Originally Posted by
porpilot
Delta Air Lines Said to Seek $2.6 Billion in Loans to Help Refinance Debt
Well, let's hope the guy making the above financial decision has better luck than the guy who's running the Fuel Hedging Program. Whoever that is made a tough luck bet on WTI as a hedging instrument and while it did have a run-up, it hasn't risen nearly as quick as other hedging instruments....and certainly not enough to cover the large crack spread (Man, I giggle every time I say crack spread).
Should have bet on Heating Oil futures and now that they're dumping the whole WTI portfolio and plowing it into Brent and HtOil, I think it's too late to benefit from much more price instability unless the Mid-East really goes to hell.
Delta Air Lines shifts fuel hedges out of US benchmark
By Gregory Meyer in New York
Published: March 28 2011 20:35 | Last updated: March 28 2011 20:35
Delta Air Lines, one of the world’s largest carriers, has shifted almost all its jet fuel hedges away from US crude in the latest sign that the benchmark has run into trouble as a tool to manage energy costs.
Delta and other US airlines have traditionally purchased contracts for US benchmark crude oil to hedge volatile jet fuel costs. Jet fuel is refined from crude oil and usually tracks its price.
But this year, the US crude benchmark known as West Texas Intermediate, has lagged behind the 27 per cent rise in jet fuel, creating difficulties for US airlines. The rise in Brent, a European benchmark, has been more in line with the jet fuel trend.
“We’ve needed to restructure our hedge position,” Ed Bastian, Delta president, told a conference last week. The airline spent $7.6bn on fuel and related taxes in 2010
FT.com / Commodities - Delta Air Lines shifts fuel hedges out of US benchmark
Edit....Sorry, bad link...the upshot is that Delta had to cash in it's whole WTI portfolio for lack of performance as a hedging instrument compared to Jet fuel's rise and is plowing it into Brent and Heating oil contracts which have tracked jet fuel's rise much more closely....but it may be too late.