Finances

World's oil prices have been tumbling down substantially since June 2014 to current level of US$60/barrel. As most of us already knew, when this kind of news appear, airlines industry tends to be one of main beneficiaries. However, why cheaper oil price this round doesn't really translates into cheaper air ticket price? The Oily Factor... Oil is the biggest variable cost for airlines, often representing 1/3 or more of their operating expenses. Hence, the profit of an airline is very much depends on oil prices movements. And, due to this very important factor, many airlines are trying hard to minimize this risk until they found one strategy called --- hedging . However, there is a flip side to this hedging strategy, which is if they bet on the wrong direction. Normally, an airline would hedge against the rising oil prices up to certain months. It can be three months or six months for example. This strategy works well if oil prices didn't fluctuate much, helping airline to e