Originally Posted by
autdi
Makes for a plausible excuse to the public, but isn't fuel already hedged? There is likely zero real impact for 6-9 months.
Originally Posted by
hhdl
Other than Southwest, US airlines haven't engaged in fuel hedging for at least a decade. As with basically any kind of insurance, they've basically found it loses money overall assuming that the price spikes aren't catastrophic (arguably WN lighting money on fire for fuel hedges for a decade damaged their finances enough that it made them easy pickings for Elliott). Even the airlines that hedge (e.g. the European airlines) generally only hedge at most a low-double-digit percentage of their needs.
DL does effectively hedge out fluctuations in crack spreads by owning an oil refinery (near PHL, IIRC). UA also indirectly hedges out oil by having an IAH hub.
Airlines were heavily hedged during the great recession, only for oil prices to crash while airlines were locked into long dated contracts. If I remember correctly, and ironic if my memory does serve correct, WN was the only airline that was not hedged and that helped them wind up with a huge competitive advantage for many years. As a result, along with the realization that over the long term airlines were losing more money than they gained from hedging, and airlines being in a stronger position to be able to absorb the cost of higher fuel for longer, most airlines vowed never hedge again.