The Rise, Fall, and Rebirth of Airline Fuel Hedges

Airlines are a fun industry to track, as long as you don’t have to own the stocks.

1. There’s a natural emotional appeal to flying. If you take a flight, you’re traveling about 50x faster than the fastest any human had ever traveled until the 20th century.
2. Because some people just go crazy over aircraft, the industry has a disproportionate number of talented and hyper-competitive executives.
3. Another group that loses all sense of proportion about planes: governments! Many countries subsidize national airlines, especially when they exemplify values the government would like to promote, such as Singapore Airlines’ quiet, expat-friendly efficiency, or HNA’s colossal, unsustainable leverage. Airlines are a particularly useful business to promote for countries that want business travel, sell exports for dollars, and don’t want their currency to appreciate. They can recycle those dollars into planes, so Middle Eastern carriers are well-funded famously luxurious.
4. Airlines are a big business with direct exposure to all sorts of interesting trends: they’re heavily unionized, so they’re a good leading indicator of labor’s negotiating strength; they service leisure and business travelers, so they offer a broad look sentiment across the economy; they’ve slowly shifted from a ticket- and route-level model to a customer acquisition model, where a substantial chunk of their profits come from membership programs rather than airline operations; and their most variable…