Why are some airlines better protected against the recent jet fuel price surge caused by the Iran war, while others are heavily exposed?

The disparity stems from differences in fuel hedging strategies: airlines like Ryanair and Air France-KLM hedged effectively—Ryanair locked in 80% of its fuel needs at $67/barrel, and Air France-KLM estimates its hedges reduced its $2.4 billion fuel bill increase by $1.5 billion—whereas others, including United Airlines and AirAsia X, hedged poorly or not at all; hedging requires upfront costs (like insurance), which many carriers—especially in the US—avoid due to thin margins, leaving them vulnerable when supply shocks drive prices up over 60% to ~$160/barrel.

What is the main trade-off airlines face when deciding whether to hedge jet fuel costs, and why do US carriers tend to hedge less than European or Asian ones?

The main trade-off is paying ongoing costs for derivative contracts that typically expire worthless in stable markets—akin to insurance premiums—but pay off only during supply-driven price spikes; US carriers have historically been more reticent to hedge due to these recurring costs straining already thin margins, whereas many European and Asian airlines routinely use derivatives, with hedging coverage ranging from 30% to 80% or higher at year-end, and some—like IAG—emphasize that strong hedging enables stable pricing and capacity decisions amid volatility.