Let the Bleeding Begin

[20/20]

Somebody tell me if I'm reading this wrong but the article states that a 1 cent change in fuel affects UAL's bottom line by 22 million dollars. So if United paid a 1 dollar more per barrel than say SWA then they would be saddled with an additional 2.2 billion dollars in cost?? That seems outrageous.

Even more alarming if the article is correct Ual will pay around $10 more per barrel than SWA due to fuel hedging. Does that mean Ual's fuel bill will be 22 BILLION dollars higher than SWA. That is astronomical. Why do they even waste their time worrying about concessions when fuel has such a dramatic effect on the bottom line. You would think they would have a team of executives working around the clock on fuel prices.

They are way off, considering that according to the most recent SEC filings UAL's annual fuel budget is roughly $2B. Got to love the press!

 

[T-Bags]

the 22 million per penny increase refers to a per GALLON increase, NOT a per barrel hit.

 

[T-Bags]

As an oil industry insider it would behoove him to keep oil prices high thus making more $$. Too long though and no second term.

Incorrect, prolonged high oil prices mean people go out and buy crappy little cars that get a zillion miles to a galloon instead of a new escalade. OPEC, at least publically, claims a price target of 22-28 dollars a barrel. It has also been estimated by economist that when oil is above approx $22 barrel, OPEC LOSSES market share (and therefore pricing power) due to a stronger economic case for developing other fields.

 

[merikeyegro]

Another question. With Bush being cozy with the oil industry wouldn't you think he would be doing everything he could to keep these legacy carriers in business? They are obvously an enormous cash cow for the oil companies.

Cars produce way more revenue than planes. They can sacrifice an airline to make bllions on SUVs. If it's about the $, airlines don't hold a candle to 175 million automobiles.