Hey Sparticus,
A hedge, be it fuel, currency or corn etc, is just locking in a future price. If the price moves against you, then you lose. If the price moves for you, then you win.
VB bet that fuel would stay high so they hedged. They pre purchased fuel at $100 per barrel (I'm not privy to the exact figure so this number is just for the example) however, now fuel is $60 a barrel. So they lose $40 per barrel. Their total hedging exposure is 200 mil.
Where the currency hedge came from I am not sure. Perhaps there was financing arranged in US dollars and then the Aussie dollar plummetted giving them a windfall. Maybe it materialised from the purchase of the e-jets. I'm not sure.
Regardless, Wirgin Blew indicated
VB got lucky that their 200 mill loss on fuel hedging was covered by their 200 mill dollar gain on currency hedging.
tsalta
(part time options trader)