Found this online today regarding oil prices and the economy. Things change fast and the company has to constantly think of new ways to spin news to their favor.

Remember Smisek has already told investment analysts and financial reporters that today we are in much better position to handle higher oil prices than we were in 2008. Oil prices are still well below their peak of $147.27 on July 11, 2008 (jet fuel at that time was approx. $175/bbl). Within three months, oil was below $70/bbl and by December of 2008 oil was below $34/bbl. Now most of that was related to the economic slow down worldwide, esp. the US.

Keeping the above in perspective, I think the following article is interesting. Airline analysts have cut the profit forecast for the airlines for 2011 based on fuel, but they still expect a profitable year even with these current prices. Take that forecast along with what's stated in the article and my opinion is they can afford to pay me.

Oil slumps to $106 on US economy concerns - Yahoo! Finance
Oil slumps to $106 on US economy concerns

Oil falls to near $106 in Europe as traders eye signs US economic growth slowing


On Thursday May 5, 2011, 7:20 am EDT
LONDON (AP) -- Oil prices slumped to near $106 a barrel Thursday as investors feared that slowing U.S. economic growth will undermine crude demand.


Benchmark crude for June delivery was down $2.86 at $106.38 a barrel by midday European time in electronic trading on the New York Mercantile Exchange. The contract lost $1.81 to settle at $109.24 on Wednesday.
In London, Brent crude for June delivery fell $3.05 to $118.13 a barrel on the ICE Futures exchange.


Crude has fallen from a 2 1/2-year high above $114 late last week as traders eye signs U.S economic growth is faltering.


The Institute for Supply Management said Wednesday its service sector index rose at the slowest pace in eight months in April, while private payroll processor ADP reported that 179,000 new private sector jobs were added in April, far fewer than economists expected.


The government is scheduled to announce April non-farm payroll numbers Friday.


"Employment seems unlikely to increase by as much as it needs to for sustainable economic growth," Cameron Hanover said in a report. "The major assets that have been the focus of investor buying for so long have lost some luster."


Fighting between rebels and forces loyal to Libyan leader Moammar Gadhafi, which has shut down almost all of the country's 1.6 million barrels a day of crude output, has ground to a stalemate in recent weeks. A resolution of the conflict and resumption of oil production would likely trigger a sharp drop in crude prices, analysts said.


"The ongoing civil war in Libya and unrest elsewhere in the Middle East has added a risk premium of around $30 to a barrel of crude," Capital Economics said in a report. "We expect the risk premium to fade as and when the Libyan crisis eases, helping to drag prices back within OPEC's $70 to $90 range by year-end."


In other Nymex trading in June contracts, heating oil fell 8 cents to $3.07 a gallon and gasoline dropped 7 cents to $3.25 a gallon. Natural gas futures were down 4 cents at $4.61 per 1,000 cubic feet.


Alex Kennedy in Singapore contributed to this report.

 

Oh no problem there... this one is easy. The geniuses are back at it with another exceptional fuel hedging strategy: They will have no problem losing money as oil plunges.


United Continental Holdings Inc.
4/21/11 58% April to June 2011 $114
4/21/11 36% July to Dec. 2011 $125

 

And that's the big thing to remember. Speculators affect oil on a temporary basis, but supply and demand is the real driver. Rising oil prices follow a strong economic outlook. Falling oil prices follow a weak economic outlook. We're much better off with relatively high oil and a strong economy than the opposite. It's just part of the cost of business. FUPM!

 

They're prepared for any news. If oil goes up: "That means higher fuel prices, so we can't afford to pay you more." If oil goes down: "That means the economy is slumping and our revenue will fall, so we can't afford to pay you more." If oil does both or neither: "That means things are uncertain, so we can't afford to pay you more."

 

Tom,

You broke the code!

Lee

 

I think you got that from the same source as the following:


Alaska Air Group Inc.
4/21/11 50% April to June 2011 $86
4/21/11 50% July to Sept 2011 $86
4/21/11 50% Oct to Dec 2011 $86
4/21/11 40% 2012 $90
4/21/11 19% 2013 $92

JetBlue Airways Corp:
4/21/11 43% April to June 2011 (21% @ $93)
4/21/11 36% July to Sept 2011 (18% @ $94)
4/21/11 26% Oct to Dec 2011 (7% @ $92)
4/21/11 8% Jan to Mar 2012 (3% @ $99)

Why or how are our smaller competitors able to hedge at lower prices than us? Do our fuel hedging people wait too long to do so? Do they look at different numbers than the others do? That being said even SWA is hedged over $100/bbl closer to what we are.

 

..and our response should be that pilot's cost what they cost. Looked at analytically, this is a pretty well defined number, and it is dramatically above where we're at now. I, for one, am tired of subsidizing bad management decisions (Avolar, upside down fuel hedges, etc), which is what we're doing at UAL. As a very senior 320 F/O maxed on the pay scale, I make $94 and hour. That works out to roughly 85K a year, or 30-40K below market.