After much partisan wrangling, congress has signed financial legislation into law that will limit the size of trades for anyone not hedging fuel with the intent of actually using it.
Some airlines may be tempted to think this new Dodd-Frank Act will solve many of their fuel-hedging problems. But we believe airlines should not be lulled into a false sense of security.
The legislation may curb the trading activities of energy trading participants like investment banks and hedge funds. But they will remain significant players in energy markets. Moreover, large fuel price swings will return. The only questions are when, and which airlines will emerge from the turbulence in the strongest position.
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