Since oil has been falling (and I do not believe it will stay at this level for longer than a year) precipitously, I want to lock in my prices at. I assume that fuel prices in AS are correlated to the real world because it seems that way...
I think AS should introduce fuel hedging. It can be very simple. Just purchase oil at a given spot price 100% cash payment up front and have the system price your flights until the hedge runs out using the hedged value.
As hedges are based on estimates, I personally doubt that it will be a massive advantage. Having said this, that suggestion was discussed previously. I would welcome such a solution as there is no correlation between AGEX and oil price, thus the return of airlines is kind of a oil price gambling.
Just to be fair, I am not yet sure how a better but equally balanced system should look like. Introducing hedges would give cash ridge companies significant advantages, thus wouldn't help a balanced competition.
Btw, the way you are explaining hedges is not what we see in reality. Hedges are calls not commodities, thus less cash intensive. Finally, drawing just a thin line to reality, it might be easy to handle the volume of hedges, but developing a market that includes fair price at risk, volumes and expiry might be not that easy to implement nor to understand.
As hedges are based on estimates, I personally doubt that it will be a massive advantage. Having said this, that suggestion was discussed previously. I would welcome such a solution as there is no correlation between AGEX and oil price, thus the return of airlines is kind of a oil price gambling.
Just to be fair, I am not yet sure how a better but equally balanced system should look like. Introducing hedges would give cash ridge companies significant advantages, thus wouldn't help a balanced competition.
Btw, the way you are explaining hedges is not what we see in reality. Hedges are calls not commodities, thus less cash intensive. Finally, drawing just a thin line to reality, it might be easy to handle the volume of hedges, but developing a market that includes fair price at risk, volumes and expiry might be not that easy to implement nor to understand.
Hence pre-purchased fuel contracts (at full face value) is an easy solution but does not provide balance, I agree.
Yes, it would be an easy solution, I agree. But it is so far from reality and risk-bearing that I don't know whether it make more sense than providing a new option to bunker liquidity in an economically questionable manner just for having no better option.
As much as I'd like the underlying idea and came up with a similar idea in the pass, I don't really see it within AS today. In terms of priority, it is no doubt far behind the capital market, that needs urgently to be revised. Probably a new capital market would then provide other options to deal with liquidity than buying commodities.
I think the new performance system is much more needed than fuel hedges.
Now, how fuel hedges could work so every company small and big is on the same playing field:
1) Call options - you buy a call option for a certain price, for a certan number of liters per week. If you exercise the option, you buy fuel at the lower rate. If you do not exercise the option, you have lost the hedge fee, and you buy at market price. No disadvantage to smaller companies because they would buy smaller volume of hedges (less liters per week). Bigger company, bigger volume of hedges and also bigger fees. In the end, it's like both smaller and large rocmpany buy fuel at lower, hedged rate, while each paying fee according to the consumption.
2) Fuel contracts - I have seen this in another airline game, you pay a weekly fee for a fuel contract from supplier X, for a period Y. There are various suppliers who price dynamically and offer dynamic contract lengths, accoridng to the actual market conditions (if the market price is going up, fuel contract rates offered are going up as well). The bottom line is you are locked to fuel contract and you pay fuel at the contracted rate regardless of what is the market rate. So if you buy a fuel contract at 70 and fuel goes down to 60, you keep paying 70, for the duration of fuel contract. Also, you pay the fuel as you go, but at the fuel contract rate; though you can also select 10-100% fuel contract coverage. So if you buy a 50% fuel contract, you buy 50% fuel at the contract rate, and 50% fuel at the market rate.
Fuel hedges, in one way or another, are on our (very) long-term roadmap. But as FlyHigher has already guessed correctly, they priorities lie elsewhere for the time being.
Fuel hedges, in one way or another, are on our (very) long-term roadmap. But as FlyHigher has already guessed correctly, they priorities lie elsewhere for the time being.
Thanks, Martin!
I think the idea of Fuel Contracts is best. That way, the bigger airlines can’t gain too much of an advantage over small airlines because of higher cash reserves.
If fuel was purchased at a contracted price, its the same risk for all airlines. Granted, the bigger airlines can tolerate or mitigate the risk of higher prices easier than the smaller airlines.
It would be great if you could have fuel storage in terminals and you could have a very big storage and you just by lots of fuel at one time and you can sell it to your self or others flying from that terminal or stopping there to refuel. This is what they do in real life, every terminal has fuel tanks.
Example: I am flying from GOT to HEL and HEL to GOT. In GOT were I then have a terminal and have my fuel I would fuel up those 2000 litres whit fuel that I bought cheaply. Then in HEL on the way back I have to use the normal fuel or if I have a handling contract I would use that guys fuel at his price.
I understand that you have other stuff to do but this would be awsome for the future.
Christian
THat will be released as FuelSim ;)
Which airport in the world do have fuel storage in terminals? I would rather not fly there ;)
THat will be released as FuelSim ;)
Which airport in the world do have fuel storage in terminals? I would rather not fly there
Maybe for the next incarnation of Quimby? Ends when a random passenger lights a cigarette in the wrong area and blows up the entire world?
THat will be released as FuelSim ;)
Which airport in the world do have fuel storage in terminals? I would rather not fly there ;)
LAX *did* at least in 1998 :)
http://articles.latimes.com/1988-03-25/local/me-181_1_underground-tanks
THat will be released as FuelSim ;)
Which airport in the world do have fuel storage in terminals? I would rather not fly there ;)
Every airport has to store their fuel so they can be without fuel for at least 1 day without having to stop flights. Here is a guidance for fuel storage on airports from IATA https://www.iata.org/policy/Documents/guidance-fuel-storage-may08.pdf. Here are pictures of fuel storage at very many airports and if you look you might understand that there are some of the most important airports in the world https://www.google.de/search?q=fuel+storage+in+airports&sa=X&biw=1366&bih=643&tbm=isch&tbo=u&source=univ&ei=dgmoVL_fFYvhywP0iYGYDg&ved=0CEAQsAQ , so why not have it in airlinesim if we can have our own terminals we could have our own fuel.
I know that ... but "IN TERMINALS" ;)
Are we running between two different ideas...
Fuel Hedging... an airline pays for an ammount of fuel at a fixed price paid at the present for the future. They are then gambling on fuel prices
Fuel Tankering.... an airline knows the price of fuel at two different airports. If the price at A is significantly cheaper B (to offset the cost of taking the fuel from A-'B then the airline will aim to either take round trip fuel, or land with extra fuel at B to reduce uplift
Welll I know - and sorry for not making this clear. It was just a more or less "funny" idea of having fuel tanks below or above an area were people walk arround and wait for their flights. Anyhow... the fuel hedging is pure financial issue and already debated a lot of time. Also Fuel Tankering (don't know if that's the right word) is nice, but not easy to realise. I guess it is not very easy to receive the information at all. I had the luck to know the differences for some airports in Germany, but these information are highly rare and subject to change due to several events starting from high water or (temporary) closing of streets/railway tracks etc. ending at the capacity to be stored at an airport.
I know that ... but "IN TERMINALS" ;)
Well not in the teminal itself lol, but in the terminal area (outside of it or in a special fuel house filled whit tanks but it is owned by the terminal).
Actually I would not be in a terminal whit fuel in it eider ;) but all airplanes I ahve been in, except one have fuel in lol :D .
