Airlines benefit from WTI recovery

摘要

WTI futures are a popular hedging tool for airlines. High liquidity on the Nymex contract means that costs are generally lower than hedging with jet fuel swaps or heating oil futures. But WTI’s dislocation from other oil markets this year introduced much more volatility into the spread between it and the cost of US jet fuel, compared with the same spread in Europe (see graph). This basis risk forced many airlines with WTI positions to take losses in the third quarter under mark-to-market accounting rules.