International oil prices continue to rise, prompting multiple domestic airlines to increase fuel surcharges on international routes.

Can AI and airline fuel hedging strategies help alleviate oil price volatility pressure?

Affected by Middle Eastern geopolitical conflicts, international oil prices and jet fuel costs have surged significantly, prompting many domestic airlines to raise fuel surcharges on international routes.

According to Xinhua News Agency, international oil prices rose on March 17. By the close of trading, the NYMEX April light crude oil futures increased by $2.71 to $96.21 per barrel, a 2.90% rise; the London Brent May futures increased by $3.21 to $103.42 per barrel, a 3.20% rise.

As a major airline expense, fluctuations in jet fuel prices directly impact operational profitability. Imposing fuel surcharges has become an important way for airlines to mitigate cost pressures.

A review by reporters shows that Spring Airlines, starting from midnight on March 12 (based on booking date), adjusted the fuel surcharge standards for some international routes, mainly involving Japan, South Korea, Thailand, Cambodia, Vietnam, Singapore, Malaysia, and other countries. Several routes saw fuel surcharges increase by up to 180 yuan.

Source: Spring Airlines official website

Juneyao Airlines announced that, due to international fuel price adjustments, starting from March 20 (based on ticket issue date), it will adjust the fuel surcharge rates for routes between China and Southeast Asian countries. The surcharge for routes between China and Vietnam will be adjusted to 400 yuan per segment. Routes between China and Indonesia will be adjusted to 600 yuan per segment. Routes between China and Thailand, Singapore, Malaysia, the Philippines, Laos, Myanmar, Cambodia, and other Southeast Asian countries will be adjusted to 550 yuan per segment. The surcharge for children tickets will be the same as for adults; specific amounts are subject to system display.

Source: Juneyao Airlines official website

Additionally, due to international fuel price adjustments, Juneyao Airlines has also adjusted the fuel surcharge for routes between China and Finland starting from March 16 (based on ticket issue date). For flights originating from Europe, the Middle East, and Africa, the surcharge per segment is adjusted to 150 euros; for flights originating outside Europe, the Middle East, and Africa, it is adjusted to 1,431 yuan.

Source: Juneyao Airlines official website

Xiamen Airlines announced that starting from March 16 (ticket issue date), it will adjust the fuel surcharge for flights from Indonesia to mainland China. The rate will increase from 640,000 IDR (Indonesian Rupiah) to 736,000 IDR. Infants not occupying a seat are exempt from fuel surcharges.

Source: Xiamen Airlines official website

In response to soaring fuel costs, several Hong Kong-based airlines, including Cathay Pacific, Hong Kong Express, Hong Kong Airlines, and Greater Bay Airlines, have announced plans to adjust passenger fuel surcharges.

For example, Cathay Pacific announced on March 12 that it would increase fuel surcharges on certain international routes. These include flights between Hong Kong and the Southwest Pacific, North America, Europe, the Middle East, and Africa; flights between Hong Kong and Japan or the US; flights between the US and Brazil, Chile, or Peru; flights between Hong Kong and Australia, New Zealand, or Chile; flights between Brazil and the UK, France, or New York; flights between Hong Kong and Africa or Brazil; flights between Spain and Brazil, Chile, or Peru; and flights between Qatar and Brazil, Croatia, Kenya, Russia, Serbia, Seychelles, South Africa, or Ukraine.

Data shows that many of these international routes have seen their fuel surcharges double, with other Hong Kong airlines experiencing increases of 50% to 100%. However, for flights between mainland China and Hong Kong operated by Cathay Pacific, Hong Kong Express, and Greater Bay Airlines, the original surcharge rates remain unchanged, with only Hong Kong Airlines making an adjustment.

Cathay Pacific Group CEO Augustus Tang stated at the March 11 FY2025 earnings presentation that the Middle East situation mainly impacts fuel costs, which have roughly doubled from January and February averages since March. The company plans to implement two measures: first, maintaining its existing fuel hedging mechanism with a current hedge ratio of 30%, unaffected by the geopolitical situation; second, quickly announcing plans to raise fuel surcharges to ensure flight operation efficiency.

According to reporters, fuel costs are one of the airline’s most significant expenses. Large fluctuations in international oil prices can significantly impact jet fuel prices and airline fuel surcharge revenues, thereby affecting operational performance. For example, China National Aviation Corporation (Air China) reported that, assuming other variables remain constant, a 5% increase or decrease in average jet fuel prices in the first half of 2025 would result in approximately 1.216 billion yuan increase or decrease in fuel costs for the group.

To mitigate the risk of fuel price volatility and ensure operational stability, airlines can set domestic route passenger fuel surcharge standards within a regulated range. Previously, airline personnel told The Paper that domestic route fuel surcharges are linked to jet fuel prices, and adjustments are made accordingly based on fuel price fluctuations.

The next adjustment window for domestic airline fuel surcharges is scheduled for April 5. The last adjustment was on January 5, 2023, when routes of 800 km or less charged 10 yuan per adult passenger, and routes over 800 km charged 20 yuan, both decreased by 10 and 20 yuan respectively.

It is also important to note that rising oil prices have extended their impact into the shipping industry.

According to a recent research report from Galaxy Futures, the Middle East geopolitical conflict continues, with Iran and the US remaining highly tense and engaged in military confrontation. Ongoing disruptions near the Strait of Hormuz have caused a sharp rise in crude oil prices and related industry chain product prices.

The report highlights that marine fuel oil, closely related to shipping, has seen prices for low-sulfur bunker fuel rise above $1,000 per ton last week. The high oil prices have put significant pressure on shipowners. For ongoing voyages, rising fuel costs directly erode voyage profits. For forward contracts with fixed fuel prices, potential supply chain disruptions due to force majeure could trigger performance risks. If the war risks persist, future fuel price increases may be passed on through higher charter rates, pushing up spot shipping rates.