‘Hedging is a waste of time,’ UBS analyst tells airlines

Singapore (Platts) —
The world’s airlines should stay away from trading oil derivatives and
hedging in general because the exercise had proven to be “a waste of time,”
the head of Asia transport research at Swiss bank UBS, Damien Horth, told a
meeting of the world’s airlines in China late last week.

“I would be of the view that hedging is a waste of time,” said Horth.
“Most of the hedging I have seen in the last two to three years has been
speculative.”



Horth, who was speaking to delegates at a jet fuel meeting hosted in
Shanghai by the International Air Transport Association, said that few
airlines seemed to be using oil derivatives simply to manage cost. In Asia,
only Singapore Airlines, which has a well-publicized hedging strategy that is
discussed in detail in each quarterly result, appears to have been hedging
effectively, he said.

“If you are simply price-setting, fine … what they have been doing
has been non-speculative. Every other airline has been taking a view on oil,
and once you do that, you are speculating.”

Horth dismissed academic studies that suggested there was a positive
correlation between share prices for listed airlines and those that have
hedging programs in place.

Platts