paparazzo1011的部落格

In the poker game of predicting fuel prices, American Airlines has shown it holds the winning hand.

American, which reports its earnings Friday, is one of the few airlines that hasn't been paying a premium to lock in fuel prices, preferring instead to ride the petro roller coaster. That strategy has paid off handsomely as oil prices have fallen. With no big spikes on the horizon, American executives may want to keep riding it out.

Hedging — buying fuel at a specific price to avoid wild price fluctuations — has been a common practice for years, not just by airlines but by other heavy fuel users such as transit agencies. Fuel, along with labor, are typically the two biggest expenses an airline face. The falling price of oil is one of the big factors behind airlines' booming profits, but one interesting sidelight has been how the industry practice of "hedging" has proven costly to some carriers.

For years, hedging worked like a charm protecting airlines from sudden oil price hikes, but in the falling price environment of the past few months, hedging has often worked against them -- sticking them with above-market fuel prices. Prices of benchmark U.S. crude oil managed to stay above $30 a barrel on Monday. It was down $1.85 to close at $30.34 a barrel on the New York Mercantile Exchange.

Southwest Airlines, which slashed its fuel bills for years by hedging more of its fuel purchases than rivals, now finds itself on the losing side of the wager. It reported last week that it is on the hook for $1.8 billion in fuel hedging costs through 2018 at current market prices. That may sound painful, but overall the airline still emerges a winner on its overall fuel bill. Even when hedging losses are taken into account, Southwest still managed to slash its fuel costs by $189 million in the fourth quarter. The savings added about 17% of the carrier's fourth-quarter income before special items.

Southwest is cutting the percentage of fuel it buys on hedging contracts in half — to 30% to 35% in the second half of 2016, down from 60% to 70% in the last six months of 2015.

It's a similar story for Delta Air Lines, which has taken some hefty losses as it tried to protect itself with hedges. In the fourth quarter, for instance, Delta saved more than $700 million from the same period the previous year due to lower cost of fuel. But that was after taking a $340 million hit from hedging losses.

Delta isn't closing the door on hedging altogether, but it's not likely to show up in a big way anytime soon.

"We’re still committed to hedging over the longer term, but feel this is the right time to just kind of sit on the sidelines and wait it out," Chief Financial Officer Paul Jacobson said in a call with analysts.

Alaska Airlines is confident that oil prices are going to stay low, so it's no hurry to hedge more fuel. Oil is "something like $50 a barrel or below that looking out for a long time," said Mark Eliasen, the airline's vice president of finance, on a conference call. "So we could do something like (hedge), but we kind of like our program the way it's working right now."

Just because fuel prices have fallen dramatically doesn't mean airlines and other heavy fuel users should give up on hedging, says Steve Sinos, a vice president for Mercatus Energy Advisors, a Houston-based service that consults on hedging strategies. As some companies have cut back or given up on hedging, "others see it as an opportunity," he says. He acknowledges, however, "sometimes it is not a winnable argument."