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KevinAu

Three airline-business questions.....

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Hi all.Decided it's time to ask. I have three issues relating to the airline business that I'm keen on an explanation to. Please see below:RPK'sSeem to be very significant in assessing an airline's profitability/cost structure. I know what it stands for, but how does it fit into the airline business?FUEL HEDGINGAgain, I understand the basic concept, but find it hard to understand why some airline's don't do it (Virgin Blue is one). Given fuel is more likely to increase in price than go down, why would you NOT do this?"OPTIONS" ......when purchasing aircraft. I often read "XXX airline has bought 15 XXX aircraft, with an option to buy 7 more".So? Hasn't an airline always got an option to buy more aircraft? I know that's simplistic, and maybe someone can explain exectly what an "option" to buy actually means. Does it give airlines an easy "out" if they change their minds, or something like that?Thanks guys (and gals)TimNZWN

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>Hi all.>>Decided it's time to ask. I have three issues relating to the>airline business that I'm keen on an explanation to. Please>see below:>>RPK's>>Seem to be very significant in assessing an airline's>profitability/cost structure. I know what it stands for, but>how does it fit into the airline business?I don't know what RPK is. But I am guessing you are asking about Revenue Per Seat Mile or Cost Per Seat Mile. It is your revenue or cost divided by how many passenger seats are available divided again by how many miles those seats fly. It is a measure of efficiency.>>FUEL HEDGING>>Again, I understand the basic concept, but find it hard to>understand why some airline's don't do it (Virgin Blue is>one). Given fuel is more likely to increase in price than go>down, why would you NOT do this?>Not enough cash. Belief that fuel might actually go down. Gas is already down to $2.45 where I am from a high of $2.97 a few weeks ago.>"OPTIONS" ...>...when purchasing aircraft. I often read "XXX airline has>bought 15 XXX aircraft, with an option to buy 7 more".>So? Hasn't an airline always got an option to buy more>aircraft? I know that's simplistic, and maybe someone can>explain exectly what an "option" to buy actually means. Does>it give airlines an easy "out" if they change their minds, or>something like that?>Buy options for seven more and we will lock in this certain price if you choose to exercise them in the future. Who knows what the price will be a year from now.>Thanks guys (and gals)>>Tim>NZWN>>

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