Discussion – Airline Industry and Fuel DerivativesSome airlines like Southwest Airlines manage the

Discussion – Airline Industry and Fuel DerivativesSome airlines, like Southwest Airlines, manage their future costs by implementing very active hedging strategy (fuel derivatives, options to buy aircraft), while others don’t. Why do firms like Southwest hedge? What are the costs and benefits of hedging? Please be aware that when oil prices go down, this strategy become very costly, as Southwest saw in 2009 (Forbes article) and in late 2014 (Reuters).Please read this article (Fuel Hedging by Carter, Rogers, Simkins, Financial Management 2006) for some interesting thoughts on the topic.

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