An article in the Wall Street Journal in 2016 noted:
“After decades of spending billions of dollars to hedge against rising fuel costs, more airlines, including some of the world’s largest, are backing off after getting burned by low oil prices.”
a. How would airlines hedge against rising fuel costs?
b. Why would low oil prices cause airlines to be “burned”?
c. Does the fact that airlines were burned by their fuel hedges in 2016 mean that hedging their fuel costs was a bad idea? Briefly explain.