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Are Baggage Fees Beginning To Backfire? EasyJet  
User currently offlinedjmatthews From United Kingdom, joined Dec 1999, 213 posts, RR: 0
Posted (3 years 9 months 5 days 14 hours ago) and read 12024 times:

EasyJet's shares hit hard on warning loss could double - Higher fuel prices and lower takings from baggage fees hurt budget airline http://www.guardian.co.uk/business/2...easyjet-shares-warning-loss-double

I found this article to be most interesting, it seems like the easyJet business model could be stalling. I'm sure the industry will be watching any further developments very closely.

[Edited 2011-01-20 05:26:20]

32 replies: All unread, showing first 25:
 
User currently offlinealm1 From Lithuania, joined Oct 2008, 63 posts, RR: 0
Reply 1, posted (3 years 9 months 5 days 14 hours ago) and read 11920 times:

I would say dismal ontime performance and lots of cancelled flights scare passengers away. I know that I would prefer Ryanair over easyjet anytime because I like to get to my destination (or sometimes even near it in case of Ryanair) and I do not trust easyjet to provide that anymore. Anythink else is less important.

User currently offlinerichardw From United Kingdom, joined May 2001, 3755 posts, RR: 0
Reply 2, posted (3 years 9 months 5 days 14 hours ago) and read 11849 times:

Overhead locker hand luggage charges for weekend flights might be on the horizon.

They also need to look at pre-ordered meal revenue as AirAsia and seat charges as Air Asia.


User currently offlinetraveler_7 From Estonia, joined May 2000, 540 posts, RR: 0
Reply 3, posted (3 years 9 months 5 days 13 hours ago) and read 11749 times:

What I like about EasyJet is, reasonably unlimited weight of carry on luggage.
Well, taking into account that they are not in the lowest price segment of the market, I think that 20kg of checked baggage should be free.

Quoting richardw (Reply 2):
They also need to look at pre-ordered meal revenue as AirAsia and seat charges as Air Asia.

How good this meal would be? Once I tried pre-ordered meal on Air Baltic and it was Ok. Much better compared to buy on board sandwiches... .
As to seat charges. They have "priority boarding" which works fine on my opinion.

Regards,
Sven


User currently offlinenighthawk From UK - Scotland, joined Sep 2001, 5163 posts, RR: 33
Reply 4, posted (3 years 9 months 5 days 13 hours ago) and read 11628 times:

Quote:

EasyJet also provided evidence that passengers were actively avoiding the rigmarole of bag check-in charges and other add-ons. Ancillary revenues in the first half fell by more than a quarter due to the reduction in checked-in bags – prompting easyJet to announce a review of charges. Ryanair had claimed that the charges would boost profitability even if they ultimately eliminated checked-in bags because of the savings in baggage handling costs. However, easyJet's statement, and the reaction to it, indicated that the charges are an important earner for budget airlines.

Lower baggage fee revenue is still better than no baggage fee revenue at all... I dont see the logic here? Ryanair is right, even if no-one checks in any bags, the airline is saving money by not paying handling fees. It might be that lowering the fees will encourage more people to take bags, at which point revenue can be maximised, but abolishing the fee all together isnt the answer.

Baggage fees are certainly not backfiring, but high bag fees may well be.



That'll teach you
User currently offlinerichardw From United Kingdom, joined May 2001, 3755 posts, RR: 0
Reply 5, posted (3 years 9 months 5 days 12 hours ago) and read 11391 times:

Quoting traveler_7 (Reply 3):
As to seat charges. They have "priority boarding" which works fine on my opinion.

It's called Speedy Boarding, does it generate enough revenue in your opinion?

They have many holiday flight routes and pre-ordered hot meals might be popular.


User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 6, posted (3 years 9 months 5 days 11 hours ago) and read 11122 times:

Quoting richardw (Reply 5):
It's called Speedy Boarding, does it generate enough revenue in your opinion?

It generates revenue that otherwise wouldn't be obtained, and at no cost to the airline.

Quoting djmatthews (Thread starter):
it seems like the easyJet business model could be stalling

Sorry, but how exactly are you arriving at such a dramatic 'conclusion'?


User currently offlinerichardw From United Kingdom, joined May 2001, 3755 posts, RR: 0
Reply 7, posted (3 years 9 months 5 days 11 hours ago) and read 10986 times:

IMHO the AirAsia short haul allocated seating/pay to chose your seats system may generate more revenue than 'Speedy Boarding'.

User currently offlineGlom From United Kingdom, joined Apr 2005, 2820 posts, RR: 10
Reply 8, posted (3 years 9 months 5 days 10 hours ago) and read 10838 times:

Yikes. That was massive hit. That's really buggering my portfolio. I'm not pleased with RR either. And BA? I'm taking off my monocle. In fact, all my holdings have gone down today.

I always enjoy flying EasyJet. They do a minimalist service, but there is a charm to it and I've not had any problems of note.

[Edited 2011-01-20 09:44:40]

User currently offlineBoeingGuy From United States of America, joined Dec 2010, 3151 posts, RR: 7
Reply 9, posted (3 years 9 months 5 days 10 hours ago) and read 10790 times:

QX lost the business of a large Seattle based ski club traveling from SEA-RNO in February only because of AS/QX's bag fees. They didn't want to pay $80 in bag fees (2x$20 round trip). So the ski club books WN, and will likely always do so.

QX advertises themselves as a ski airline, but they you have to pay extra to check skis, and probably the second bag.

Even though QX's schedules to RNO are slightly better than WN, the trip leader told me that they specifically picked WN because of their free luggage.

Considering their 80% load factor these days, AS/QX probably couldn't give a %$#@ that they lost the business of this ski club group and these people all of the time. I just want to stick it in their face and make sure they know (and WN knows) that QX lost a large group's business to WN because of their first bag fees.


User currently offlineflyglobal From Germany, joined Mar 2008, 590 posts, RR: 3
Reply 10, posted (3 years 9 months 5 days 9 hours ago) and read 10694 times:

Nobody comes to a another point while easyjet may have higher losses.

Here in Europe, they are ell known to sit out and fight over any repaying the EU law fees in case of delay or other circumstances they would be obliged to do.

Even if other airlines do not necessarily have clean shirts in this one, easyjet is the toughest and they rather wait until they get sued until to give up. So getting the customer tired is a strategy. More and more easyjet appears at the rock bottom place of customer satisfaction.

Wording here: Sue them immediately in case of an issue, but better avoid easyjet at all.
Maybe load factors already reflect some customer behavior.

They do not seem to notice.

Instead of creating new ideas for additional fees, they better try to strat making a turn around in customer 'recognition'.

regards

flyglobal


User currently offlineGT4EZY From United Kingdom, joined Dec 2007, 1794 posts, RR: 3
Reply 11, posted (3 years 9 months 5 days 9 hours ago) and read 10183 times:

It's worth noting that the increased loss is projected for the end of Q2. In otherwords half year. This doesn't take into account the Summer months where Easyjet (and pretty much every other airline) makes all it's profits. The company has come through a very tough year, continued economic woes, snow and ash cloud crisis aswell as it's own crew crisis last Summer yet year end last financial year still pulled in a profit along with an increase in pax and yield. This has continued through Q1 with an almost 9% increase in passenger and a reduction in seat cost (excluding fuel).

As for baggage fee's. It's important to remember that these were also introduced to deter some from checking hold baggage. Has it deterred too many? I don't know but anecdotally, the usual routes carry as much hand baggage as they always have. A couple/few days away with unlimited weight cabin baggage has always been popular for those wanting to avoid baggage charges aswell as business travellers who want a quick escape from the airport. What has changed however, is the scope of the Easyjet network over the last few years. Longer distance holiday destinations where for most checking in baggage is an inevitability.
Any review into hand baggage is likely to be related to certain routes being horrendous for hand baggage with extra time required to offload bags or find space in the lockers. That said, if bags were place correctly into the locker this would ease the situation. Just one of my gripes.

Quoting richardw (Reply 2):
They also need to look at pre-ordered meal revenue as AirAsia and seat charges as Air Asia.

Pre-ordered meals will never happen whilst the current oven design remains. Many people, including crew, believe it would be a great idea to earn extra revenue however it would only work or be popular on the longer distance routes.

Quoting richardw (Reply 2):
Overhead locker hand luggage charges for weekend flights might be on the horizon.

This would over complicate things IMO.

Quoting traveler_7 (Reply 3):
Well, taking into account that they are not in the lowest price segment of the market, I think that 20kg of checked baggage should be free.

Why? It's a low cost carrier with lots of it's network consisting of short flights/short trips/day trips where people don't check much baggage regardless. It's one of those instances where you can argue why should those not checking bags subsidise fellow passengers on that flight and on other parts of the network? Perhaps free hold baggage allowance with the new flexible ticket but thats all.

I think in terms of handbaggage we are more likely to see redefined size or even weight limitations.

Quoting richardw (Reply 7):
IMHO the AirAsia short haul allocated seating/pay to chose your seats system may generate more revenue than 'Speedy Boarding'.

Absolutely. It needs to be done. Some won't like the idea but most do. The review is still ongoing but info on it seems to have gone a bit quiet since the TTG article last Autumn.

Easyjet certainly aren't whiter than white but the hit on the share price is merely reactionary to the Q1 results. It will recover and probably increase when the Q3 and final year results are released.....as per usual. Of course, a lot would love there to be a back lash to the baggage charge but U2 are by no means the only carrier these days to impliment it and I believe it is here to stay. Better not pack the kitchen sink just yet.................



Proud to fly from Manchester!
User currently offlineAeroWesty From United States of America, joined Oct 2004, 20732 posts, RR: 62
Reply 12, posted (3 years 9 months 5 days 9 hours ago) and read 9989 times:

Quoting djmatthews (Thread starter):
Higher fuel prices and lower takings from baggage fees hurt budget airline

Last week I was looking for a one-way flight between Nice and Athens for late February. A search on ITA came up with an incredibly low fare on BA via LHR, about half the cost of the next lowest, SN. I then checked fares on skyscanner.net, and it came up with a set of flights with comparable times on EasyJet via LGW for even less than BA, plus an option to go via ORY with an overnight connection (and stopover if I chose) for even less. Backtracking through the UK isn't a problem since this isn't a business trip—I've scheduled the whole day for traveling.

But, once I counted in the cost of baggage—with a separate charge for each flight—plus the cost of other ancillaries, U2 came up more expensive than BA. When I counted in that U2 wouldn't guarantee the 2-hour LGW connection if the first flight was late (that I could find), didn't provide any meals or drinks, plus my impression that legroom would be less, U2 didn't appear to be of any value at all. I didn't even count in the 2,000 or so AAdvantage miles the BA flights would earn in the equation, that's just icing on the cake.

With the trend towards individuals booking online and constructing their own trips and connections, U2 is going to have to do better to incentivize people to book with them. If this trip comes together, I won't even go back to easyjet.com to see where their prices are when I'm ready to buy, despite them flooding my a.net pages with their banner ads now as a result of my visit.

Just with that one impression, from someone who doesn't buy intra-European tickets all that often, I've a very negative view of U2's product and trading practices, and don't believe I'm the only one who comes to that conclusion. I doubt that blaming fuel costs and baggage fees for their lower takings tell the whole story.



International Homo of Mystery
User currently offlineGT4EZY From United Kingdom, joined Dec 2007, 1794 posts, RR: 3
Reply 13, posted (3 years 9 months 5 days 8 hours ago) and read 9480 times:

Quoting AeroWesty (Reply 12):
With the trend towards individuals booking online and constructing their own trips and connections, U2 is going to have to do better to incentivize people to book with them. If this trip comes together, I won't even go back to easyjet.com to see where their prices are when I'm ready to buy, despite them flooding my a.net pages with their banner ads now as a result of my visit.

Just with that one impression, from someone who doesn't buy intra-European tickets all that often, I've a very negative view of U2's product and trading practices, and don't believe I'm the only one who comes to that conclusion. I doubt that blaming fuel costs and baggage fees for their lower takings tell the whole story.

As my username suggests, i'm an employee but i will always take a balanced view.

Point to point airline so unfortunately they aren't going to guarantee your connection. However, some limited connections where there is a market would be a great way forward as the network is one of Easyjet's strengths.

Easyjet (with help from other airlines) pioneered the "dynamic" packaging/self packaging of trips and more carriers have followed their lead than the other way round........and on both sides of the Atlantic. There is no argument against the fact that the competition has made BA et al more competitive........which is great for everyone IMO.

For simple point to point journey's however, more often than not, Easyjet, Ryanair (i ain't their biggest fan), Wizz etc etc will be cheaper, even with the charges on top. The regions/provinces of the UK (and other European countries) are also served well by the LCC's, U2 in particular. There is a lot of reluctance in Europe to "change planes" on short haul trips and there is a value placed on direct flights which Easyjet and others obviously provide.

For a very basic trip, the whole baggage situation is no different to domestic US flights and AA with whom you are a frequent flier.

I'm not just out to justify Easyjet because at the end of the day I have my own ideas where things could be changed and improve and i work for them, i don't own them outright. (Shareholder) However, some of you paint the picture that dictates doom and losing passengers hand over fist when in fact 8% more passengers were carried in Q1 at a time when growth (aircraft deliveries) have slowed.



Proud to fly from Manchester!
User currently offlinespud757 From United Kingdom, joined Nov 2007, 339 posts, RR: 0
Reply 14, posted (3 years 9 months 5 days 8 hours ago) and read 9349 times:

Allocated seats on U2 would bring in extra revenue - LS, WW and BE prove it works. Adds value for the airline and reassures pax. I avoid U2 and FR if there is an alternative. Can't stand non-allocated seat queuing and stampedes.

As for baggage... reasonable charges and reasonable allowances. FR 15kg what's that all about. Again LS has the right idea and for that I have no issue flying with them


User currently offlinevfw614 From Germany, joined Dec 2001, 4013 posts, RR: 5
Reply 15, posted (3 years 9 months 5 days 8 hours ago) and read 9041 times:

Easyjet could simply do away with their unlimited weight for carry-on and introduce Ryanair-style nickel-and-diming at the gate - if the situation gets that desperate. Would be quite interesting to find out what the better overall deal is for the airline.

User currently offliner2rho From Germany, joined Feb 2007, 2678 posts, RR: 1
Reply 16, posted (3 years 9 months 5 days 7 hours ago) and read 8788 times:

U2 has had a poor performance, so... let's attack the baggage fees and conclude that its business model is broken! What kind of logic is that???

Truth is, U2 was not long ago an excellent airline, in an ideal position between the overpriced unflexible legacies and the too-no-frills FR. But over the past 1-2 years, unrealistic scheduling and understaffing has led to systematic delays and frequent cancellations that have seriously harmed its reputation. Furthermore, legacies have become more competitive over the years and U2's price advantage has decreased.

Ways forward? Regain its okd reputation, offer allocated seats instead of speedy boarding, introduce ad-hoc connections, ...


User currently offlineeisenbach From Austria, joined Mar 2001, 116 posts, RR: 0
Reply 17, posted (3 years 9 months 5 days 7 hours ago) and read 8539 times:

Quoting BoeingGuy (Reply 9):
QX lost the business of a large Seattle based ski club traveling from SEA-RNO in February only because of AS/QX's bag fees. They didn't want to pay $80 in bag fees (2x$20 round trip). So the ski club books WN, and will likely always do so.

I agree. That's the reason why I always fly with Finnair to Northern Europe, as they carry my sports equipment for free.
I often even don't think about low cost carriers (except NIKI, but I do not consider them as a "real" LCC), because I don't want to bother with 100 extra fees and having less legroom.



Do228, Saab340, Twin-Otter, C212, Fokker50, AN24, ATR42, ATR72, Dash8-400Q, MD90, MD83, EMB120, A300, A343, B721, B743,.
User currently offlineOceanRover From UK - Scotland, joined Jan 2011, 7 posts, RR: 0
Reply 18, posted (3 years 9 months 5 days 5 hours ago) and read 7368 times:

It would be interesting to find out what proportion of passengers check bags into flights less than 1 hour duration.
Most, I suspect would only check in baggage if they really had to. On longer flights for those on a vacation, pax with checked baggage would be in the majority.

My recent experiance on a U2 flight from STN to EDI would indicate around 90% of passengers without hold baggage.

[Edited 2011-01-20 14:30:28]

User currently offlinetrintocan From United Kingdom, joined Apr 2000, 3240 posts, RR: 4
Reply 19, posted (3 years 9 months 5 days 4 hours ago) and read 6938 times:

Somehow, when reading that article and reflecting on my own travels, I think there may be another side to the baggage fees issue. Here's the situation: frequent flyers and business people generally know the airline's rules inside out and thus walk only with hand luggage. However, some less frequent flyers may head out on a weekend break or something like that to a city of choice. They know or realise that the airline charges for hold baggage so they intuitively decide not to purchase any allowance when buying the ticket.

The trouble is, once they get to their destination, they may find something(s) which they really like and, as it is a special occasion, they decide to buy the stuff not necessarily thinking about baggage charges when doing so. They then find that the stuff cannot fit in their hand luggage and decide to check in a piece (either by buying a bag to check in - or maybe the bag was the item they fancied so much!). Then they go to the airport and find that the baggage charges are higher than if they had purchased an allowance online (the website does state this but the people overlooked this fine point in the excitement of booking). They then are hit with a high baggage bill and trust me, even as a fairly frequent traveller a baggage charge on the spot is frustrating. So, maybe it is not necessarily just those who are against paying upfront for luggage but also those who, stung by an experience like that, decide not to fly with the airline again.

It is very much human to decide to buy something on the spur of the moment when away and I think it is those travellers who find themselves either facing check-in fees or excess baggage fees at premium desk rates who the airlines are privately hoping for. This may thus account for some of the "anger" mentioned in the article and all carriers which charge for checked luggage may be affected.

Trintocan.



Hop to it, fly for life!
User currently offlineVV701 From United Kingdom, joined Aug 2005, 7617 posts, RR: 17
Reply 20, posted (3 years 9 months 5 days 3 hours ago) and read 6479 times:

If we are discussing the contents of the link provided by the thread starter which is titled:

"EasyJet shares dive as fuel costs, snow and anger at baggage fees threaten to double losses"

it is interesting that the number one item on the Guardian list and what I believe is the greatest threat to the easyJet business model, fuel costs, has not received a single mention in the first 19 replies.

Baggage fees? A useful if small add-on. But fuel costs . . . They are an entirely different matter.

When we refuel our cars we are crudely protected from the full blast of the increasing price of crude oil because most of what we pay for fuel in the UK is fuel duty and VAT. But when U2 refuels its aircraft it is fully exposed to the worldwide free market in oil and its derivatives. And clearly if the price of crude oil continues to escalate through US$100 a barrel towards $200 a barrel then the low cost aspects of an LCC business model compared to the full cost aspects of a traditional or legacy carrier begin to evaporate.

Put another way every time the cost of a barrel of oil increases by $1 and the cost of aviation fuel follows so the impact of aviation fuel cost on total costs grow and at the same time the cost advantages of the LCC model become smaller.

The article says:

"EasyJet said the cost of aviation fuel rose to $897 (£565) a tonne from $681 a year ago – squeezing an industry in which fuel makes up a third of costs."

If that "up to a third of costs" were to become "up to a half" or even "up to two thirds" of costs then not only would the competitive position of U2 and many other LCCs b e threatened. Much of their market might be driven away by fare increases. Baggage fees would become almost an irrelevance.

With the current price of oil and the trend in that price we are re-entering another period where the profitability and the very existence of some airlines will reflect not baggage fees, not whether or not it has snowed or a volcanoe has blown its top but the calls maded by the airline in the oil futures market.


User currently offlineprebennorholm From Denmark, joined Mar 2000, 6484 posts, RR: 54
Reply 21, posted (3 years 9 months 5 days 3 hours ago) and read 6250 times:

Quoting alm1 (Reply 1):
I would say dismal ontime performance and lots of cancelled flights scare passengers away.

You are right on the spot here. Those business analysts at The Guardian can analyze the EasyJet Business accounts, but what they can't (and don't try to) analyse is the minds of the people who for various reasons put a little red flag next to www.easyjet.com in their browser favorites.

An event like recently, when EasyJet had a plane overloaded with fuel in Birmingham, and they transfer ownership to that problem entirely to the passengers, that costs dearly when it is so extensively treated by the press next day.

Being put at the very bottom of the list of airliner's on time performance is another thing.

Having the reputation that pax never gets a refund for a cancelled flight unless they go to court. Oh, well....

Any talk about load factors in such a situation is nonsense. What is relevant is the data in the EasyJet yield management system which calculates much too low fares in order to get reasonable load factors.

In any service business reputation is master of the game. It will be hard these days to find an airline which has a harder job than EasyJet to do to improve general reputation.

The hardest customer relationship to analyse is always the potential customer who never calls you and never visits your web site.

It is much easier, like The Guardian does, to analyse simpler business factors like fuel prices, ahs, snow and all such things. Troubles which EasyJet share 100% with all their competitors.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
User currently offlineAeroWesty From United States of America, joined Oct 2004, 20732 posts, RR: 62
Reply 22, posted (3 years 9 months 5 days 2 hours ago) and read 5901 times:

Quoting GT4EZY (Reply 13):
Point to point airline so unfortunately they aren't going to guarantee your connection. However, some limited connections where there is a market would be a great way forward as the network is one of Easyjet's strengths.

Thanks for your considered reply. It may very well be that customers such as myself are chaff that isn't worthwhile chasing. At least I found out about that up front than at the boarding gate.

It seems that U2 is trying to lean more towards traditional airline services though, if their banner ads are any indication, since the one I'm hit with the most is the one advertising same day ticket change, something of high value to business travelers, who won't stand by too idly being treated as if they're a once-per-year vacationer on their way to Benidorm.

While I'm no expert on U2, it seems like the airline is at a crossroads, not exactly knowing which road to take. U.S. airlines went through something similar over the years. They decided to shower their most valuable customers with perks, while leaving the masses to fend for themselves. Even our venerable Southwest Airlines, one of the original Greyhounds-in-the-sky, has figured out how to cater to everyone who presents themselves for travel on their network. I guess that's what I was most miffed at during my limited EasyJet experience.

Quoting VV701 (Reply 20):
"EasyJet said the cost of aviation fuel rose to $897 (£565) a tonne from $681 a year ago – squeezing an industry in which fuel makes up a third of costs."

Those numbers actually surprised me, since the company had ample opportunity to hedge fuel costs in the $40/bbl range in late 2009/early 2010. I realize one can't expect them to hedge their entire need, since hedging can be a capital sink hole as well, plus the company trades in GBP and EUR while oil in priced in USD. There wasn't enough information to examine the effect of the natural hedge in oil during this period, as the dollar tends to drop in value as the price of oil rises.

Be that as it may, I agree with your analysis, adding to it that eventually, fuel costs may very well turn out to be their Achille's Heel if the company doesn't have a strategic fuel and currency hedging plan in place.

Quoting prebennorholm (Reply 21):
The hardest customer relationship to analyse is always the potential customer who never calls you and never visits your web site.

  



International Homo of Mystery
User currently offlineltbewr From United States of America, joined Jan 2004, 13138 posts, RR: 15
Reply 23, posted (3 years 9 months 5 days 1 hour ago) and read 5816 times:

When PeopleExpress existed back in the 1980's they charged $3 for each checked bag for all flights, foreign or domestic, about $10 in today's money. In their case, it was to reduce the number of checked bags to improve turnaround of flights, but this is a time well before the higher security checks and their costs that are since required of checked baggage within and to/from the USA.

People would have no problem with a reasonable fee like $10 per standard 20 Kg. bag, maybe for the 1st of up to 2 checked bags, but they have a problem with $25 per each such bag, especially with multiple sectors and subsequent fees. Perhaps for many airlines, the use of bag fees is starting to cause too many unintended problems including too many pax with too much in carry on baggage on more crowded flights overwhelming carry on overhead capacity. Taht in turn may lead more customers to reconsider some airlines with the total costs are higher on a lower fare carrier with the fees vs. one of standard fares but lower fees.


User currently offlineprebennorholm From Denmark, joined Mar 2000, 6484 posts, RR: 54
Reply 24, posted (3 years 9 months 5 days 1 hour ago) and read 5632 times:

Quoting AeroWesty (Reply 22):
...fuel costs may very well turn out to be their Achille's Heel if the company doesn't have a strategic fuel and currency hedging plan in place.

Dear AeroWesty, I think that you are considering hedging too much as a profit generator.

Hedging is a hybrid of lottery (gambling) and insurance.

If your company is in such a stretched economic condition that a small stone on the road will turn over your load and bankrupt you, then hedging is a good way to save your company from bankruptcy in case of temporarily decreased business margins.

If you are a big gambler, then hedging can win you great piles of money. Roughly the same money piles as you may lose on the hedging contract.

At the end of the day, the banks do not sign a hedging contract if they (the banks) don't believe that in the long run they will make profit doing so. Consequently, in the long run, for airlines it will always cost money to hedge, while the banks will earn money like the insurance companies and the Las Vegas bookmakers do.

There is never a free ride.

On the other hand, hedging isn't always a choice. Quite often companies are forced into hedging deals by their creditors. That is when a company is negotiating delayed payments to a major creditor, and he considers his lending at high risk. Then he may force the company into hedging contracts even when the company doesn't find it attractive, simply because the creditor thinks that it lowers his risk.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
25 AeroWesty : I disagree. Hedging is a vehicle to help predict your future costs and how to price your product. For example, the company I work for writes contract
26 MillwallSean : I think easyjet has quite a few problems. there ontime performance is horrendous as of late and that is really a determinant to the business people et
27 Post contains links richardw : This is becoming more generally well known, easyJet has benefitted from selling tickets over the internet and the internet is sharing information abo
28 aerokiwi : My recent experiences with Easyjet have been fairly mixed. But one wayt hey might like to address revenue streams is be ensuring they have enough buy-
29 babybus : Personally I find easyjet a bit expensive for a low cost carrier. I also find their poor timekeeping a bit of a bind. 'Low cost' doesn't need to mean
30 AirNZ : I would agree with your post entirely but, to be entirely fair, when has EastJet ever stated that, or used it?
31 Pe@rson : Purely depends - my boss recently flew EZY to LGW last minute and said he would have flown BA but was too expensive. Anyway, my first search for a pu
32 Lufthansa747 : I'm not blaming them - the labor costs are ridiculous in Europe. But if I can check in 60kg with TK, they can fully well be a bit more expensive than
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