US: Why airlines are kicking the oil betting habit
US airlines are trying to harness low fuel prices to power their bottom lines. That might not be as simple as it sounds. Low oil prices mean that major airlines are less interested in using derivatives to hedge their exposure to fuel-cost fluctuations. Delta Air Lines said last week it has closed its hedges altogether, while United Continental and Southwest Airlines have scaled back their use of such contracts. In this regard they are catching up to American Airlines, which has eschewed the use of such safeguards since 2014. Certainly, there are valid reasons for airlines to pursue this strategy. Fuel is the largest expense for an airline, and low prices have provided an earnings tailwind. And with passenger unit revenues on the decline after a long climb higher, management teams need to find new ways to keep the bottom line growing. <br/>
https://portal.staralliance.com/imagelibrary/news/hot-topics/2016-03-15/general/us-why-airlines-are-kicking-the-oil-betting-habit
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US: Why airlines are kicking the oil betting habit
US airlines are trying to harness low fuel prices to power their bottom lines. That might not be as simple as it sounds. Low oil prices mean that major airlines are less interested in using derivatives to hedge their exposure to fuel-cost fluctuations. Delta Air Lines said last week it has closed its hedges altogether, while United Continental and Southwest Airlines have scaled back their use of such contracts. In this regard they are catching up to American Airlines, which has eschewed the use of such safeguards since 2014. Certainly, there are valid reasons for airlines to pursue this strategy. Fuel is the largest expense for an airline, and low prices have provided an earnings tailwind. And with passenger unit revenues on the decline after a long climb higher, management teams need to find new ways to keep the bottom line growing. <br/>
