Originally Posted by alfaromeo

Not exactly. If you buy an option for a future purchase, then you have to pay for that option. If it is not exercised, then you lose the money on that option. If you buy a collar and the fuel price is below the floor price, then you lose money on the put option. If you buy a swap and the price of the commodity (usually home heating oil) is below the swap price, then you eat the difference. Also with swaps, you may have to post collateral to cover part of the future price, so you lose access to that cash until the swap is covered.

So some of the hedging losses are just unwinding from previous paper gains, but some of the hedging losses are actual cash outlays.

That said, the purpose of a hedging program is to eliminate risk in fuel. It is meant to break even over a long period of time, not to make money or lose money. We made a lot on hedges in 2008 and of course 2009 has been a negative. This is not a failure but it is how the program is designed. If we could win every time on hedging, we could quit flying passengers around and make lots more money speculating on fuel.

This quarter is traditionally cash flow negative but Delta added cash mostly by borrowing. Overall, it was a pretty good quarter in a very rough time. Next year we will start unwinding some of the costs of the merger (you only have to repaint the planes and consolidate airport space once) and will soon get the full benefits of integration. SOC in January, reservations switchover soon after that, dispatch in April (for flight plans and weight and balance). If the AFA and the IAM can work out their representation issues, then full operational integration will occur in late summer or fall. We are in pretty good shape, wouldn't trade our lot for any other right now.

When full operational integration starts to really kick in in late 2010 and 2011, then Delta forecasts a good deal of top line growth (income). If history follows, the recovery from recession should be in full force with employment rising. Hopefully, that sets us up for contract negotiations which will open near the end of 2011 or early in 2012.