KUALA LUMPUR: Malaysia Aviation Group Bhd (MAG) is relying on its fuel-hedging strategy to cushion the blow of severe jet fuel price spikes, as escalating conflict in West Asia threatens the national carrier’s financial performance for the financial year ending Dec 31, 2026 (FY26).
The group maintains hedging coverage between 36% and 50% on a 12-month running basis, with strategies reviewed quarterly, said MAG president and group chief executive officer Captain Nasaruddin A Bakar.
“It also depends on the fuel market. Moving forward in 2027, we will continue hedging, and our current strategy is every 12 months. The hedging has helped us a lot in terms of our financial performance too,” he said at a press conference to announce that Malaysia Airlines will resume flights to Busan, South Korea in December this year.
The move is part of plans to expand its network and push to return to profitability, and also includes expansion by its regional carrier Firefly, which recently added China’s Kunming to its destination network.
He noted that the risk management approach provided vital support during past market disruptions and remains central to the group’s planning heading into 2027.
However, even with these safeguards in place, Nasaruddin said the recent rapid surge in fuel costs continues to place significant pressure on MAG’s bottom line.
Nasaruddin highlighted the extreme market volatility, noting that jet fuel prices recently reached a peak of US$230 per barrel before settling at around US$160 per barrel.
He underscored the price surge represents a massive headwind for both MAG and the broader global aviation industry.
Asked if it was still capturing demand spillover from the Gulf carriers in the midst of the conflict in West Asia, Nasaruddin said: “There was demand after the conflict started in late February, particularly our Australian routes with a load factor hovering in the high 90s during the first month of the unrest.
“But once it had stabilised, the load factor plateaued, and we are looking at about 84% average across our network. As the fourth quarter will be the big period of travelling, we are expecting the load factor to increase a little, but because of the conflict, we have not seen a spike in demand.”
