I think its funny they are reducing their hedging from 80% at present and when fuel was at its historical high, down to 30% for 2010 when fuel is at its historical lows, they still havent quiet grasped the concept of hedging have they.
Yesterday 10:03
As i understand fuel hedging, which is in effect an insurance policy, much like options in the equity market, BG had no choice. If he had not hedged, and oil had continued to rise, as just about every analyst and CEO in the world predicted, then
VB would be dead in the water as we speak, due to unsustainable fuel prices.
As it turned out, oil dropped, against all expectation and the hedge (insurance) was not required. But that is no different to the insurance most of us pay on our houses. For most it is a waste of money (in hindsight) but in the event that your house burnt down and you were uninsured, your personal company would left with a huge debt and no asset, therefore insolvent.
Hedging guards against this possibility, and it is expensive. Airlines are in the business of making money from flying aircraft, not hedging. Once management start factoring hedging in as a profit centre rather than an operating cost, you will know the company is in deep trouble.