THE FALL in oil prices—and the resulting drop in the cost of aeroplane fuel—is good news for airlines and business travellers hoping to cut costs. This could be the airline industry's best year in half a decade, according to the International Air Transport Association, a trade group. But the practice of fuel-price hedging—used famously by Southwest Airlines and now a favourite tool of most carriers—will sort airlines into a clear hierarchy of winners and losers. Those that foresaw lower prices will benefit—and may even extend their hedges. Those that expected high prices to continue will pay dearly. Reuters has details:
In Europe, airlines such as Aer Lingus and Ryanair are aiming to take advantage of the low oil prices to lock in fuel costs into 2016 and beyond. Thai Airways plans to hedge 100 percent of its fuel purchases this year... U.S. airlines that hedged based on higher oil prices, such as United Airlines, have had to dump losing bets and are now reviewing their strategies for protecting themselves from oil market...Continue reading
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