Should jetblue continue to use wti as an oil benchmark

Reference no: EM133429113

Question: Using the "2012 Fuel Hedging at JetBlue Airways" case. This case is intended to have students take on the role of a reserach analyst to 1) evaluate the jet fuel heding strategy of JetBlue Airways and 2) make a recommendation as to how (hedge or not hedge) Jet Blue should proceed , how much (volume of jetfuel) to hedge (if the recommendation is to undertakehedging), and what derivative (futures or options) contract should be used (WTI, BRENT, or ULSD -Heating Oil).

At the time of this case, JetBlue's profits had suffered as a result of increasng jet fuel costs. Since jet fuel costs generally account for 40-50% of an airlines operating expenses, significant changes in jet fuel prices definitely impact profitability.

As you read the case, consider why companies hedge. Determine if hedging is perfect and by that the reference is to basis risk. Be prepared to discuss the following questions at our F2F meeting, and these questions will ultimately be due in CASE MEMO form on July 23. You will be evaluated on both your class discussion and your case memo. The case memo should not exceed three pages (not counting any graphs or quantitative analysis students may choose to complete).

Answer the following questions, drawing on your analysis of the case and the data provided: 1) Given the high price of jet fuel at the end of 2011, should JetBlue hedge its fuel costs for 2012? If yes, should it increase or decrease the percentage hedged for 2012? Explain.

2) Focusing on the 2007 to 2011 period, which commodity (WTI, Brent or Heating oil) moved more closely to the price of jet fuel?

3) If the answer to questions 1) above is yes, should Jetblue continue to use WTI as an oil benchmark for its crude oil hedges or switch to another commodity. Justify your answer using the 2007-2011 historical data in Exhibit 6

Reference no: EM133429113

Questions Cloud

What explains the failure of chinese-us joint venture : What explains the failure of Chinese-US Joint Venture? Discuss with reference to Hofstede cultural dimensions

Write an article on the value of continuing education : Write an article on The value of continuing education and life-long learning in opticianry.

Why is coca-cola so keen to get into the chinese market : Why is Coca-Cola so keen to get into the Chinese market and Discuss the reasons for Coke's failures in the Chinese beverages market.

Write an analogy of a cell which incorporates : Write an analogy of a cell which incorporates as many of the organelle as possible (at least 5). Good analogies using a post office, the government, and rooms

Should jetblue continue to use wti as an oil benchmark : should Jetblue continue to use WTI as an oil benchmark for its crude oil hedges or switch to another commodity

What will the price of a pollution permit be in equilibrium : What will the price of a pollution permit be in equilibrium and If the government decided they wanted to achieve the same outcome using an emissions fee

Why does the narrator still feel responsible for bartleby : "Bartleby the Scrivener" by Melville. Why does the narrator still feel responsible for Bartleby, even after moving to a new office?

How much does each firm emit with the pigovian fee : Calculate and graph the firm-level and aggregate marginal savings functions and Calculate and graph the individual and aggregate marginal damage function

What it is like to stick to spending limits : His parents have already set up checking and savings accounts for him at their bank. They want him to begin to learn the responsibilities of paying part

User Account

All Pages