ABSTRACT
This chapter, and the previous one, complete the possible financial consequences of three major risks for airlines that can be hedged. Fuel prices will be covered first followed by interest rate risks in the second part. Almost all of an airline’s purchasing of fuel is contracted in US dollars, so the fuel price risk addressed in this chapter will either alleviate or worsen the foreign exchange rate risk. This is not relevant for US airlines and those that earn sufficient US dollar revenue to give them a ‘natural’ foreign exchange risk described in the previous chapter, but they are still faced with the fuel price risk.
