El Al follow-up: the fuel hedge bought time, but summer remains exposed
El Al monetized fuel hedges and secured near-term relief, but remaining hedge cover fell to about 14%, while the company itself frames April-September jet-fuel expense as roughly USD 200 million higher year over year even after hedging.
The main article on El Al framed 2026 around returning competition, weaker RASK, and higher CASK. Inside that test, fuel is no longer just another cost line. It is a separate summer margin test. El Al used the sharp March jump in jet-fuel prices to monetize a large part of its hedges, receive USD 17.3 million in cash and another USD 3.0 million in early April, and spread the hedge income across the second, third, and fourth quarters. That was a rational move in a period when jet-fuel prices jumped 100%-150% from the start of the year, and it did buy the company time. But time is not full protection: after those monetizations, remaining hedge cover was only about 14% of planned consumption through February 2027, below the minimum levels in the company's policy with risk-committee approval. The second- and third-quarter test is therefore not whether hedging helped. It is whether higher RASK, more ASK, and cost cuts can absorb a summer in which jet-fuel expense is expected to be about USD 200 million higher year over year, even after hedging.
The hedge became cash before summer started
The unusual move sits in the derivatives note. In March 2026, El Al sold part of its jet-fuel hedges for June-December 2026 and received USD 17.3 million in cash. The income is not recognized all at once as a financial gain that flatters the quarter. It will reduce fuel expense according to the original maturity dates: about USD 3.5 million in the second quarter, USD 9.5 million in the third quarter, and USD 4.3 million in the fourth quarter.
In early April, an additional part of the same hedge layer was monetized for about USD 3.0 million. That benefit will also be recognized gradually: about USD 0.9 million in the second quarter, USD 1.4 million in the third quarter, and USD 0.7 million in the fourth quarter. In addition, USD 5.4 million of hedge income tied to March fuel purchases was recorded as a reduction of inventory cost and will reduce fuel expense in the second quarter as that inventory is consumed.
The economic meaning is straightforward: hedging already helped the first quarter, where hedge transactions reduced jet-fuel expense by about USD 8.7 million, and it will add accounting and cash-flow relief later in the year. But this is timed relief, not a broad protection layer. The company advanced and locked in hedge gains, while the ongoing exposure to fuel prices remains much more open.
A 14% cover changes the risk profile
El Al's regular fuel-hedging policy sets minimum hedge volumes averaging about 35% of 12-month exposure, with a higher level for the next month, normally 60%-80% of expected consumption, declining gradually further out. After the March and April monetizations, the remaining hedge cover as of March 31, 2026 covered only about 14% of planned consumption through February 2027, with most remaining positions for April and May 2026.
That is not a technical footnote. The company moved from a setup in which hedging was supposed to smooth fuel cost through the year to a setup in which part of the protection has already been converted into cash and defined future cost reductions, while the summer itself is more exposed to the market price. The deviation from policy was not accidental: the board's risk-management committee approved it, and the company intends to return to policy levels gradually, subject to geopolitical developments and oil and jet-fuel prices. Management did not abandon hedging policy, but it chose to lock in hedge value when prices spiked and temporarily remain with less cover.
The positive side is that the company monetized the hedges when their value had risen sharply, rather than waiting until summer to receive the benefit. The weak side is that this decision makes the second and third quarters more sensitive to what happens after the monetization point. If jet-fuel prices stay high or rise again, the sold hedge layer will no longer participate to the same extent in the next move.
Summer 2026 has to absorb about USD 200 million more
The investor presentation compresses the summer test into one number: based on the fuel curve at the end of April 2026, jet-fuel prices for April-September are expected to be about 80% higher than last year. Expected fuel expense for the period, including hedging, is shown at about USD 496 million in the central scenario of USD 96 per barrel future Brent and USD 60 per barrel future refining margin, compared with USD 292 million on 2025 price terms. The rounded gap is about USD 200 million.
| Test point | Disclosed figure | Why it matters |
|---|---|---|
| March hedge monetization | USD 17.3 million | Immediate cash and lower fuel expense in Q2-Q4 |
| Additional April monetization | USD 3.0 million | Smaller added relief over the same recognition period |
| Inventory-cost reduction | USD 5.4 million | Additional relief that will show up in Q2 |
| Remaining hedge cover | About 14% through February 2027 | Most of the summer is more exposed to market prices |
| April-September jet-fuel expense | About USD 496 million vs. USD 292 million | About USD 200 million higher even after hedging |
This creates a margin test that is simpler than the net-profit line. The company expects to partly offset the higher fuel bill through higher revenue, more capacity, price adjustments, and cost cuts. The same presentation points to 1%-4% RASK growth and 6%-10% ASK growth in the second and third quarters versus 2025. If that happens, part of the fuel increase can pass into ticket prices and higher utilization. If foreign airlines return faster, or demand does not hold, fuel cost will hit operating profit faster than pricing can adjust.
The board-report sensitivity table sharpens the point. A 25% change in the average market price for the next 12 months, after existing hedges, changes jet-fuel expense by about USD 199 million up or USD 200 million down. That is almost the same size as the expected April-September increase. Even after the successful hedge monetization, remaining fuel exposure is large enough to change the reading of full-year profitability.
Conclusion
The current read is cautiously positive: El Al did not sit still during the jet-fuel spike. It monetized real hedge value and shifted part of that value into lower summer fuel expense. But the move bought time rather than solving the cost problem. The next proof point is the second and third quarters: if RASK and ASK rise within the range management expects, and actual fuel expense stays close to the end-April curve, the hedge monetization will look like a good decision that locked in temporary value and eased an emergency year. If fuel prices keep rising, or competition returns quickly enough to limit price increases, the same monetization will look more like early relief that left summer too exposed.
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