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Going South By Southwest?

OK, maybe it’s not that bad.  But their oil-price hedging strategy really isn’t an advantage for them:

This situation should be easy to visualize because the hedges are on oil rather than jet fuel and because they are settled for cash rather than physical delivery. But even if the hedges were denominated in physically delivered jet fuel, successful or unsuccessful hedging would have no impact on airline operating costs.

This is correct, but read the whole thing.

One of the companies I covered for a while, a fertilizer company, tried to hedge the price of natural gas, which is a key component in fertilizer.  They ended up getting burned, and probably would have been better off just running their business.  As it turned out, they were well-run, got bought out by a large competitor, and the shareholders ended up doing well for themselves.  But not because of nat-gas speculation.

Posted in Business.