Delta 4th quarter loss
01-20-2015, 09:29 AM
#1
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Delta 4th quarter loss
http://finance.yahoo.com/news/delta-...134535752.html
They'll still end up with more profit sharing than UAL!
They'll still end up with more profit sharing than UAL!
01-20-2015, 09:43 AM
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"Falling oil prices lowered the value of Delta's future fuel-hedging transactions by $1.2 billion. Hedging acts as insurance against rising oil prices, but it loses value when oil prices fall, as they have in recent months."
WOW. Screwed up in reverse, didn't see that one coming. It does highlight, though, that cheap oil is not all tailwind for the every industry.
Is this part accurate: "Delta hedges more aggressively than many airlines, partly because its fleet is relatively old and less fuel-efficient."?
WOW. Screwed up in reverse, didn't see that one coming. It does highlight, though, that cheap oil is not all tailwind for the every industry.
Is this part accurate: "Delta hedges more aggressively than many airlines, partly because its fleet is relatively old and less fuel-efficient."?
01-20-2015, 09:51 AM
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Originally Posted by bedrock
WOW. Screwed up in reverse, didn't see that one coming. It does highlight, though, that cheap oil is not all tailwind for the every industry.
After they adjust it'll be a tailwind.
Which landscape do you think they'd prefer to operate in, $150 oil or $50?
01-20-2015, 10:01 AM
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The pretax income for the quarter was 1 billion. Net income was $649 million. $262 million was set aside for profit sharing. The profit sharing comes out before they do the accounting writeoffs like hedging. It was a great quarter which beat the estimates.
01-20-2015, 10:10 AM
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Hedging losses occur, it's a fact of life. But they also can add stability to a volatile commodity that is a huge portion of an airlines total operating cost. When an airline is saving hundreds of millions or multiple billions they are portrayed as visionaries. The real truth is that over the long run hedging is a smart business practice that has ultimately added way more gains than losses, that is why it's done. If the financial gurus see any permanence to the low oil prices of late I would guess some major reductions in hedging, but that is the real trick to it all, accurately predicting the future.
01-20-2015, 07:03 PM
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I'd be interested in seeing stats that back up your claim that hedging has made more money than it has lost. I'm not sure that's true but don't have the ambition to sort through financial reports.
I think airlines hedge for planning purposes more than anything. I'm sure they'd prefer to make money but there is utility in knowing what your costs will be. When oil spikes it gives them time to react.
I think airlines hedge for planning purposes more than anything. I'm sure they'd prefer to make money but there is utility in knowing what your costs will be. When oil spikes it gives them time to react.
01-20-2015, 07:16 PM
#8
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Hedging is a strategy that is as polarized in opinions as vaccinating your kids.
If I were the fuel czar at Delta, I would ask for a billion dollars in about 6 months and buy enough bankrupt shale producers in North Dakota to supply Monroe Energy with enough Crude to supply them with their fuel needs.
We already have the refinery and are already buying Bakken crude for the place. I heard we even bought an oil tanker to bring oil from Texas to Trainor. Only thing left is to own the wells producing the oil and you have it covered. There should be some cheap ones up there in about 6 months.
A true top to bottom production system for their largest and most volatile expense.
If I were the fuel czar at Delta, I would ask for a billion dollars in about 6 months and buy enough bankrupt shale producers in North Dakota to supply Monroe Energy with enough Crude to supply them with their fuel needs.
We already have the refinery and are already buying Bakken crude for the place. I heard we even bought an oil tanker to bring oil from Texas to Trainor. Only thing left is to own the wells producing the oil and you have it covered. There should be some cheap ones up there in about 6 months.
A true top to bottom production system for their largest and most volatile expense.
01-20-2015, 07:17 PM
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Delta's profit, fuel hedging explained
January 20, 2015
By Trebor Banstetter, Corporate Communications
While Delta reported a $1 billion profit in the fourth quarter, some news reports said the airline lost $712 million in the quarter.
Here’s the full story.
Delta’s profit, excluding taxes and special items, was $1 billion for the fourth quarter, up $543 million from a year ago. The earnings allowed the airline to contribute $262 million to the profit-sharing pool to be paid out next month.
The largest special item excluded for the fourth-quarter profit was a $2 billion adjustment to the value of Delta’s fuel hedges for future periods. Under accounting rules, that adjustment has to be added to the airline’s income statement for this quarter even though the hedges are spread out through 2015. This number reflects the fact that, with oil prices down significantly, the value of Delta’s fuel hedges has also declined.
Similarly, the reason Delta excluded taxes from that profit report is because the airline currently uses tax credits, which were earned during past years when it lost money, rather than cash to settle its tax bill.
Investors and Wall Street analysts are generally interested in how the company performed during the quarter and don’t regard these non-cash taxes and special items as reflecting the airline’s performance.
They primarily pay attention to the pre-tax profit excluding special items to gauge how well Delta is doing.
However, some news organizations, like the Associated Press, have editorial policies that require them to report the net income, including taxes and special items, in headlines and the first few paragraphs of a story. So in those cases, some headlines will focus on the loss.
January 20, 2015
By Trebor Banstetter, Corporate Communications
While Delta reported a $1 billion profit in the fourth quarter, some news reports said the airline lost $712 million in the quarter.
Here’s the full story.
Delta’s profit, excluding taxes and special items, was $1 billion for the fourth quarter, up $543 million from a year ago. The earnings allowed the airline to contribute $262 million to the profit-sharing pool to be paid out next month.
The largest special item excluded for the fourth-quarter profit was a $2 billion adjustment to the value of Delta’s fuel hedges for future periods. Under accounting rules, that adjustment has to be added to the airline’s income statement for this quarter even though the hedges are spread out through 2015. This number reflects the fact that, with oil prices down significantly, the value of Delta’s fuel hedges has also declined.
Similarly, the reason Delta excluded taxes from that profit report is because the airline currently uses tax credits, which were earned during past years when it lost money, rather than cash to settle its tax bill.
Investors and Wall Street analysts are generally interested in how the company performed during the quarter and don’t regard these non-cash taxes and special items as reflecting the airline’s performance.
They primarily pay attention to the pre-tax profit excluding special items to gauge how well Delta is doing.
However, some news organizations, like the Associated Press, have editorial policies that require them to report the net income, including taxes and special items, in headlines and the first few paragraphs of a story. So in those cases, some headlines will focus on the loss.
01-20-2015, 07:35 PM
#10
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Originally Posted by BigGuns
Delta's profit, fuel hedging explained
January 20, 2015
By Trebor Banstetter, Corporate Communications
While Delta reported a $1 billion profit in the fourth quarter, some news reports said the airline lost $712 million in the quarter.
Here’s the full story.
Delta’s profit, excluding taxes and special items, was $1 billion for the fourth quarter, up $543 million from a year ago. The earnings allowed the airline to contribute $262 million to the profit-sharing pool to be paid out next month.
The largest special item excluded for the fourth-quarter profit was a $2 billion adjustment to the value of Delta’s fuel hedges for future periods. Under accounting rules, that adjustment has to be added to the airline’s income statement for this quarter even though the hedges are spread out through 2015. This number reflects the fact that, with oil prices down significantly, the value of Delta’s fuel hedges has also declined.
Similarly, the reason Delta excluded taxes from that profit report is because the airline currently uses tax credits, which were earned during past years when it lost money, rather than cash to settle its tax bill.
Investors and Wall Street analysts are generally interested in how the company performed during the quarter and don’t regard these non-cash taxes and special items as reflecting the airline’s performance.
They primarily pay attention to the pre-tax profit excluding special items to gauge how well Delta is doing.
However, some news organizations, like the Associated Press, have editorial policies that require them to report the net income, including taxes and special items, in headlines and the first few paragraphs of a story. So in those cases, some headlines will focus on the loss.
January 20, 2015
By Trebor Banstetter, Corporate Communications
While Delta reported a $1 billion profit in the fourth quarter, some news reports said the airline lost $712 million in the quarter.
Here’s the full story.
Delta’s profit, excluding taxes and special items, was $1 billion for the fourth quarter, up $543 million from a year ago. The earnings allowed the airline to contribute $262 million to the profit-sharing pool to be paid out next month.
The largest special item excluded for the fourth-quarter profit was a $2 billion adjustment to the value of Delta’s fuel hedges for future periods. Under accounting rules, that adjustment has to be added to the airline’s income statement for this quarter even though the hedges are spread out through 2015. This number reflects the fact that, with oil prices down significantly, the value of Delta’s fuel hedges has also declined.
Similarly, the reason Delta excluded taxes from that profit report is because the airline currently uses tax credits, which were earned during past years when it lost money, rather than cash to settle its tax bill.
Investors and Wall Street analysts are generally interested in how the company performed during the quarter and don’t regard these non-cash taxes and special items as reflecting the airline’s performance.
They primarily pay attention to the pre-tax profit excluding special items to gauge how well Delta is doing.
However, some news organizations, like the Associated Press, have editorial policies that require them to report the net income, including taxes and special items, in headlines and the first few paragraphs of a story. So in those cases, some headlines will focus on the loss.
We still will be 2 Billion dollars behind in 2015 had we not hedged expensive oil. Eventually we have to exercise those contracts and pay $90 bbl for oil when we could just buy it on the market with no contracts for $45 ($33 for Bakken crude to go to Trainor right now).
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