Which of the Following Statements Related to the Hedging of Fuel

question 4

Multiple Choice

Which of the following statements related to the hedging of fuel price risk by airlines is INCORRECT?

• A) Fuel is a major cost of the airline business and it can range from 10 percent (in good times)to more than 35 percent (in bad times)of average expenses.
• B) All airlines hedge price risk of between 75 to 100 percent of their fuel purchase.
• C) The amount of fuel needs hedged by the airlines has ranged from zero to over 75 percent.
• D) What Southwest Airlines characterizes as their successful derivatives hedging program was some combination of hedging and speculation that worked well for a time.
• E) An airline's decision to charge for checked-in baggage is a natural hedge,because loss of revenue from losing customers is offset by money received from the fees and making airplanes lighter (which are cheaper to fly).