Westjet 2005 Annual Report Download - page 21

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2005 WESTJET ANNUAL REPORT
19
In an effort to protect against spikes in the price of jet
fuel resulting from potential supply disruptions caused by
the hurricanes, we implemented a fuel-hedging strategy
in September of this past year. The challenge that we face
with respect to fuel costs relates to the length of time
between a guest booking a flight and the date at which
the guest actually travels. As airline travellers typically
purchase seats for travel weeks or months in advance of
their planned travel date, the price paid for those seats
may not reflect the actual cost to fly that guest as fuel prices
may have increased over the time period. To reduce our
exposure to that uncertainty, we implemented a fuel-hedging
program whereby we may lock in a portion of our exposure
to fluctuations in the price of jet fuel over a term and
quantity that relates to our advance ticket sales. For the
year ended December 31, 2005, we recognized a net gain of
$155,000 in aircraft fuel resulting from hedging transactions.
As at December 31, 2005, we had outstanding hedge
contracts representing approximately 50%, 40% and 11%
respectively of January, February and March anticipated
fuel consumption at a rate of $0.572/litre, $0.580/litre
and $0.562/litre. The total fair-market value of the unsettled
contracts as at December 31, 2005 is an estimated loss
of $1,300,000.
Nadia DiPardo
Customer Service Agent
$1.00 per Litre
$0.90 per Litre
$0.80 per Litre
$0.70 per Litre
$0.60 per Litre
$0.50 per Litre
$0.40 per Litre
$0.30 per Litre
$0.20 per Litre
2005 Commodity Prices (CANADIAN DOLLARS PER LITRE)