Originally Posted by YEG Guy
To buy futures contracts and start a hedging operation, airlines require a lot financial leverage. The only North American airlines with this type of leverage are ACE Aviation, Southwest Airlines, Westjet Airlines, and JetBlue. All the other airlines must buy on short term or spot price because they do not have the financial leverage.
So far, only Southwest has consistently utilized hedging activities and they are the belle of the Wall Street ball for it. JetBlue slacked off the hedging activities because they are using the financial leverage to buy aircraft (at least 2 aircraft per month). Westjet has no hedging activities for the same reason (buying aircraft). Air Canada activated their hedging desk this month. It will take them about 12 months to acquire enough contracts to have a meaningful price collar on their fuel requirements. FYI Southwest's price collar means they buy fuel at any equivalency of about $36 per barrel of oil.
Bollocks. American carrier hedging for 2005:
AA 15%
UA 11%
NW 6%
HP 45%
Alaska 50%
JetBlue 22%
Southwest 85%
US sold their hedging for this year in return for a cash payment of $2 million/month.
Source:
http://news.airwise.com/story/view/1111087731.html
Of the majors, only CO and DL are not/have not been hedged for this year.
Jetsgo had a shockingly low fuel cost until the end of 2004 due to hedging. Look where they ended up.
Hedging is not a black and white science. Hedging at a time when the market is high won't help AC out at all (unless fuel prices continue to significantly increase, in which case everyone, including AC, will be screwed anyway).