Airline fuel hedging is losing appeal for some carriers as jet fuel prices remain roughly twice their pre-Iran war levels, raising the prospect of higher fares as existing protection expires.

Key Takeaways

  • Finnair and Ryanair have stopped adding fuel hedges, although both retain protection for future fuel needs.
  • Ryanair CEO Michael O’Leary expects fares to rise by 15% to 20%; Norwegian has reversed some increases after customers resisted.
  • U.S. airline fares rose 22.4% in the 12 months through September 2026.

Why airline fuel hedging is becoming harder

Hedging lets airlines lock in future fuel prices and makes costs more predictable. But starting a hedge at elevated prices can leave a carrier paying more if fuel prices subsequently fall. Some programs also require premiums, collateral or other costs.

Finnair has stopped adding new hedges as fuel costs have surged. Its average hedging ratio for 2027 is 34%. Finance chief Pia Aaltonen-Forsell said adding hedges at current prices would be more expensive.

Ryanair said in September that it had stopped hedging, although it has hedged about 80% of its jet fuel needs for the year ending March 2027. CEO Michael O’Leary said European airlines, including Ryanair, were not well hedged through summer 2027.

Fare increases face a demand test

O’Leary said he expects air fares to rise by 15% to 20% as airlines face higher fuel costs. Finnair said higher fuel costs have already fed through to ticket prices.

Carriers may not be able to pass on every increase. Norwegian Air Shuttle said on October 28, 2026, that it had reversed some fare increases made after the Iran war began because customers were unwilling to pay them.

The U.S. Bureau of Labor Statistics’ September consumer price release showed airline fares rose 22.4% over the preceding 12 months. Fares in the European Union rose 5.8% year over year in September.

Carriers take different approaches

AirAsia CEO Tony Fernandes said the Malaysian airline was budgeting for 12 months of high oil prices and was not modelling a scenario in which prices fall. Airlines facing exposure can cut costs or raise fares, he said.

U.S. carriers have largely avoided returning to fuel hedging. American, United, Delta, JetBlue and Allegiant have no material fuel hedges, while Frontier has no active hedging position. Southwest ended its long-running program in 2025.

Higher fuel expenses have also affected airline outlooks: Delta, United and Southwest cut profit targets or disappointed investors with their earnings outlooks in October 2026. Ryanair and Lufthansa have cut capacity on some routes to limit the impact of unhedged fuel costs.

Next milestone

The next U.S. consumer price report, including airline fare data for October, is scheduled for November 10, 2026.

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