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Old 20th Jan 2018, 07:03
  #6 (permalink)  
Numero Crunchero
 
Join Date: Oct 2006
Location: Hong Kong
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It's not that simple

If we were unhedged and oil fell $2 per barrel(Jet), we would save $2 per barrel. Because we hedged 50%(or so) we only save $1 for every $2 fall in oil price.

Conversely, for every $2 rise in oil, we save $1 by having a smaller hedge loss. So overall we only lose $1 per $2 oil price increase.

Overall, we are better off with the biggest fuel hedge loss possible as that means we save a greater amount on the spot rate. So the recent increase in oil prices is actually BAD for us, not good. It actually REDUCES our profitability.
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