Ya reckon that's why I didn't include jet fuel in the list of products (although I've seen one airline with small quantities of jet fuel hedges)?
Buying stock produces winners and losers - what's the point?
Are you saying there's no winners and losers when airlines hedge fuel? I think the last half of '08 and the first half of '09 for US disprove that.
Do airlines hedge using a different mechanism or markets than others?
The airlines follow the same accounting rules as everyone else. They use the same markets, the same strategy's, etc as other's. The only thing that sets airlines apart is the reason for hedging - airline want (hope) to reduce the effective price they pay for jet fuel, which isn't an interest to others hedging since the others don't consume vast quantities of jet fuel.
Jim
Jim,
you asked
Would the airlines that hedge be some of those who help drive up the cost of oil? Taken as an industry, the airlines hedge billions of gallons of oil/heating oil/diesel/etc.
Jim
and the answer is NO. Hedging by some airlines does not drive up the cost of jet fuel.
Once again, there is a counterparty in every hedge transaction - so to think that one party could drive up the cost of the product and do it better than the power of the other party is just not accurate.
Do you know that many of the counterparties in hedge transactions are oil companies themselves? You certainly can't believe that airlines have more power over the market than oil companies.
And there is a not much of a market in hedging jet fuel because precisely the size of the market is quite small... which is why the majority of products that airlines hedge are related products.
.
I am sure you are getting at the hurt that US - and perhaps its employees - and perhaps you - might incur because US doesn't have hedges while other carriers do.
.
Not hedging at all is tantamount to not carrying any casualty insurance - except that there are rules that require airlines to carry insurance.
.
there is a far greater certainty that there will be runups in jet fuel prices than there are that there will be an accident and yet no one believes that allowing airlines to not have insurance is a good thing.
.
I do not like seeing anyone be harmed... but there are some basic economic safety nets which US chose not to use and which other carriers have... the consequences will be apparent by the 2nd quarter for sure... and there will be indications of what kind of damage fuel will do to all of the industry in a couple weeks.
.
I still stand by my prediction that if fuel prices remain high through the remainder of the year, US' future might look compromised compared to other airlines.
.
on this day when Washington wrangles over the budget, the best thing you can hope for is that one is approved that includes deep cuts in spending... that will be the best thing to bring the cost of oil back down. If it's business as usual, then Katie bar the door.