Airline Fuel Hedging: An Overview of Hedging Solutions Available to Airlines

Abstract

Over the past several years airlines have been struggling to cope with a barrage of challenging economic conditions and have been very creative in reducing cost. In an attempt to produce a profit for their shareholders airlines have slashed cost in many areas and have not willingly left any stone unturned looking for cost savings. There are two ways to make a profit however, either by lowering your cost or by raising your revenue. The revenue increase side of the airline profit equation has been limited by government security taxes, unhealthy competitive practices, and the entrance additional of low cost carriers such as Jet Blue and Air Trans. Airlines have varying degrees of control over cost with fuel being most illusive.

Author

• Westbrooks, C Lester Embry-Riddle Aeronautical University