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. :D





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.

Can UAL management do anything right?

I will give them some free advice.


Buy fuel hedges right now, today, at $94 a barrel. Won't get much cheaper than that ever again.

I bet they can hire transvestite hookers by the dozen, buy smack in bulk, and pi$$ money away in Vegas like you wouldn't believe.

I wouldn't take that advice. Oil will be alot cheaper than $94. Of course that is my opinion.

SWA makes the rest of the airline industry's managements look like the Keystone Cops.

Sadly, that's not too hard to do.

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!:rolleyes:

Well, they do take very good care of themselves, so there's something they do right.

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.