Fuel Hedging

Question 1

Fuel Hedging

Answer 1

Buying fuel in bulk at an agreed price for a length of time to try and reduce risk for the airline.
If the oil price goes down, the airline loses out.
If the oil price goes up, the airline saves money

Question 2

Ryanair Treasury

Answer 2

Ryanair Group Treasury
Based in Dublin
Responsible for:
-Cash management
-Financing the group’s ongoing financial requirements
-Monitoring and managing the Group’s extensive foreign exchange, interest rate and commodity exposures

Question 3

Ryanair Case Study 2013

Answer 3

45% of operating costs = fuel
Including fuel hedging
Trading oil in $
Forward 18 month contracts
90% of fuel was hedged until end of 2014. $980 per met ton
2015 - fuel went down - $935 per met ton
$10 movement in fuel = impact on Ryanair of $17 million

Question 4

USA Airlines Case Study - Business Insider 2016

Answer 4

American Airlines does not hedge fuel = benefited from a sharp fall in oil prices
Southwest Airlines hedges fuel but has cancelled hedge contracts up to 2018 for to reduce hedged fuel allocations from 70% to 30%: lost $1.8 billion.