Jetblue Fuel Hedging Case

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JetBlue Fuel Hedging Case by Mengni Huang David Niedrauer . 1. the high price of jet fuel at the end of 2011, JetBlue should hedge its fuel costs for 2012. JetBlue’s approach to fuel hedging was to enter into hedges on a discretionary basis without a specific targets. As you can see from Exhibit 1 in the Appendix, it hedged less in 2009 when oil prices were low and increased the percentage hedged again in 2010 and 2011. Dynamic strategies were based on the idea that oil prices followed a mean-reverting process. Ideally,…show more content…
WTI is also not hedged against counterparty risk in the fulfillment of its derivatives contracts, or the extent to which global oil shocks or systemic instability could affect the fulfillment of these contracts. Appendix: Exhibit 1: Exhibit 2: Exhibit 3. Total Fuel Cost – Unhedged (assuming 525,000,000 gallons of consumption/year or 1,041,667 barrels/month) Exhibit 4 – WTI Hedge (note-jet fuel spot prices converted to price/barrel) Exhibit 5 – Brent Hedge (note – jet fuel prices converted to

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