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Corporate Finance: Should airlines hedge out their fuel price risk?
So Ryanair lost on its oil price hedge but this was offset by a gain on its currency hedge.
The recent past is littered with examples of airlines that have lost significant amounts on hedging out their fuel price risk. The article by Rivers (2012), available below as core reading, describes many of these causalities.
This has led many to question whether hedging really adds value for an airline. Please read the articles suggested below that look at the problem from slightly different angles but come up with a similar conclusion.
Address the following questions:
What are the arguments for and against an airline company hedging its fuel risk?
Based on this, would you advise Ryanair to continue on hedging its fuel price risk?
Write a maximum of 750 words answering the questions above
What are the arguments for and against an airline company hedging its fuel risk?Explain
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