QUESTION IS TO HEDGE OR?

t.man hatter
This is in our view another sign of complacency in the energy market. Airlines might not be buying hedges on the dips, but that doesn't mean you as an investor shouldn't be adding select companies to your energy portfolio.

Take what the market gives you. The more pessimistic people become about the lack of economic recovery the more likely they will get surprised. The more these central bankers claim they know what they're doing, the more they're likely to screw things up.

China is now doling out large cash incentives for interracial marriages to help quell unrest among a mainly Muslim ethnic group. And with the Chinese economy moving down toward 7 percent, new stories about India with its new regime picking up the global growth slack are starting to pop up.

The point is basic: There's plenty of room here for error.

An old investing adage is to buy on the dips, a philosophy generally followed by US airlines in the hedging market over the years. This year? Not so much.
Jet fuel prices have declined in price and volatility so far in 2014. So has jet fuel hedging, at least in the US. What is essentially insurance on any airline’s single-largest cost has become seen as less than necessary.
 
The world’s largest airline, newly merged American Airlines, said it had sold off its hedging contracts by the end of the second quarter, an expected move as merger partner US Airways had gone without hedging since 2008.  

Traders and brokers who make money selling the calls, collars and other financial instruments questioned whether other airlines would pick up the slack, especially tempted by a flat-price drop over the summer.
“My sense is less hedging overall,” one jet trader said. “Take AA. They’ve adopted the US Airways model so they are entirely out of it. Nobody wants to catch a falling knife, plus consolidation has created less demand for hedging.”

Platts data showed that 2014 spot market prices in the benchmark Gulf Coast, where half of US jet fuel is produced, averaged $2.88 per gallon as of August 28. 

http://blogs.platts.com/2014/09/01/us-airlines-hedging/