Fuel Hedging
Hello
I have a small question re fuel hedging and would appreciate any input from someone who preferably has direct knowledge/experience of the commercial realities of hedging, not just those who care to share their informed guesses! ;-)
As an airline, would I setup a hedging agreement directly with a supplier, e.g. BP or via a 3rd party fuel broker?
If I agree to purchase X million litres of fuel at $10/litre (hypothetical) and then the price falls to $8/litre on the open market, what is there to stop me buying my fuel on the open market at the spot rate and then only returning to the hedged fuel when the market price had once again risen above $10? Contractual obligations/financial penalties etc?
Many thanks, DM
PS: Don't mean to upset those of you who volunteer your time and effort giving informed guesses, it's just I am looking for hard answers on this one.