UAL Fuel Hedge
09-18-2008, 04:15 AM
#12
Don't want to participate
Joined APC: Jul 2005
Position: 737 Left Seat
Posts: 1,016
No, but I think that SWAPA should be out in front of this issue so we know what type of headlines to expect in mid-October. The accounting rules will dictate that we show a loss on ALL of our existing hedging contracts, no matter what price we bought them at because their value has decreased over the last quarter. That is a meaningless number, the number that counts is the non-GAAP number that SWA releases.
I'm just saying that they should be managing the inevitable angst that a large part of our pilot group will be feeling when the GAAP number comes out.
I'm just saying that they should be managing the inevitable angst that a large part of our pilot group will be feeling when the GAAP number comes out.
09-18-2008, 06:37 AM
#14
Recommend Retention
Joined APC: Jun 2007
Position: Bigfoot
Posts: 1,077
UAL isn't the only one who bet wrong... AGAIN!
Continental hurt by Ike, Boeing strike, fuel hedges
By MARK BABINECK Copyright 2008 Houston Chronicle
Sept. 18, 2008, 8:44AM
Continental Airlines said today it expected Hurricane Ike, which shut down its hub at Bush Intercontinental Airport last weekend, to cost the company about $50 million.
In a Securities and Exchange Commission filing this morning, the Houston-based carrier also said its liquidity at the end of the third quarter should be about $100 million less than previously announced, around $2.7 billion.
Along with Ike's impact, Continental says it has been hurt by jet delivery delays caused by striking workers at Boeing and estimated cash collateral requirements of its fuel hedges.
Continental locked into oil hedges near the peak of the market in July, and according to past SEC filings has been paying above-market prices for most of its fuel over the past few weeks. The company has declined to detail the negative impact of the hedges so far.
Continental hurt by Ike, Boeing strike, fuel hedges
By MARK BABINECK Copyright 2008 Houston Chronicle
Sept. 18, 2008, 8:44AM
Continental Airlines said today it expected Hurricane Ike, which shut down its hub at Bush Intercontinental Airport last weekend, to cost the company about $50 million.
In a Securities and Exchange Commission filing this morning, the Houston-based carrier also said its liquidity at the end of the third quarter should be about $100 million less than previously announced, around $2.7 billion.
Along with Ike's impact, Continental says it has been hurt by jet delivery delays caused by striking workers at Boeing and estimated cash collateral requirements of its fuel hedges.
Continental locked into oil hedges near the peak of the market in July, and according to past SEC filings has been paying above-market prices for most of its fuel over the past few weeks. The company has declined to detail the negative impact of the hedges so far.
09-18-2008, 10:55 AM
#17
Gets Weekends Off
Joined APC: Sep 2006
Position: B-737
Posts: 392
What all this illustrates is that hedging is not the cure all for the airline industry. It's a financial tool to smooth out the price spikes and stabilize the income statement.
SWA has been extremely lucky with their hedging program, but that's not what makes them a great airline. SWA has never forgotton what they are--an airline. They treat their employees well and deliver for their passengers.
What a concept...
SWA has been extremely lucky with their hedging program, but that's not what makes them a great airline. SWA has never forgotton what they are--an airline. They treat their employees well and deliver for their passengers.
What a concept...
09-18-2008, 07:31 PM
#18
Gets Weekends Off
Joined APC: Jun 2006
Posts: 919
It would be instructive to look at SWA in 1985 and 1986. There was a much bigger collapse in the oil market then - not sure if they were hedging then or not. Looking at those numbers, if they were hedging, would probably be a lot worse that what they will report this time but that is simply a hunch.
09-19-2008, 05:26 AM
#20
Gets Weekends Off
Joined APC: Feb 2005
Posts: 495
Originally Posted by stinsonjr
It would be instructive to look at SWA in 1985 and 1986. There was a much bigger collapse in the oil market then - not sure if they were hedging then or not. Looking at those numbers, if they were hedging, would probably be a lot worse that what they will report this time but that is simply a hunch.
SWA 1985 revenues were $679,672m. Operating profit was $78,524m (11.6%). Net profit was $47,278m (6.9%)
Oil was about $15/barrel in 1986 ($29 in today's dollars)
SWA 1986 revenue were $768,790m. Operating profit was $88,963 (11.6%). Net profit was $50,035m (6.5%)
I don't know if SWA was hedging then but the collapse in oil price didn't seem to make a difference.
S.B.
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