Singapore Airlines

[specuvestor]

Hedge means you priced your product to be profitable at US$116 on a CONSISTENT basis, rather than trying to forecast where prices going to be, which many are actually doing. Net result is that the profit should be what you are expecting, rather than windfall.

Reason why I view some of these speculative is because they vary the amount of hedges that makes the word "hedge" a misnomer. And it is not just airlines but other commodities as well, from palm oil to gold.

Ironically some companies hit cashflow problems when they have to pay up for their losses in hedges ie margin calls before they get cashflow from their products, even though on longer term they are hedged right. And then there is also basis risk because oil and jet fuel are not the same.

In theory always sound easy until you have to do the grunt work. That's why you pay for CFO

That said, you can only "hedge" that long. Structural advantages ie cheaper input costs are much more lasting.