Hosted by Joe Weisenthal and Tracy Alloway
Written by a model from the transcript; not yet reviewed.
This episode of Odd Lots explores the intricacies of airline fuel hedging with David Kang, former group treasurer at Qatar Airways and an energy market expert. The conversation unpicks how airlines manage their single most volatile and second-biggest cost after labor, why many carriers proxy trade Brent or heating oil rather than thin jet fuel markets, and how corporate hedging strategies are often misconstrued as mere insurance. Kang explains his creative hedging approach at Qatar Airways, which involved identifying that the airline was structurally long on oil through ticket surcharges and revenue management, enabling them to execute a profitable strangle strategy without taking naked directional risks.
Joe and Tracy open the episode, introduce the theme of airline fuel hedging and set the stage for the discussion.
Hosts outline the basics of fuel hedging, its importance, and the challenges airlines face in managing volatile fuel costs.
Kang discusses how fuel is the second largest cost for airlines, its volatility, and how airlines balance hedging with fare and surcharge adjustments.
The hosts welcome David Kang, former group treasurer at Qatar Airways, who will share insider insights on airline hedging strategies.
Kang explains why airlines use Brent crude as a proxy for jet fuel hedging due to the thinness of the jet fuel market and the correlation challenges.
Kang details the creation of a revenue‑hedging program that links ticket surcharges to fuel price movements, allowing airlines to be long on fuel while hedging consumption.
Kang recounts the implementation of the hedge, the financial outcomes, and how it enabled Qatar Airways to reduce fares and gain a competitive edge.
Kang discusses logistical challenges of sourcing jet fuel in the Middle East, including tankering from Dubai and dealing with national petroleum companies.
The conversation turns to the present state of airline fuel costs, ticket revenue, and how airlines are navigating the surge in oil prices as of September 2026.
Review of significant financial losses airlines suffered during the 2020 pandemic due to hedging missteps.
Exploration of a novel strategy that weaponizes ticket pricing to offset fuel costs, and its limited adoption.
Examination of why airlines hesitate to adopt new hedging structures, citing auditors, sovereign funds, and industry norms.
Proxy Hedging with Brent Crudeinsight
The guest explains why airlines must use Brent crude as a liquid proxy for hedging rather than trading the extremely thin physical jet fuel market directly.
Why US Carriers Dropped Hedgingdata
Many US carriers pulled back from active fuel hedging after getting severely burned during market downturns in 2014 and 2015.
Qatar Airways Fuel Exposuredata
Jet fuel accounted for 44 percent of Qatar Airways' total operating expenses, which forced the treasury team to adopt unusually creative risk management tactics.
The guest recounts walking into a massive hospital pass when he joined Qatar Airways and found the hedge book down $360 million.
Hedge Profits Fund Fare Cutsstrategy
By generating 130 million dollars in hedge profits, the treasury gave the revenue management team the financial flexibility to cut fares by 20 percent and lead the market.
“Fuel is, I think, the second biggest cost for airlines after labor, which makes sense, but it's also the most volatile cost.”
“So we use Brent as a proxy. And in the surcharge, right, we now knew there was a correlation there. So that we can hedge.”
“So the word trading is not very well accepted at corporates. They don't believe in it and auditors don't like it either.”
“At the end of the day, it's a pass-through to the customer.”
“I basically weaponized the revenue.”
“The revenue could go up during times of higher oil prices.”
“You have to have a directional view.”
“The next opportunity? But sometimes what matters most is being ready for what you never saw coming.”
Fuel is a huge expense for airlines, and even on a good day, jet fuel prices are pretty volatile. Throw in two major wars now effecting energy infrastructure, and fuel prices across the board are higher and higher. Airlines have long tried to manage this expense through fuel hedging, using things like swaps and options to hedge against future increases in the price of jet fuel. David Kang, former group treasurer at Qatar Airways, has firsthand experience hedging for a large carrier, and he tells us exactly how it all works. He also explains why airlines use heating oil as a proxy for jet fuel, how much they can make by raising ticket prices and fuel surcharges, and why airlines and oil refineries aren't so different. Read more: War Exposes the Cost of the West’s Retreat From Oil Refining https://www.bloomberg.com/news/articles/2026-09-30/war-exposes-the-cost-of-the-west-s-retreat-from-oil-refining?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article JPMorgan and Goldman See Mideast Oil Flows Near Pre-War Levels https://www.bloomberg.com/news/articles/2026-09-30/mideast-crude-oil-flows-hit-98-of-pre-war-level-jpmorgan-says?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast Subscribe to the Odd Lots Newsletter http://bloomberg.com/subscriptions/oddlots Join the conversation: discord.gg/oddlots https://discord.gg/oddlots See omnystudio.com/listener https://omnystudio.com/listener for privacy information.
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