Full article in JPG format: page 20/21 & page 22/23
In its 2006/07 annual report, Dubai-based Emirates Airline proudly announced that its “fuel risk management programme” – more accurately described as an oil hedging strategy – had delivered savings of $197 million against spot prices for jet fuel. Gary Chapman, president of group services at the carrier, said the programme had saved Emirates $1 billion over eight years.
One year later, on the precipice of the worst financial crisis in living memory, the airline vowed that it would continue to “achieve a level of control over jet fuel costs so that profitability is not adversely affected” by volatile market prices.
It failed to do so. By the time Emirates’ 2008/09 report was being audited by PricewaterhouseCoopers, the company had written down annual fuel hedging losses of Dhs1.57 billion ($428 million). It may have succeeded in positioning itself defensively against higher oil prices, but it did not mitigate the downside risk of a price crash, which inevitably accompanied the global recession. The mistake was repeated in airline boardrooms around the world...