Qantas, Virgin benefit from low oil prices

Record low oil prices will benefit Qantas and Virgin Australia as their fuel expenses plunge.

Record low oil prices will benefit both major airline groups in Australia and could see Qantas gain more than $240 million in additional benefits if the prices remain low for the rest of the financial year.

Qantas officials revealed last week that the airline’s fuel and currency hedging policies would see a worst-case scenario that it would make the same savings in this financial year compared with fiscal 2014 — almost $600m — as it did last year.

The airline’s fuel bill was just shy of $3.9 billion last financial year compared with $4.496bn in 2014.

But chief financial officer Tino La Spina said the airline would reap an additional $240m based on forward prices as of last Wednesday and would benefit from any further falls.

The prediction is based on jet fuel prices of $71 to $100 a barrel.

Qantas chief executive Alan Joyce said the airline was set to benefit because its treasury team had used “the right instruments at the right time’’.

“That gives us a significant improvement compared to a lot of our peers and there is a strategic advantage that we have,’’ he said.

Virgin Australia also expects a benefit from lower fuel prices.

The airline last financial year saw a benefit of about $60m compared with the previous year but this was partly offset by a $35m adverse effect from movements in the Australian dollar.

It said earlier this month its current hedging position and market rates meant it expected a net fuel pricing benefit of $162m in the current financial year but this would be reduced to $63m because of a $99m adverse impact of the weaker Australian dollar.

A Virgin spokeswoman said the airline had seen further benefits since its results but did not specify to what extent.