, when they were at an all-time low in 2014-15, it is highly likely that the airline expects prices to fall further in 2015-16, said a senior analysts tracking the aviation sector for a foreign consultancy on the condition of anonymity.

“Jet Airways reported a slim profit during the December quarter when jet fuel prices stood at under Rs 60,000 per kilolitre. So, with the fuel price, which constitutes a chunk of an airline’s costs, expected to rise in 2016, it will be interesting to see if Jet Airways benefits by not hedging its fuel prices at the current level,” the person said.

However, there are some who say that the decision to not hedge fuel costs is a good strategy.

“By not hedging their fuel costs, Jet Airways is giving out a clear message that they don’t want to speculate on fuel pricing. Though several banks and consultancies have pegged fuel prices to increase in 2016, this may not happen. So, the strategy employed by Jet Airways seems good,” said Edelweiss Capital’s Niraj Mansingka.

* Air India has hedged a fifth of its fuel needs at $75 per barrel. It expects to save R2,000 crore in FY16 with the move
* Several international carriers have hedged fuel prices at an average of $116 a barrel, losing out significantly due to the recent fall in ATF prices
* Jet Airways’ decision to not hedge its fuel prices has led to questions as to whether the airline has missed the bus on saving money at a time when ATF prices stand at their lowest in several years