Doug the Head

I agree to the extent that its not easy to guess a oil price. Although, someone is actually payed a lot of moeny AND recieving a large bonus every year to be good in guessing!

Its like stocks or whatever; its a science where your guessing becomes more accurate the more you know and the more competent you are. Pro-active....

However, how can you even think that the oil price will continue to rise from $180 a barrel for a substantial future, and actually stay at the all time high price? If the price would have stayed there for long, the whole world would have gone bankrupt.

Come on, that was really, really stupid :ugh:

And we are the ones paying for it. Again.

Cant believe that person is still working for the orange...........

Hedging vs decent planning.
 

Exactly, but the point is: you win some, you lose some.

That's the whole point. It's extremely hard to predict prices. As long as, overall, you win more than you lose, then the game is well (enough) played. Even if losses = gains, then at least you dampen the price volatility effects. That's all hedging is: it hedges against (extreme) price fluctuations, and in going from $147 to $33, and back to $75 is definitely extremely volatile!

If an airline is consistently good in betting on oil/fuel prices, then perhaps they should be in the hedge fund business instead of the airline business! I suppose it's much easier than running an airline, just set up an account and make money! No unions or nasty employees to deal with, and IF (heaven forbid) you lose money, then just pass the bill to the taxpayers!! ;) :}

If an airline is consistently good in betting on oil/fuel prices, then perhaps they should be in the hedge fund business instead of the airline business! I suppose it's much easier than running an airline, just set up an account and make money! No unions or nasty employees to deal with, and IF (heaven forbid) you lose money, then just pass the bill to the taxpayers!!

That is what happened with Enron, they strayed from their business of being an energy firm to that of a speculating financial machine that umtimately collapsed and had many knock on effects.

The danger for society is when big players in an industry (as with the banks) play too much and create systemic risk that threatens all aboard. A bit like two pilots getting too distracted playing on their laptops when they should be managing the aircraft.

I know, thanks for the update, but I think the topic here is not macro economics, but a strike in Berlin.

Negotiating contracts, treatment of employees on one side, and a company's ability to hedge fuel on the other, are not really that closely related IMHO. Naturally, any management tries to get the best deal on both, but that's about where the similarities end.

p.s. if there were any similarities on management's competence, then negotiating a contract should be a slam dunk for the unions if you're using the fuel hedge situation as a benchmark! :)

Agreed Doug The Head, lets get back to original point of the post.

But some good discussion there for a bit!

SouthWest Airlines has consistantly been on the right side of fuel hedges. They also have the lowest total executive compensation of any US airline and the highest paid narrow body aircrew (front and back). They have been consistantly profitable over the last five boom and bust airline cycles. History has amply demonstrated that airline long term success starts with competant management. Long term failure usually started with squeezing the T & C's.

I have to disagree over the fuel hedging debacle. There is no dispute that fuel hedging is a gamble - if it was a science rather than an art it would be easy. The key point, however, is that every airline in Europe had the same information available to them and for whatever reason easyJet made the biggest mistakes. As an independant accessor, The Daily Telegraph costed those mistakes at over £300 million- whatever the real figure, we can all agree it is a shed load of cash. The simple fact is easyJet management blew it when most of their main competitors got it right. I have yet to hear of a single resignation over this vast error or even a sniff of an apology. Plenty of bonuses though.

This is not off-topic as the fuel hedging debacle and the scale of associated losses give some measure of the relative sums of money involved. If you take the company at its word, and I don't, they are saying that all the pilot pay claims for this year add up to a maximum of £5 million - including sorting the German contract. That is as nothing compared to fuel hedging and is well-afordable given the extra £100m they expect to get back from no fuel hedging this coming year.