Severe supply disruptions in global oil markets have forced international airlines to rapidly adjust their risk management strategies. Jet fuel prices have experienced unprecedented volatility, surging from 75toover 75 to over \,75toover120 per barrel within six months. For a mid-sized carrier like AeroHorizon, this volatility threatens to increase operating costs by more than $45 million annually by 2025. While some airlines unhedged their fuel requirements during the low-price era, analysts warn that unhedged carriers could see profit margins contract by 8% to 12%.
A senior treasury manager at AeroHorizon noted that high passenger demand will not offset these fuel spikes if hedging is not utilised. He remarked, 'The period of stable fuel costs is gone [...] Leveraging forward and futures contracts is now our primary shield.' The airline has secured futures contracts to lock in 65% of its fuel requirements at a fixed rate of $85 per barrel.
Using the data provided in Extract C, explain one role of financial markets.
