afaik: My view is every airline might have different way of hedging. And usually none of them would like external people know how they do hedging. Disclosure has been very limited. And they don't have to do hedging every year consistently using the same hedging approach, which can vary sometimes. The basis of costing is also another critical issue. Whether using cash-flow or else for accounting the hedging cost, or loss/gain. Very complicate. My impression would be whatever an airline says about the loss or gain is just what they want to say for a reason they want outsider to know. Seldom accurate enough, at all! No hedge reporting standards for reporting hedging details yet, it seems to me. If yes, we might be able to analyse an airline's annual hedging result according to previous disclosure of hedging data plus crude oil price movement data already known at year-end. But usually we can't. We would have to wait for announcement until several months later. Then share price reacts to the announcement whether resulting a huge hedging loss or else. Hedge accounting procedures do exist, yes. Just 2 cents!
Looks like: On page 17, the " Fuel, including hedging losses 13,259 " is already a total fuel cost, inclusive of the mentioned hedge loss -4.49 (which is part of the HK$13.25). In other words, -8.76 -4.49 = -13.25. Fuel cost alone before hedging was 8,76. After hedging (loss) was 13.25. https://www.cathaypacific.com/conte...ngs/en/2016_analyst_briefing_17Aug2016_en.pdf
An article I read today says according to the CEO of Cathay, 54% of the fuels this year were hedged at $89 level, and 46% of next year's fuels are being hedged at $80 level. Someone now estimates these negative hedging effects will last probably until year 2020 when the current hedging will end.
Hedging commodity risk is actually very tricky for a company that consumes a resource. In the end it often becomes a speculative bet: in rising oil prices, airlines can pass the cost on as unhedged airlines need to and its becomes a defensible argument for hedged airlines. In declining prices unhedged can drop their prices (less than the oil price drop would warrant) and get margin improvement while taking market share from the hedged guy. Where it makes sense to hedge is for a producer where the certainty of a certain price level can make a project a go vs no go.
Too many books about hedging already, especially energy hedging. Airline finance included, that alone can be a degree course by many institutions. Google "airline finance degree" to see. Perhaps you should write another book to teach them something.
Lots of books and phds who have wasted their lives. I think the concept of hedging for all these industries was built by banks to sell services and create price insensitive orderflow.
I once owned the book exclusively covering the court case in length and photo copies of original documents about below article, which seems surprisingly a better source than reading the original book. Truly a classic!
Are you a lawyer that you would read up on something so esoteric? I remember when I rented my first apartment in NYC - the landlady wanted to know what I did for a living. I told her I traded derivatives at a bank. Her only response was "a lot of people lost a lot of money trading derivatives."
I regretted immediately after receiving the book from Amazon.com . Most the contents were unreadable to me, being a layman in nothing. She just missed two words: "a lot of people "outside banks" lost a lot of money trading derivatives."