Icelandair fuel hedges delivered an ISK 3.5 billion benefit

Icelandair’s fuel hedging reduced the impact of rising fuel prices by ISK 3.5 billion in the third quarter, mbl.is reported. The airline’s fuel costs rose by just 11% even though global fuel prices more than doubled from a year earlier.

Icelandair reported record revenue and a profit of nearly ISK 12 billion for the quarter. Without the fuel hedges, its profit would have been almost a quarter lower, according to the report.

Jet fuel currently costs between 1,500 and 1,600 US dollars per tonne. That is about 2.3 times the average price in 2025 and roughly twice the average for the period from 2008 to 2025. Icelandair uses hedges to limit price swings, paying a premium for the option to buy fuel at a fixed price in the future.

The company had hedged 46% of the fuel it bought in the third quarter, at prices below 700 dollars per tonne. Its hedges cover 45% of expected fuel use in the final quarter of this year at 722 dollars per tonne. For the first quarter of next year, coverage stands at 24% at 900 dollars per tonne, and for the second quarter at 18% at 731 dollars per tonne.

Higher fuel prices reduced Icelandair’s operating profit by 12.9 million dollars compared with the same quarter last year, equivalent to about ISK 1.6 billion. Higher revenue, which increased by 61.6 million dollars, more than offset that impact.

Without the hedges, rising fuel prices would have reduced operating profit by 41.3 million dollars, or about ISK 5.1 billion. The direct increase in fuel costs was 54.7 million dollars, while factors including fleet changes and other input costs reduced costs by 13.4 million dollars. The hedges cut the resulting impact from 41.3 million dollars to 12.9 million dollars, benefiting the company by 28.4 million dollars, or about ISK 3.5 billion. That was nearly a quarter of its operating profit for the quarter.