WITH fuel prices, airlines can hedge but they cannot hide.

All major carriers try to offset possible fuel increases by hedging - buying some of their fuel on the futures markets. By agreeing a contract for delivery in the future at current prices, companies are protected from sudden rises.

But if prices continue to rise, airlines must bear the extra cost, or pass some of the increase on to passengers.

Flight International magazine's operations and safety editor David Learmount said: "Fuel is a fixed cost. Airlines can hardly say they are going to do without fuel because the price has gone too high. There is absolutely nothing they can do if the price goes up."

In BA's case, the airline has hedged 72 per cent of its fuel up to March next year, and its fuel costs are expected to be £225m higher than last year.

BA's fuel costs for 2004/2005 are expected to be £1.14bn, which is £75m more than was estimated in May last year. Fuel accounts for 14.5 per cent of BA's total costs and the fuel surcharges are expected to reduce the airline's costs by £70m.

Mr Learmount said: "Depending on how oil prices are, fuel can account for as little as ten per cent of an airline's costs and as much as 25 per cent.

"This is not the worst fuel crisis we have had. The worst was in the early 1970s and I do not think this one is too worrying.

"What is causing the difficulties at the moment is the instability in the Middle East and concerns about the American economy.

"Demand for fuel is likely to remain high, which means prices will remain high. China and India, particularly China, are increasing their oil usage considerably. There is going to be big demand from these hugely-growing economies.

"Even if America cuts back on the amount of fuel it uses - and that is unlikely - then China will make up the difference."