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Last Look - July '21 WTI expires at $73.06; Gas gains 6.7c to climb to $3.25
Fixed-Base Operator (FBO) Receives 48% Returns on Fuel Hedges Within Two Months
MARKETS: REFINED PRODUCTS | COMMODITY: JET FUEL | CLIENT: GALAXY FBO

Situation

With the sudden impact spurred by the COVID-19 pandemic, jet fuel prices declined over 46% between January and March 2020. In response to the volatility, Galaxy FBO (Galaxy) wanted to lock in the historically low jet fuel prices for the next 12-18 months through hedges, enabling them to better manage their commercial risk during uncertain times.

At this time, Galaxy purchased Jet-A Fuel with additive, Terminal Phillips TX Pasadena P66, priced-off the Jet-54 Gulf Coast. Their estimated fuel volume through December 2021 was over 4,500,000 gal.

Galaxy did not have a hedge program in place and struggled to manage the complex data and processes needed to run a program in-house. They needed to arrive at a clear perspective of the market and gain a true understanding of the drivers impacting the jet fuel pricing index. They also had little familiarity on counterparty relationships and needed an experienced hedging partner to support this process and provide clarity on the current market trends, risks, and opportunities.

Outcome

AEGIS identified and introduced counterparties to put hedge protection in place for Galaxy and supported the execution process.

AEGIS planned and managed their jet fuel protection strategy for 75% of their forecasted Jet A fuel volume through December 2021.

Galaxy bought a ceiling protection of 89.5¢/gal in June and received a 24% return on their premium within the first 30 days.

In the following 30 days, Galaxy doubled their return to 48%, and continues to see returns into August.

Platts USGC Jet Fuel

 

“We knew there was an opportunity for us to capitalize when the market dropped. AEGIS provided professional guidance in an unprecedented time that allowed us to make a fast and calculated hedge decision on our jet fuel price and volume. Within a month, we saw returns. I could not have asked for more. Working with AEGIS was too easy.”


Jonathan Hitchcock   |   CFO Galaxy FBO

 

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