http://stocks.usatoday.com/custom/usatoday...83964DDF2F58%7D
09/14/2007 - Updated 12:39 PM ET
TABLE-U.S. airline fuel hedging positions
NEW YORK (Reuters) - U.S. airlines have hedged their expected jet fuel purchases to protect themselves from rising fuel costs.
Hedges typically involve buying financial contracts in a related product such as crude oil or heating oil.
The financial gains from those contracts, if the price rises, can help offset higher costs for jet fuel, which vies with labor as an airline's largest cost.
Other hedging strategies include so-called "collars," which are combinations of put and call options. They generally cost less to put in place and limit the risk if prices rise, but also limit the gain if prices fall. Within the band of put and call options, the airline is essentially paying the market price.
Southwest Airlines for years has had the best hedging position in the industry, helping the low-cost carrier undercut competitors' fares and still post profits.
Below is a table outlining the hedging positions at major airlines (For full story, please double click on [N14389098] ):
09/14/2007 - Updated 12:39 PM ET
TABLE-U.S. airline fuel hedging positions
NEW YORK (Reuters) - U.S. airlines have hedged their expected jet fuel purchases to protect themselves from rising fuel costs.
Hedges typically involve buying financial contracts in a related product such as crude oil or heating oil.
The financial gains from those contracts, if the price rises, can help offset higher costs for jet fuel, which vies with labor as an airline's largest cost.
Other hedging strategies include so-called "collars," which are combinations of put and call options. They generally cost less to put in place and limit the risk if prices rise, but also limit the gain if prices fall. Within the band of put and call options, the airline is essentially paying the market price.
Southwest Airlines for years has had the best hedging position in the industry, helping the low-cost carrier undercut competitors' fares and still post profits.
Below is a table outlining the hedging positions at major airlines (For full story, please double click on [N14389098] ):
