Alitalia expects to benefit from cheaper oil later this year

Etihad president and chief executive James Hogan, left, and Alitalia chairman Luca di Montezemolo in Rome during the announcement of their airlines’ partnership. Tony Gentile / Reuters

ROME // Alitalia, the Italian airline affiliated with Etihad Airways, said it would begin to benefit from lower oil prices in the third quarter of this year.

Oil prices have been falling since last June. The reason for Alitalia's delayed benefit is that it has used future contracts for oil, a practice known as hedging, to cover its oil purchases for the first half of the year.

Fuel hedging has been a common practice among airlines in recent years in light of rising energy prices.

Typically, airlines sign contracts to buy fuel at a specific price range to insulate themselves from price volatility.

Oil constitutes about 28 per cent of Alitalia's costs, said Silvano Cassano, Alitalia's new chief executive. "We are fully hedged for the first half of 2015. All airlines do this, Etihad as well, it is a common practice to balance the risk and opportunity," Mr Cassano said yesterday at a news conference in Rome.

“We will look into opportunities going into the third quarter of 2015. We are collecting all the data. “The price of oil is very volatile and as everybody else, we are trying to understand the best approach.”

Mr Cassano did not specify the price range in which Alitalia had hedged.

The price of Brent crude, as of yesterday’s trading, had fallen almost 60 per cent from its June peak and, at around US$48.50, was near the lowest levels in five years.

The market has been pinched by lagging demand caused by slow growth in the global economy, on the one hand, and higher supply arising from the US shale boom on the other.

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