How does a airlines company hedge with rising oil price? Will the airlines industry tumble? Can we buy "value"

Question

How does a airlines company hedge with rising oil price? Will the airlines industry tumble? Can we buy "value"

Answer 1

no now they are just charging us for each piece of baggage that we check....they are saying that now it will just be cheaper for people to UPS their luggage to avoid this BS they are pulling!

Answer 2

A few of them bought aircraft fuel futures.  The agree to buy x thousand gallons for x dollars.  Even though most will increase fares anyway they can, temporarily layoff some of their staff, and ground / lease to others some of their planes (often those that burn more fuel).  Even those who boutht fuel futures will raise their fares if the other airlines did also. Unfortunately, this method often causes the airline to spiral downwards even more.

Answer 3

Airlines hedge against higher oil prices by buying futures contracts.  A futures contract is an agreement to buy a certain commodity (in this case oil) at a certain price at a certain time in the future.  By buying oil futures contracts, airlines are able to lock-in the price that they will pay for oil in the future.

By the way, oil futures prices are high and they indicate that the market is expecting tight oil supplies in the future.

Answer 4

1. Airlines company can hedge by promising to buy a certain quantity of fuel in future at a designated price. Through this they are safeguarding themselves against future rise in the oil prices. In case, the prices fall, the company looses but still it is a good strategy to mitigate the risk of oil price increase.

A company can further hedge itself against the abovementioned risk (of prices of future oil falling) by dealing in oil futures options in the commodities market.

2. What industry - the american airlines industry, the european airlines industry, the asian low cost airlines industry, or the asian conventional airlines industry?

Airlines industry is extremely competitive and hardly gives a good profit margin for most competitors. A lot of lowcost airlines have come and gone. Definitely some airlines will be affected by the prices in future. There will always be winners and losers, and maybe more losers than winners.

3. ??? I didn't understand.