US Airways touts decision not to hedge fuel, cites $126m savings

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US Airways is touting its decision not to hedge fuel, saying it gives the carrier a competitive advantage over airlines that have embraced fuel hedging programmes.

"Fuel prices are up 29% year-over-year through the third quarter, so you'd think a hedging programme would save you a lot of money in 2010," US Airways president Scott Kirby said today during the Hudson Securities Airline Conference.

In reality, he says, "If you take the industry average fuel hedging programme, it would have cost us $126 million this year" because such programmes "are so expensive".

"You have to have massive spikes in fuel for systematic hedging programmes to work," says Kirby, adding that "it has to be something more than 29%" just to break even.

Southwest Airlines, Alaska Airlines and United Airlines are among the long list of US carriers that have adopted fuel hedging programmes. The three airlines paid $2.36/gal, $2.31/gal and $2.29/gal through the third quarter for fuel, respectively, versus US Airways' cost of $2.19/gal, notes Kirby.

"We have actually what is the best hedging programme in the industry and producing the best fuel expenses in the industry," he says.

During today's conference Alaska CEO Bill Ayer said the carrier sees fuel hedging as a way to reduce volatility, and that hedging "has saved us $425 million" since the carrier started the practice in 2002.