Did AirTran completely mess up their fuel hedges?

[Mongolikecandy]

I know I am not a genius but to lose $26 million due to fuel hedges seems like a lot. Can someone explain it?

http://articles.moneycentral.msn.com/news/article.aspx?Feed=PR&Date=20100721&ID=11728033&Symbol=AAI

ORLANDO, Fla., July 21 /PRNewswire-FirstCall/ -- AirTran Holdings, Inc., AAI, the parent company of AirTran Airways, Inc., today reported a net profit of $12.4 million or $0.09 per diluted share for the second quarter of 2010. Excluding $26.4 million in unrealized losses, net of taxes, related to the reduction in value of future fuel hedges, the Company's net income for the quarter would have been $38.8 million dollars or $0.23 per diluted share. This result is particularly noteworthy given the 37.2 percent increase in the per-gallon cost of jet fuel, the airline's single largest expense, year-over-year.
AirTran Airways also made significant improvements to its financial position during the quarter, including re-signing and extending a secured credit facility for two additional years, revising the terms of future aircraft deliveries to reduce required capital investments by over $200 million between now and 2012, and retiring $90.4 million in convertible notes in July that eliminated the potential dilutive effect of issuing 8.1 million shares of common stock. Based on these and other improvements, including the Company's profitability, Standard & Poor's (S&P) upgraded its debt rating of AirTran Holdings on July 7, 2010.
Operating income in the second quarter of 2010 was $68.2 million, $2.1 million higher than the prior year due to the favorable impact of a 16.1 percent increase in total revenue that exceeded the substantial increase in the cost of jet fuel. Net income for the second quarter of 2010 was $66.1 million less than the prior year due to $34.0 million in net losses on derivative financial instruments in 2010 compared to a $27.3 million net gain on derivative financial instruments during the same period last year along with a $4.0 million gain on early extinguishment of debt in 2009. As of June 30, AirTran Airways' fuel hedge portfolio stands at $16.1 million.
The Company also set quarterly records for revenue passenger miles flown, load factor and enplaned passengers. For the first time in AirTran Airways' history, load factor topped 83 percent in the second quarter. Despite flying more miles with more people than ever before in the second quarter, the airline improved upon its exemplary operating performance. AirTran Airways continued to rank number one in fewest mishandled bags and is among the leaders in on-time performance, posting an on-time rate of 83.8 percent for the second quarter.
"I want to thank all of our hard-working Crew Members. Working together, we have been able to serve more customers than ever before during the second quarter. We all take pride in delivering the award-winning, high-quality, low-cost service that our customers have come to expect from AirTran Airways," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "Because of this, we are able to continue to strengthen the Company's long-term financial position."

 

[gt1900]

Imagine that. Just when AAI is getting really close to finishing a TA with their pilots, they manage to miss profit estimates by a ton. I have to give it to them, they know what they are doing in MCO... BTW.. The operating profit was 66 million, and AAI now has unrestricted cash of over 500 million. Don't let the numbers fool you. But don't worry, someone will jump in here and talk about how crappy AAI management is and how they screw everything up...... Delta and UAL both recorded record earnings when they needed to make the companys look good to boost stock prices, AAI just reported dismal earnings when they need to show the pilots how brutal the airline industry is, and that they need to keep wages low. The sad thing is some people will buy it and think the sky is falling because AAI only reported 9 cents a share earnings, when the forecast was 26 cents a share.

 

[j41driver]

.....

 

[livintheredream]

The miss had nothing to do with the economy. He had to do with Bad MGT. They hedged when many other airlines didn't. Nobody will buy into " The sky is falling" when its time to vote. All sympathy for these clown's is gone. Its a pretty BAD place to work and lots of guys are applying elsewhere.

 

[jonjuan]

Its a pretty BAD place to work and lots of guys are applying elsewhere.

Yeah, but who's really hiring?

 

[livintheredream]

Truckmasters!

 

[CoolSidePillow]

I tell everyone above me in seniority that they would look better in a Delta double breasted than that ridiculous brown leather. :laugh: