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UAL Loses $520 mil on fuel hedges

SpauldingSmails

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That was the surefire way you would know oil prices would drop. Once the airlines bought in at $130/bbl you just had to know it would go down.

Why? Because no matter what airlines screw it up.
 

curtaindriver

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UAL sees potential $544M fuel hedge loss for 3Q
Wednesday September 17, 11:48 am ET United Airlines facing possible $544 million fuel hedging loss for 3Q

MINNEAPOLIS (AP) -- United Airlines said Wednesday that its fuel hedges are under water by $544 million.
Like other airlines, the nation's second-largest carrier has been aggressively hedging its fuel expenses, which have seemed to rise without respite. But oil prices have declined since peaking at $147 a barrel this summer, down to less than $94 a barrel on Wednesday.
[SIZE=-2]ADVERTISEMENT[/SIZE]
if(window.yzq_d==null)window.yzq_d=new Object();window.yzq_d['2cMmIEwNBlE-']='&U=13fdh7a8m%2fN%3d2cMmIEwNBlE-%2fC%3d632061.11883682.12483716.1435155%2fD%3dLREC%2fB%3d5113717%2fV%3d1';In a filing with the SEC, United estimated its hedging loss through the end of the month based on Monday's predicted fuel prices. It included $72 million in realized losses and another $472 million in unrealized losses.
Even while falling oil prices cause hedging losses, United still benefits from buying cheaper jet fuel, its largest single expense.
United also said it expects third-quarter passenger revenue to increase 4.5 percent to 5.5 percent per mile. It said it is reducing overall capacity by around 3.6 percent.
JPMorgan airline analyst Jamie Baker wrote in a note that United's guidance suggests it will lose $2.30 per share for the quarter. Analysts surveyed by Thomson Reuters were predicting a loss of $1.08 per share. United shares were down 99 cents, or 7.1 percent, to $13.03 in late morning trading.
 

On Your Six

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How much more can UAL lose before things come to a screeching halt? Every quarter we are seeing major losses... I understand some of those losses are "paper" losses but the party has to end sometime. I would think their banks or funding sources are scared by now - the picture ain't getting much better.

No doubt Tilton would still walk away with $ millions...
 

TWA Dude

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UAL's only the first. Just wait for the other airlines (excluding SW) to announce how much they're losing on their hedges.
 

habubuaza

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UAL's only the first. Just wait for the other airlines (excluding SW) to announce how much they're losing on their hedges.

Without knowing a single thing about SWA hedging, I would bet money that they did not hedge fuel at $130. As a matter of fact I would venture to say that most people who invest in futures trading probably did not bet on this kind of oil price sustaining itself.
 

ThisistheDream

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after the govt bail out of Lehamans and AIG, I would expect the govt will bail out any legacy airline before they just go way!!! Becuase according to the Govt companies that are too big...cannot fail and they will step in to help out any legacy stay afloat.
 

ultrarunner

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Without knowing a single thing about SWA hedging, I would bet money that they did not hedge fuel at $130. As a matter of fact I would venture to say that most people who invest in futures trading probably did not bet on this kind of oil price sustaining itself.


I bet you're right...but if SWA did hedge at a buck thirty, they prly sold it to UAL for a buck forty!

And UAL being UAL, they were happy to pay it....

Idiots!
 

Raoul Duke

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trading 101 would tell you to cover that position with a short as soon as the mkt fell. They are so stupid it is embarassing.
 

ultrarunner

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How in the name of Raptor Jesus is Tilton still at the helm at UAL?

If I were to venture a guess Walter, it's because his exit contract is likely way to expensive for UAL to pay right now.

I'm sure a UAL person will chime in with the data, but I'm sure if he's terminated, he walks with millions...not a popular thing for UAL to do right now...
 

RedDogC130

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after the govt bail out of Lehamans and AIG, I would expect the govt will bail out any legacy airline before they just go way!!! Becuase according to the Govt companies that are too big...cannot fail and they will step in to help out any legacy stay afloat.

I would not bet on it. If say United failed...the rest of the industry would have huge gains. They would have all thier passengers, incresed loads, then the price of tickets go up helping the bottom line.

I do not see the government keeping a carrier around that is just not needed. We have too empty seats flying around. Cut 1/4 of those out of the mix and then you are flying close to full making $$$.

Losing 1 big or even 2 airlines (legacy size or SWA size) will not kill this industry...it will help it
 

StopNTSing

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What RedDogC130 said....

At the rate Wall Street is imploding, there may not be any money left in the Fed's coffers to bail out an airline or six! :crying:
 

SpauldingSmails

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Frankly, I don't see why people believe the government will even bail out an airline. I always hear, "They're too big they won't let them fail." I don't know who "they" are to stop it.

Remember, Eastern and Pan Am were not exactly small players either. Someone is going to eat it, and its not the purview of government to stop it.
 

MALSR

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Don't worry United, the U.S. government will bail you out.
 

FatesPawn

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trading 101 would tell you to cover that position with a short as soon as the mkt fell. They are so stupid it is embarassing.

Raoul,

This isn't directed at you, but the premise of UAL losing 520mil on hedges is more about GAAP accounting than actual losses.

SWA pulled this on us when they cyphered our "profit" sharing last year. The gains from hedges - even if UNREALIZED - must be accounted for. Since losses are the same, UAL will have to show that too. SWA may show a loss in the coming quarters because they had to show a GAIN during the oil run-up. Now, they have to show the "perceived" loss even though they never made a DIME on those positions.

-fate

Oh.... and as for the govt caring about legacies... you only have to look as far as the rejected ATSB loan application to see how far the govt will back legacies.
 

FatesPawn

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Oh, and I have trouble balancing my checkbook - so take that financial info as PILOT MUMBOJUMBO....
 
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