Fuel-Hedging at Alaska Airlines

Case Study Questions:

1. 1. How many gallons of jet fuel did Alaska require in 2019. What was the cost per gallon of this fuel, and the total fuel expense recorded in their financial statement.
2. 2. Fuel costs for Alaska represent what percentage of total operating expenses, and total revenue, respectively, for Alaska.
3. 3. If fuel costs were to increase or decrease by $.01 per gallon, what would be the related impact on operating income.
4. 4. Alaska says that it hedges fuel costs with call options. Explain in laymans terms, how one might use a call option to hedge fuel costs.
5. 5. What percentage of Alaskas fuel needs are hedged? Over what period of time?
6. 6. Explain as concisely as you can, accounting for fuel hedges at Alaska, including a discussion of the reconciliation between Net Income recorded under GAAP, versus Non-GAAP adjusted Net Income.