How do airlines protect themselves against increases in fuel prices? Do they use commodity futures? Is there much difference in the approaches used by the legacy carriers and the newer carriers, say Delta and Southwest?
Airlines use a strategy of hedging fuel costs through trading fuel derivatives (future and forward contracts), (Southwest, 2011). This hedging process has led to recent losses with oil trading significantly lower than when the forward contracts were purchased. (See Bachmann, 2008).
There isn't much difference in how ...