To hedge or not to hedge that is the question
Generally Airlines lose money by hedging fuel.
Sometimes it works for them and sometimes it works against them.
Effectively they are buying insurance that provides a defined range to their future costs of an often volatile major part of their expenses.
Over a multi-year time frame the cost of hedging exceed any net savings.
What airlines are buying is a degree of certainty.
So last year AIR 'lost' money by hedging fuel.
This current year they are, at present, 'making' a little but where they end up at the end of it, well we will have to wait and see.
Some airlines do not hedge and with the recent dramatic fall in the price of oil not hedging at all has become a popular topic in the industry.
The discussion will probably change if there is a sudden upswing in the price.
But at the end of the day the higher the cost of a barrel the higher the fuel bill even if tempered by company foresight.
Best Wishes
Paper Tiger
It is getting tougher out there
To throw some more figures into the ring, I calculate for July YoY that:
Short-haul revenue is down 0.6-0.7% (i.e. a bit);
Long-haul revenue is down 0.06-0.07% (i.e. a tiny bit).
So far, fuel costs will be lower than last year but other operating costs higher, but I have not quantified them.
Best Wishes
Paper Tiger