Fuel Hedging by Airlines
- Thread starter UPNAWAY
- Start date
ChockJockey
Veteran
WorldTraveler
Corn Field
- Dec 5, 2003
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The real takeaway from the article is that earnings predictability is more important than necessarily having lower costs. Given that everyone excepts US hedges and pay about the same price for jet fuel, there isn't a real competitive advantage one way or another.
Hedging takes a lot of cash and Parker will have to make a decision whether to hedge after the merger. There is evidence that US has managed to win despite hedging but it only takes one big shock to put the new AA at a huge disadvantage to its competitors which is exactly what happened 10 years ago.
Given how unstable the Middle East is, hedging may continue to be a small price to pay.
Hedging takes a lot of cash and Parker will have to make a decision whether to hedge after the merger. There is evidence that US has managed to win despite hedging but it only takes one big shock to put the new AA at a huge disadvantage to its competitors which is exactly what happened 10 years ago.
Given how unstable the Middle East is, hedging may continue to be a small price to pay.
