Does JetBlue hedge Fuel?

[whymeworry?]

How can they charge $25 a seat and make money?

 

[Patriot328]

How can they charge $25 a seat and make money?

I don't believe they hedge fuel at all. I also doubt they are going to make money on a $25 ticket, but that is just an intro fare (unless they pull an Indy.. we've seen a lot of those intro fares for the last year! ) and it's only on a few seats. It's to get some attention and build up the route a little. I imagine that if the 190 turns out to be as good as everyone (that is buying them) is hoping, in conjunction with jB's very low cost structure, cheaper tickets will be the norm on those routes, though higher than $25.



Has anyone heard if jetBlue posted a loss for 3rd quarter or not? Talking to a few people that work over there, they are possibly going to post a loss for Qt 3 and 4 of this year. To be expected, though... fuel, competition, spooling up new a/c, etc...

 

[Smoking Man]

We are hedged at 22% for the year 2005.



.

 

[lowecur]

Funny, Spirit is 100% hedged in 2006 and Jetblue is 0%.

They did buy a cat policy just in case fuel heads further north due to a named peril.....probably terror act of some sort. I think it's a smart move as the economy is slowing and 2006 should yield $50 per barrel by spring and $40. by fall.

:beer:

 

[skykid]

We are hedged at 22% for the year 2005.

That is 1/2 of the equation. At what price? Thanks.

 

[Dizel8]

Here are the fuel hedgings (sic) for the airlines, well some:

http://www.airlines.org/files/Airlines_Fuel.pdf

 

[Smoking Man]

That is 1/2 of the equation. At what price? Thanks.

$30.....

 

[PoorJetDriver]

But they have no hedges in place after Q4 '05.

 

[FlyBoeingJets]

Funny, Spirit is 100% hedged in 2006 and Jetblue is 0%.

They did buy a cat policy just in case fuel heads further north due to a named peril.....probably terror act of some sort. I think it's a smart move as the economy is slowing and 2006 should yield $50 per barrel by spring and $40. by fall.

:beer:

Very aggressive prediction. I hope you are right!!

If 2006 averages $45 a barrel the industry will do very well. But I'm not going to hold my breath on this one.

That price would make Airtran's and Alaska's hedges basically worthless and even out the playing field.

 

[Paul R. Smith]

Very aggressive prediction. I hope you are right!!

If 2006 averages $45 a barrel the industry will do very well. But I'm not going to hold my breath on this one.

That price would make Airtran's and Alaska's hedges basically worthless and even out the playing field.

Not really even for SWA. Are you guys not hedged through 2150 at .05 cents a barrel?

Please tell me you guys have a good time over there at SWA, cause damn if it ain't bleak everywhere else. I hope somebody's doing well.

 

[Rhino]

fuel costs

I was channel surfing last night and caught a few minutes of CSPAN coverage. A presentation on global fuel supply vs demand in the near and long term. One graph showed price "guesses" for 2006 from many brokers and financial groups, bank, etc. Industry average was $55/barrell. That seems reasonable vs current prices.

 

[castle bravo]

"Funny, Spirit is 100% hedged in 2006 and Jetblue is 0%. "



Lowecur,
Just curious, but at what price is NK hedged at? How about beyond 2006?

 

[lowecur]

"Funny, Spirit is 100% hedged in 2006 and Jetblue is 0%. "



Lowecur,
Just curious, but at what price is NK hedged at? How about beyond 2006?

Since they are a private company I don't think they gave out the numbers. They did say that the add'l money just pumped in($100M I think) would be used to hedge at 100% for the next 3 or 4 years.

Maybe Enigma or another employee could answer that.

 

[castle bravo]

"Since they are a private company I don't think they gave out the numbers."


This is exactly the reason for my inquiry.

 

[lowecur]

"Since they are a private company I don't think they gave out the numbers."


This is exactly the reason for my inquiry.

So your inquiry is to point out that being 100% hedged is unimportant and it's really all about what they paid for the hedges? I know they hedged when oil was at about $58 a barrel, but they probably bought some hedges in the open market that SWA was looking to sell for $30, so it was a great deal, no?

:smash:

 

[Spectre]

Couple reasons not to hedge fuel at JetBlue for 2006:

1. It takes a lot of cash up front to hedge fuel. If you are buying new aircraft and paying for new facilities for expansion, that cash isn't available.

2. Your competition isn't hedging fuel. Thus, if you hedge fuel at $55-60 and next year's fuel price falls below 55, watch out!

 

[castle bravo]

"So your inquiry is to point out that being 100% hedged is unimportant and it's really all about what they paid for the hedges? "


Yes, that is my position, especially with fuel prices recently finding some stability (relatively) at high levels.





"I know they hedged when oil was at about $58 a barrel, but they probably bought some hedges in the open market that SWA was looking to sell for $30, so it was a great deal, no?"



IF, in fact they were actually able to acquire acquire $30 hedges it certainly does look smart at this point in time. However, finding out factual, verifiable information pertaining to NK is sometimes a challenge.

 

[castle bravo]

2. ..... Thus, if you hedge fuel at $55-60 and next year's fuel price falls below 55, watch out!

Which goes back to my original inquiry to LC.

 

[FlyBoeingJets]

Couple reasons not to hedge fuel at JetBlue for 2006:

1. It takes a lot of cash up front to hedge fuel. If you are buying new aircraft and paying for new facilities for expansion, that cash isn't available.

2. Your competition isn't hedging fuel. Thus, if you hedge fuel at $55-60 and next year's fuel price falls below 55, watch out!

Buying hedges now at say $55 is much more of risk than buying in the mid $30's, I agree.

If your competitors leapfrog you by not hedging at $55 and buy hedges later at $45, bought with higher profits due to no hedging, you may get a double whammy. If your profit with hedges at $55 limit how much you can hedge next year at $45 you continue to trail your competitors in fuel price.

I wonder what the break even on these hedges are?? If you buy a hedge (I know its a complex financial instrument) at $30 what does oil have to trade at to pay for the purchase of the hedge?

It must be easier to buy hedges in a rising oil market than a declining one. The management type to bet wrong on these now will get sacked next year.

 

[CitationLover]

$30.....

wow thats got to be EXPENSIVE in and off itself with oil being at its current price. how much cash was spent on these derivatives?