2 replies to this topic

[Delta Force]

In real life, trying to get the best price on aviation fuel is a major concern for the airlines. Some airlines buy spot price, which is essentially buying the oil for what it happens to cost at the time they buy it (similar to when you go to buy gasoline from a gas station), while other airlines lock in their cost for fuel by using a process called hedging. Yet others use a combination of the two. Think of it something like insurance, the airline can go to a company that sells fuel and lock in the price for the fuel with them. Say oil is selling for $40 a barrel right now, but the airline thinks it might hit $100. If a seller thinks that the price will actually go down to $30 a barrel for oil, then they could sign an agreement with the airline to lock in fuel prices at an agreed upon rate, say in this case $60. The catch is that the airline is obligated to buy and the seller obligated to sell oil at that price and in the specific amount outlined in the contract. If oil hits $80 a barrel the airline is making a nice $20 savings on the price of its jet fuel, while the oil company is losing $20 per barrel on the price. However, if it were selling for $40 per barrel the situation would be reversed, the airline would now be paying more for oil than everyone else.

Hedging can either make an airline more profitable or less profitable, depending on where the oil markets go. The alternative is simply to go along for the ride of the markets, but that produces instability in prices. It is up to the airline to determine how lucky it feels, and if it wants to use hedging or merely buy from the spot market.

[ChemicalReaper]

I think this would be a cool thing to add to the game. It sounds like it would take a lot of coding to do -- so perhaps this is something that can be added in the relatively distant future (I believe there are other things on the development plan that are easier to do).

[miller22 (inactive)]

Not so speak out of turn, but I had started the work on this although at a rudimentary level. It wasn't exactly the hedges you see today, but the same concept through pre-buying fuel at current rates. If the price of fuel went down, you lost out, but if it went up you were in the money.

The trick was setting the fuel price. The best way was to just use current oil prices since nobody truly knows if they'll go up or down. I tried scraping the fuel price for a while to get a good data set, but that only worked for a short while. I couldn't find a reliable data source for the oil/jet-A fuel price.

The other issue is with the accounting. The way the game was set up earlier, you would have had to pay cash up front for the fuel and then each flight would have essentially free fuel. However, in order to have a true look at whether the flight was profitable, you had to include fuel at the price they paid. Then you'd have to track the amount they bought so that it went back to market price when they ran out.

All in all, it was a very simple concept that became much more complex when you tried to implement. Not impossible, just complex.