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Online Airline Management Simulation
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Author Topic: New feature: Fuel hedging  (Read 1848 times)

Offline Sami

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New feature: Fuel hedging
« on: April 23, 2012, 03:29:45 PM »
A new feature has been just added to all running game worlds: Fuel hedging.

Fuel hedging is a contractual tool that can be used to reduce the exposure to volatile and potentially rising fuel costs. A fuel hedge contract allows the airline to establish a fixed and known fuel cost base for the future, and may this way protect the airline from high fuel costs or otherwise just help in budgeting the expenses for the future when costs are known.

Fuel hedge can save you money when fuel prices are on the rise, or you may also loose money if you bet at the wrong time. If the company takes a fuel hedge and the price of fuel declines, the company will effectively be forced to pay an above-market rate for fuel. And vice-versa, if the fuel price increases the company is winning compared to paying standard market prices of the fuel.

In AirwaySim fuel hedging system is simplified, and the airline owner has the ability to "lock in" the present daily market fuel price for a period of 1-12 months to the future by agreeing to pay a commission (1-8%) to the fuel broker. Once the contract has been signed it cannot be cancelled and it continues to run until the due date. When contract is nearing it's end it can be re-negotiated with the terms of that day.


Please see more about the feature from manual: http://www.airwaysim.com/game/Manual/Office/Fuel/

wapp11

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Re: New feature: Fuel hedging
« Reply #1 on: April 24, 2012, 10:34:47 PM »
So will fuel prices follow historic ups and downs, or are they random? I remember in the past the game world would say whether prices were custom or actual, but could not find them now, granted I'm on my iPad, and did not do the best search. Also say they are not going to follow historic levels, will technical analysis work on the fuel price charts as it somewhat works in the real world markets? Or is it just going to be a random lucky guess? 
Thanks
Wapp

Offline JumboShrimp

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Re: New feature: Fuel hedging
« Reply #2 on: April 24, 2012, 10:46:49 PM »
Most of the games have been random.

BTW, just trying the figures, going to 12 months, the fee seems to rise very quickly.  It seems too quickly.  I don't know how it corresponds with actual prices of these types of hedges.  Going up to 24 or 36 months with 6 month increments after 12 moths might be good additional options...

Offline Sami

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Re: New feature: Fuel hedging
« Reply #3 on: May 03, 2012, 06:31:13 PM »
The mandatory feedback round ... Any comments so far? For example in regards of the fee levels and such.

(not that I'm planning to change anything, but still ....)

Offline schro

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Re: New feature: Fuel hedging
« Reply #4 on: May 03, 2012, 06:45:57 PM »
The mandatory feedback round ... Any comments so far? For example in regards of the fee levels and such.

(not that I'm planning to change anything, but still ....)

I like the feature so far - it is simple and intuitive. The only tweaks that I would want to see done is having a longer range available to hedge (perhaps up to 5 years), and the fee be a bit lower than it is now, especially for longer ones. The current percentage for a 1 year hedge is steep enough to almost make it not worth while unless you are 100% certain that fuel will spike - it basically makes it a bad deal if fuel stays around the hedge price. I'd like to see the one year fee run about 2% or so, then perhaps add a percent for each additional year hedged.

Offline Pukeko

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Re: New feature: Fuel hedging
« Reply #5 on: May 03, 2012, 06:52:30 PM »
In regards to setting default prices - it appears that the hedged priced is used to calculate this parameter. Is this correct? I hedged 100% of my fuel in MT when it was at its lowest point (lucky me), and have reset my ticket prices to the default several times since - and the same default prices appear. I think it would be better if they are calculated off the actual price (rather than the hedged price)...in my opinion anyway.

Offline Sami

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Re: New feature: Fuel hedging
« Reply #6 on: May 03, 2012, 07:08:02 PM »
In regards to setting default prices

Fuel price and suggested ticket price have no relation. Ticket price is based on the inflation level.

Offline Jona L.

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Re: New feature: Fuel hedging
« Reply #7 on: May 03, 2012, 07:27:14 PM »
Fuel price and suggested ticket price have no relation. Ticket price is based on the inflation level.

It appears to conincide though, as default pricing goes (or seems to go) up or down with the fuel with about 1 game day delay...

Offline schro

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Re: New feature: Fuel hedging
« Reply #8 on: May 03, 2012, 07:41:27 PM »
It appears to conincide though, as default pricing goes (or seems to go) up or down with the fuel with about 1 game day delay...

I'm guessing that fuel price and inflation are recalculated and applied independantly on different game days during the week....

Offline swiftus27

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Re: New feature: Fuel hedging
« Reply #9 on: May 04, 2012, 11:09:57 AM »
They are both independent variables.

raggixx

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hedge vs contract
« Reply #10 on: May 19, 2012, 02:22:10 AM »
how does hedging comply with fuel contracts? i have a fuel contract at my location and am hedging as well.
How is the effective fuel price then calculated?

Offline EsquireFlyer

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Re: hedge vs contract
« Reply #11 on: May 19, 2012, 03:19:16 AM »
how does hedging comply with fuel contracts? i have a fuel contract at my location and am hedging as well.
How is the effective fuel price then calculated?

The manual says that at your home base(s), you get BOTH discounts (hedge + contract). Of course if your hedge is a bad hedge, you get that markup, plus the contract discount.

At outstations you just get the hedge discount/markup.

 

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