Fuel Prices & Hedging: The Complete Guide

For most airlines in Tailwinds, fuel is the single largest operating cost — which makes the fuel market the single largest thing you don't control. Except that you can, partially. This guide explains exactly how fuel pricing works under the hood, how hedge contracts are priced, and a simple routine that takes the drama out of spikes.

How the fuel market works

Tailwinds prices jet fuel from a base of $1.45 per litre, multiplied by a market index that starts at 1.00 and moves every week. The index wanders between roughly 0.55 (a cheap-oil glut) and 1.90 (a full-blown crisis spike), so the world price ranges from about $0.80 to about $2.76 per litre before the local station price (below) is applied.

The index is mean-reverting: wherever it is, it gets pulled gently back toward 1.00 each week, with random shocks layered on top. Two practical consequences fall out of that design:

• Extremes don't last. An index at 1.60 is being dragged downward even while the headlines feel apocalyptic. An index at 0.70 is quietly climbing back. The further from normal, the stronger the pull.
• But extremes do happen, and they arrive fast. The weekly shocks can stack in one direction for a while. An airline with thin margins and zero protection can go from comfortable to cash-negative inside a month.

Historical-era games work the same way, except that the index is pulled toward that year's real price level rather than 1.00 (cheap through the 1950s and 60s, then the 1970s oil shocks and so on, until 2026) and may fall as low as 0.35. Past 2026 it reverts to 1.00 like a classic game.

You can watch the current index and its recent history in Finance → Fuel — it's worth a glance every week, the way a real CFO glances at Brent crude.

What fuel actually costs your airline

Each aircraft type has a physical burn rate in litres per 100 km. Engine choice and wingtip devices adjust it for an individual aircraft, and efficiency programmes trim it across the fleet (both covered below). Your cost per kilometre is burn × price per litre. At the base index of 1.00, before station prices:

Multiply by route distance and weekly frequency and the sums get large quickly: a single 737-800 flying fourteen 1,100 km round trips a week burns roughly $179,000 of fuel at index 1.00 — and roughly $259,000 if the index spikes to 1.45. Same aircraft, same schedule, same passengers: $80,000 a week of difference you didn't choose. The aircraft guides list burn rates for every type in the game, and per-seat fuel efficiency is one of the biggest reasons newer types justify their higher leases.

How hedge contracts work

A hedge contract fixes the price of a set share of your fleet's total fuel bill for a fixed number of weeks. The price it locks is not today's index. It is where the index is expected to average over the contract's term, plus a premium for the certainty. Because the market mean-reverts, that expected average sits between today's index and 1.00, and the longer the term, the closer to 1.00 it gets. Buying a hedge costs no cash up front; the premium is built into the locked price. Four durations are available:

Coverage comes in steps of 25%, 50%, or 75% of your fuel bill, and contracts stack — you can layer several at once up to a total of 100% coverage. While a contract runs, its share of your fuel is charged at the locked price no matter what the market does; the unhedged remainder floats. Your effective price is simply the blend:

effective index = hedged share × locked price + unhedged share × market index

Worked example: the market index sits at 0.97. You buy a 13-week hedge at 50% coverage. The expected average over 13 weeks is about 0.98, so your locked price is 0.98 × 1.025 ≈ 1.005. Six weeks later a spike drives the market to 1.45 — but you pay 0.5 × 1.005 + 0.5 × 1.45 ≈ 1.23. On the 737-800 schedule above, that's about $40,000 a week you didn't spend, for a premium that cost you a few thousand a week while prices were calm. The Fuel tab previews every contract before you buy: the expected average, the locked price, what it covers in dollars, and the average index it needs to beat to pay off.

Closing a contract early

A live contract can be unwound before it expires. You are quoted what it is worth today — the gap between the locked price and where the market is expected to average over the weeks still to run — less a 1.5% haircut for exiting early. In the money, that pays you cash; underwater, it costs you, and the game will not let you unwind into a position you cannot afford. The practical use is taking the win: if you hedged at 0.99 and the market is at 1.45 with twenty weeks left, you can bank the contract's value now instead of waiting to see whether the spike holds. Expect less than the spike itself suggests: the quote assumes the market will fall back over those twenty weeks, so it values the rest of the contract at about 1.25, not 1.45. The Fuel tab also keeps a running scoreboard of every contract you have closed, so you can see whether your hedging has actually made money rather than guessing.

When to hedge — and when not to

Know what you're betting on

Because every contract is priced off the expected path, there is no free money in hedging at any particular index. A hedge pays off when fuel ends up averaging above the locked price over the term, which means the market came back down more slowly than the model expected, or spiked again. It loses a little when the market behaves as expected or better. The premium is what you pay to stop caring which happens.

Cheap fuel: lock in a good level

When the index is low, the locked price sits above today's index, because the market is expected to climb back toward 1.00. That is normal, not a bad deal: you are buying a price you'd be happy to pay for months, at a small markup. Think of it as insurance shopping on a sunny day.

During a spike: hedging is no longer a trap

At an index of 1.50 the market is expected to come back down, so a hedge locks below today's index: about 1.40 for 8 weeks, 1.29 for 26 weeks and 1.21 for 52 weeks. You are not locking the bad price. You are protecting yourself against the spike lasting longer than it should. That is worth doing if a long spike would really hurt you. Alongside it, the operational levers still work: nudge fares up (your competitors' costs spiked too) and trim marginal frequency.

Ladder your contracts

Rather than one all-or-nothing decision, keep a rolling ladder: for example, a 52-week or 26-week contract at 25% coverage as your long-term floor, plus a 13-week contract at 25–50% renewed as each one expires. Expirations then arrive staggered, no single renewal date can ambush you, and you always retain some floating share to benefit when fuel gets genuinely cheap.

Match coverage to your fragility

Hedging matters most when a spike could actually hurt you. A young airline running thin margins and big lease commitments should carry more coverage — 50–75% — because a bad quarter is existential. A mature airline with fat margins and a cash cushion can run 25% or even none, treating fuel swings as noise. And note which fleets care: a turboprop regional network at $2.57/km of fuel has far less at stake than a widebody long-haul operation at $10.40/km.

Burning less: the efficiency programmes

Hedging fixes the price you pay. It does nothing about the litres. Seven airline-wide efficiency programmes attack the other half: single-engine taxi, reduced cruise speed, weight reduction, optimised flight planning, ground power at hubs, statistical contingency fuel and an engine wash programme. Each takes between 0.5% and 2% off the burn of every aircraft you own. Run all of them and the fleet burns roughly 8% less fuel — permanently, in every market condition, which is more than most hedging will ever earn you.

None of them is free. Single-engine taxi costs a one-off sum and adds a little to maintenance. Reduced cruise speed is the biggest saving, paid for in punctuality: it takes 1.5 points off your on-time rate. Weight reduction is a one-off cost per aircraft. Optimised flight planning has no side effect but charges every week. Ground power only works if you have a designated hub. Statistical contingency fuel raises the odds of a breakdown by 10%. The engine wash programme charges per aircraft every week, but slightly lowers your maintenance bill. Read what each one gives up before switching it on — the Fuel tab states the cost and the trade-off next to the saving.

Individual aircraft can also be fitted with wingtip devices, from the fleet page or in bulk from a multi-select. A retrofit costs more than ordering the device with a new aircraft, and it permanently lowers that tail's burn and extends its range a little. There is no weekly cost.

Where you buy it: station prices and tankering

Fuel is not one price worldwide. Every airport has its own, set by how close it sits to refining capacity and how much competition there is to supply the ramp. A Gulf hub next to a refinery is cheap; a remote island station that barges its fuel in is dear. The spread between the cheapest and dearest stations in the world is wide enough to decide whether a thin route is worth flying at all.

Because that matters, the price is shown wherever you are choosing an airport: on the airport page, in the gate table (where the column sorts, so you can rank the world by cheapest fuel), in hub management, on the route planner and route detail, and in the airport pickers. Each route buys roughly half its fuel at each end, so a route between a cheap station and a dear one lands in the middle.

You can also tanker — carry the return leg's fuel out of the cheaper end rather than buying it at the dear one. Carrying that weight costs fuel of its own, so it only pays when the price gap is large and the sector is short enough that the tanks have room. Leave tankering on Auto and the game re-decides every week whether it is worth doing on that route, and tells you on the route page what it concluded and why.

Airport-by-airport pricing is on for new games. Saves started before it existed keep flat world fuel, and nothing in them changes.

Owning the supply: farms and a refinery

At an airport you already fly a decent number of departures from, you can buy into the fuel infrastructure. A consortium stake is the cheaper option and makes your own uplift at that station meaningfully cheaper. A full fuel farm costs considerably more, discounts your fuel there further once it beds in, and is exclusive — one airline owns the farm at any given airport. How many farms you may own scales with the size of your fleet.

Above all of that sits a refinery, and it is the one piece of the fuel department that is not a discount. It costs two and a half billion dollars, takes a year to commission, charges running costs every week from the day you order it, and is only sold to airlines with a very large fuel bill. What it does is move a fixed slice of your fuel off the jet fuel price and onto the price of crude plus a refining cost.

That is a different bet, not a smaller one. When the gap between crude and jet fuel is wide, the refinery makes that slice of your fuel considerably cheaper than the market. When the gap collapses, you pay more than the market on every one of those litres, and the running costs and the occasional outage are due regardless. Delta bought a real refinery in 2012 for precisely this reason and lost nine figures in the years the spread went against them. Note too that hedges cover only the share the refinery does not: the crude-to-jet spread is exactly the exposure you bought, and it is not something you can insure away.

The capacity you buy is fixed in litres at the moment of purchase and never grows, so the share of your fuel bill it covers falls as your airline expands.

Reading fuel in your route P&L

Fuel flows through every route's weekly profit line, so a market move shows up as your whole network getting better or worse at once — distinct from a single route souring, which points to competition or pricing instead. When your P&L dips across the board, check the fuel index before touching your fares; the fix for expensive fuel is rarely a fare cut. The route economics guide covers how to decompose a route's profit change into its causes, and the route case study shows a fuel spike hitting a live route — with and without the hedge.