Incorrect, they're just on $20m in the money mark to market value of hedges for FY17 so they don't have a problem with that particular issue. Outlook with the annual result or in discussions in the conference call on Friday could be interesting.
Please explain how you reach this conclusion? Total "net compensation from hedges" for FY17 seems to be approx $19.8 mill.
To me the table seems to show that AIR have reduced their hedging from 80% to 34% in light of reduced prices. Seems a prudent move to me? Roll on Friday.
Please explain how you reach this conclusion? Total "net compensation from hedges" for FY17 seems to be approx $19.8 mill.
To me the table seems to show that AIR have reduced their hedging from 80% to 34% in light of reduced prices. Seems a prudent move to me? Roll on Friday.
AIR are close to their maximum self imposed limit on hedging forward. They have taken some excellent hedge positions earlier this year when oil was close to $30 and its nice to see them in the money, they'll need that with this new era of more intense competition.
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.
More info for the spreadsheet
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Originally Posted by bull....
To hedge or not to hedge that is the question
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