It's hedging almost three-quarters of its fuel at roughly half the going rate again this year. Even so, it expects to pay $800 million more on fuel this year than in 2005 because of the rising costs of both fuel and fuel hedging.

One of the most common types of fuel hedging contract is known as a "call option," or "cap," which names the highest price an airline would have to pay for fuel, usually averaged over a future monthly or quarterly period.

"If fuel prices drop, well, we're out the premium we paid," said Steve Rock, manager of Alaska Air's fuel hedging program. "If prices go above the $75 barrel threshold, we would start getting compensated back for whatever quantity we purchased at that level."

Hedging became difficult, if not impossible, for some airlines during the industry-wide slump that followed the Sept. 11, 2001, terrorist attacks.

Whether companies are hedging fuel, aluminum, coffee beans or Japanese yen, they generally need to have good credit and be in a position to pay some substantial upfront costs. That's been an obstacle for carriers that have had to limp through bankruptcy reorganization.

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