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Delta's 70% Hedged at $3.22 per Gallon

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Old School

Well-known member
Joined
Feb 17, 2005
Posts
115
Delta announced today that they are 70% hedged at $3.22 per gallon for the fourth quarter of 2008. Anybody know what that equates to per barrel?
 
From what I have seen lately on the paperwork that equates to somewhere between $90-100 a barrel but there are many factors that go into jet fuel prices other than cost per barrel.
 
Old School,

You need to also look at the refining costs, the so called "crack spread." Jet fuel has not come down like other crude oil products.

However, based on this chart, your concerns are well placed. Delta is underwater on their hedges:

http://www.iata.org/whatwedo/economics/fuel_monitor/price_analysis.htm

Delta is not necessarily hedging the market as an investor, per se'. They are trying to get an accurate predictor for costs, so they can build their pricing and revenue models for business going forward. This is not to infer that they will not bend to competitive pressures and they have stated their uncertainty about 2009. But for the next six months they have to have a game plan.
 
Last edited:
their fourth qtr will read like this:

Delta reported a $335,000,000 profit today as they nearly took over the world however due to special one time charges showed a net loss of 3 million and a special one time writeoff of $250,000,000 due to ( insert your own term here, merger, bankrupcy, fuel hedge loss etc etc)
 
Delta is not necessarily hedging the market as an investor, per se'. They are trying to get an accurate predictor for costs, so they can build their pricing and revenue models for business going forward. This is not to infer that they will not bend to competitive pressures and they have stated their uncertainty about 2009. But for the next six months they have to have a game plan.

... and hence the real reason that commodities are traded in a futures market; so that end users can plan ahead by way of purchasing in advance at a given price. Sometimes you come out ahead, sometimes behind, but at least you can plan.
 
their fourth qtr will read like this:

Delta reported a $335,000,000 profit today as they nearly took over the world however due to special one time charges showed a net loss of 3 million and a special one time writeoff of $250,000,000 due to ( insert your own term here, merger, bankrupcy, fuel hedge loss etc etc)

:D Well played!
 
Well if they are stating prices in unusual terms, ie. price per gallon instead of barrel, it can't be good.

Gup
 

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