I don't get this business. Exactly how does First Fuel Banks stand to
gain if customers only withdraw fuel when regular market prices are
higher? Are they banking on fuel prices crashing?
~j
On 15-May-06, at 9:38 PM, sriram bala wrote:
southwest airlines uses a similar model on a larger scale to buffer
rising fuel costs.
From Wikipedia <snip>
One of the reasons for profitability is Southwest's reliance on
fuel hedging. Almost since its inception, Southwest has purchased
fuel options for years in advance to smooth out fluctuations in
fuel costs. Southwest substantially increased its hedging in 2001
in response to projections of increased crude oil prices. The use
of these hedges helped Southwest maintain its profitability during
the aftermath of the September 11, 2001 attacks and the oil shocks
related to the Iraq War and later Hurricane Katrina. As of 2005,
Southwest is currently paying 50% of the market price for its fuel;
however, that number will increase as hedges from 2001 and 2002
expire and new hedges at higher prices take effect. Southwest has
hedges of varying percentages and prices in place through 2009.
--
Kiran Jonnalagadda
http://www.pobox.com/~jace
