The airline recently told investors that, at current levels, the surcharge would recoup £160m, with some exposure to high prices limited by forward buying.
"Due to swift and significant increases in energy prices over recent months and, as a small supplier our inability to forward buy energy to allow us to access the best possible wholesale prices, means that the position of the business has become untenable".
The heuristic, designated as the Newsvendor Production Planning with Emissions Allowance Forward Buying (NPPAFB) method, applies a forward buying algorithm to determine the number of periods for which to forward buy allowances, the current production order up to level, and the current and future emissions allowance requirements (which serves as the order up to level for allowance purchases).
Fraser Millar, its head of foreign exchange, told BBC Radio 5 live: "Some customers are forward buying for holidays they have already booked, while others are buying now before they have even booked their holiday".
Undeterred, we moved forward buying ad space like any sponsor or company (mostly large corporations like Budweiser or Coca-Cola).
Best Fashion Foot Forward: "Buy less, choose well, and mix it all," fashion designer Vivienne Westwood once opined.
Forget the complex nuances of forward buying, or different prices for different suppliers – in general, wholesale prices aren't expected to rise significantly in the coming year and probably by less than the rate of inflation, despite the latest eye- watering consumer bill hikes.
For instance, it engages in aggressive forward buying when it anticipates inflation in drugs and loads its inventory.
This study presents a new forward buying heuristic, designed for those firms that need to purchase emissions allowances via auctions, which reduces the impact of emissions allowance acquisitions on the firms' financial performance.
Big retailers also keep costs down by entering into "forward buying" deals, through which they lock in a lower price for a set period.
