The airlines, after being financially burned by their fuel hedging programs when oil prices crashed late last year, are back into the futures markets to stabilize prices and allow them to plan. With oil and fuel prices rising more than 60 percent in the recent months, this planning eliminates much of the volatility airlines face.
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These are hard times for the airline industry. Dropping oil prices are a double-edged sword, with some airlines losing millions because of hedges gone bad. Currency woes are wreaking havoc with international prices and bills, air cargo loads are dropping dramatically and passengers just aren’t flying.
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Anyone following the story of the American airline industry over the past year knows that Southwest Airlines has held an ace in the hole with their successful fuel hedging operations that have saved the company millions of dollars. When United finally decided to hop on the hedging bandwagon, they managed to lose hundreds of millions.
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