One thing all airlines have in common, for now at least, is their reliance on oil. But how they pay for it varies widely. There’s a divide between those that hedge — notably European and Asian airlines — and those that don’t. Going au naturel seems riskier now, but there is much to recommend it.
There’s a lot to be said for making a business’s most volatile input more predictable. Fuel roughly accounts for between a quarter and a third of an airline’s costs. Hedges gained widespread popularity as a form of insurance after the early 1990s Gulf War sent oil prices soaring.
The big US carriers have mostly abandoned the practice after oil markets weakened, leaving them overpaying and red-faced. Scott Kirby, once American Airlines’ president and now boss of United, grumbled that bankers, not airlines, are the beneficiaries. Southwest gave up last year. Delta, for its part, owns a refinery.