Originally Posted by
oliver2002
The company I work for (and many other export oriented german firms) hedges the USD vs EUR and has long term precious metal contracts to reduce the risk of unplanned changes in exchange rates or commodity prices for the bottom line of the company. In the day to day business we don't see the hedge and painfully suffer from the falling dollar or the increasing Pt prices. The correction can only be found in the annual corporate report when they close the books. I strongly assume its the same for LH. Its highly unlikely they don't take the cost of fuel into account when checking the profitability of a route.
Just to record my 100% agreement.
For people who still wonder whether $140 is the realistic opportunity cost, SmilingBoy already pointed out two things: (i) LH's hedge covers only 80% of their projected use, so they're probably 100% exposed on the margin. (ii) The realistic alternative use for today's barrel is not to roll it back to the market (which I agree would be difficult), but to buy one less barrel tomorrow. So the opportunity cost is actually quite tangible.