UAL Fuel Hedge
#1
Gets Weekends Off
Thread Starter
Joined APC: Apr 2006
Position: 737 CA
Posts: 2,750
UAL Fuel Hedge
From the management at SWA: Dear UAL management, nice job on the fuel hedging. FYI...you are suppose to MAKE money on the hedges. Perhaps you need another CEO.
UAL sees potential $544M fuel hedge loss for 3Q
Wednesday September 17, 11:48 am ET
United Airlines facing possible $544 million fuel hedging loss for 3Q
MINNEAPOLIS (AP) -- United Airlines said Wednesday that its fuel hedges are under water by $544 million.
Like other airlines, the nation's second-largest carrier has been aggressively hedging its fuel expenses, which have seemed to rise without respite. But oil prices have declined since peaking at $147 a barrel this summer, down to less than $94 a barrel on Wednesday.
In a filing with the SEC, United estimated its hedging loss through the end of the month based on Monday's predicted fuel prices. It included $72 million in realized losses and another $472 million in unrealized losses.
Even while falling oil prices cause hedging losses, United still benefits from buying cheaper jet fuel, its largest single expense.
United also said it expects third-quarter passenger revenue to increase 4.5 percent to 5.5 percent per mile. It said it is reducing overall capacity by around 3.6 percent.
JPMorgan airline analyst Jamie Baker wrote in a note that United's guidance suggests it will lose $2.30 per share for the quarter. Analysts surveyed by Thomson Reuters were predicting a loss of $1.08 per share.
United shares were down 99 cents, or 7.1 percent, to $13.03 in late morning trading.
UAL sees potential $544M fuel hedge loss for 3Q
Wednesday September 17, 11:48 am ET
United Airlines facing possible $544 million fuel hedging loss for 3Q
MINNEAPOLIS (AP) -- United Airlines said Wednesday that its fuel hedges are under water by $544 million.
Like other airlines, the nation's second-largest carrier has been aggressively hedging its fuel expenses, which have seemed to rise without respite. But oil prices have declined since peaking at $147 a barrel this summer, down to less than $94 a barrel on Wednesday.
In a filing with the SEC, United estimated its hedging loss through the end of the month based on Monday's predicted fuel prices. It included $72 million in realized losses and another $472 million in unrealized losses.
Even while falling oil prices cause hedging losses, United still benefits from buying cheaper jet fuel, its largest single expense.
United also said it expects third-quarter passenger revenue to increase 4.5 percent to 5.5 percent per mile. It said it is reducing overall capacity by around 3.6 percent.
JPMorgan airline analyst Jamie Baker wrote in a note that United's guidance suggests it will lose $2.30 per share for the quarter. Analysts surveyed by Thomson Reuters were predicting a loss of $1.08 per share.
United shares were down 99 cents, or 7.1 percent, to $13.03 in late morning trading.
#4
Gets Weekends Off
Joined APC: Feb 2008
Position: 757/767 FO
Posts: 847
#5
Gets Weekends Off
Thread Starter
Joined APC: Apr 2006
Position: 737 CA
Posts: 2,750
#8
Get ready for the press release...
SWA's GAAP numbers will show a large loss this quarter as their "portfolio" of fuel hedge contracts are worth less. SWA management is careful to break out results into realized and unrealized hedging gains/losses (unrealized=contracts that settle in the future.) United has never broken out their results from unrealized gains, as their loss last quarter would have been significantly higher.
SWA's GAAP numbers are going to show a large unrealized loss this quarter - they would have needed to sell all of their hedge contracts at last quarter's prices in order to avoid it, and they wouldn't do that because they don't look at hedges as an investment, they view it as insurance.
Anyway, don't be too suprised if the GAAP numbers show a large loss for SWA this quarter. The numbers that really depict company performance do not have the unrealized gains/losses included.
If you hate SWA - enjoy the headlines!
SWA's GAAP numbers are going to show a large unrealized loss this quarter - they would have needed to sell all of their hedge contracts at last quarter's prices in order to avoid it, and they wouldn't do that because they don't look at hedges as an investment, they view it as insurance.
Anyway, don't be too suprised if the GAAP numbers show a large loss for SWA this quarter. The numbers that really depict company performance do not have the unrealized gains/losses included.
If you hate SWA - enjoy the headlines!
#10
SWA views them in a correct manner. Amazing how quickly oil drops. Seems there were some threads when people were talking about $200 oil and I commented that oil prices can drop MUCH more rapidly than they climb...of course, I was stupid then because the sky was falling. Haven't seen a thread about peak oil in a while either.
Thread
Thread Starter
Forum
Replies
Last Post
Atreyu
Regional
16
08-11-2008 10:10 AM