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While hedging may stabilize your revenues, it doesn't come for free. There are margin costs, execution costs, credit risks, and you can't hedge out into the future indefinitely.
The other option is to not leverage your business up so much that you can afford some volatility in your revenues.
And hedging is still pure speculation, sure it gives short to medium term certainty on cost of input (fuel), but it also requires you to make a call on the future direction of price. I wonder how many heli operators have the emotional profile to lock in at today's price, just to see a 30% decline in fuel by next winter.
Astars burn 45 gallons per hour
average price jet fuel per gallon in AK: $6.23
fuel operating cost per hour: $280
what they charge per flight hour: usually over $900
they have some room to spare.......
This thread is wack.
Awesome! A business model with only one variable cost and no fixed costs! [/sarcasm]Quote:
Originally Posted by Bob O
Actually, the real world data is appreciated.
Um, only if you own the Heli. No ops in AK own their own Heli, they lease them from someone. Then you buy your own fuel from the local fuel supply company.Quote:
Originally Posted by Bob O
By the way $900 is less than half of what is charged per person per hour of fly time in AK.
When I worked up there - we charged close to $4,500 per hobbs hour and sent close to 2/3 of that to the heli company. Factor in Jet B fuel costs + cost of the shuttle up there for the heli (you own them a bunch of hours before you are charging guests) and standard operating costs for the lodge/facilities - it's pretty tight.
Yes, you can make a lot of money but the expenses involved in running a heli op are ridiculous.
i wasn't sure what the pilots get paid. i would hope at least $60 an hour. I saw a few places that charged $900 an hour (that is per person) and in about a full day of heliskiing you're in the heli for about an hour give or take 15-20min.
x2. Can't see the dentists staying home vs. throwing down a few $100 more.Quote:
Originally Posted by Hugh Conway
ATV/ORV use around here (which is usually dust-choked ATV hell) is WAY down this year, thank god.