UAL Loses $520 mil on fuel hedges

[V-1]

Hindsight is 20/20.

Not to cheerlead UAUA management, but if oil prices climb to $170/barrel next spring/summer, they'll look pretty smart.

In any event, wasn't Tilton one of the airline executives that signed off on that ridiculous "Stop oil speculation" memo that got so much press coverage just a couple of months ago? Perhaps he should have heeded his own demand?

Oh, the hypocrisy!

 

[123]

Hindsight is 20/20.

In any event, wasn't Tilton one of the airline executives that signed off on that ridiculous "Stop oil speculation" memo that got so much press coverage just a couple of months ago? Perhaps he should have heeded his own demand?

Oh, the hypocrisy!

Not that I am a fan of UAL management, but where exactly is the hypocrisy in this? There are two primary reasons for hedging: 1. a common business practice used to reduce risk and exposure to variable costs in a commodity (note that the purchaser of the hedge is actually impacted/uses the commodity) and 2. a speculator that has no invested interest in the actual commodity and their only interest is in a short term gain on either the increase or decrease in price.

 

[magrs]

Has AMR hedged up there also?

I know CAL and UAL did, but AMR could be the wild card in all of this. If they didn't hedge yet, it could become quite a windfall for them in '09.

 

[Poahi]

Hindsight is 20/20.

Not to cheerlead UAUA management, but if oil prices climb to $170/barrel next spring/summer, they'll look pretty smart.

In any event, wasn't Tilton one of the airline executives that signed off on that ridiculous "Stop oil speculation" memo that got so much press coverage just a couple of months ago? Perhaps he should have heeded his own demand?

Oh, the hypocrisy!

You're right about the possibility of oil going up to $170, but I think most analysts were thinking is wasn't going to do that. I think the legacy airlines were a little late to the hedging party.

BTW, it's not speculating if you actually consume oil.

 

[nosoupforyou!]

Now, if I did the math right and made sure to carry the "1" that means they went through about $1.5Bil in cash, in the 3rd Qtr. And again, if I did the math right, that's a cash burn of about $16Mil./day????


Dude that's peanuts.

Last quarter, UAL posted a loss of 2.7 BILLION. Now, that equates to 30 MILLION FREAKIN' DOLLARS A DAY!

and guess what the stock did the next day?

.......it went UP 50%

WHAT KINDA MONKEYS ARE RUNNING THIS JUNGLE!

 

[contrail67]

CHICAGO, Sept. 18 /PRNewswire-FirstCall/ -- UAL Corporation UAUA, the holding company whose primary subsidiary is United Airlines, completed the amendment of its co-branded card marketing services agreement with Chase Bank, as well as amended its credit card processing agreement with Chase/Paymentech L.L.C. These agreements boost United's liquidity by approximately $1.2 billion, including $1.0 billion in the short term and an additional $200 million over the next two years.
"This is one of the many steps we are taking to improve our liquidity and increase the amount of cash we have on hand to strengthen our business for all our stakeholders in this volatile fuel environment," said Jake Brace, executive vice president and chief financial officer.
Under the terms of the agreement, United has received an additional $600 million from Chase in consideration for the advance purchase of frequent flyer miles and for extending the agreement. As part of the transaction, United has granted a security interest in various assets, including specified intangible Mileage Plus assets. United continues to have more than $3 billion in unencumbered hard assets to use to raise additional liquidity if needed.
With its amended credit card processing agreement, United realizes a return of more than $350 million of restricted cash back to the company compared to its prior reserve requirement

 

[ReverseSensing]

BTW, it's not speculating if you actually consume oil.

It may not be manipulative "speculating", but it is a speculative endeavor. Just because you're doing it as a business practice to have some measure of fixed future costs doesn't mean it doesn't affect the speculative market.

People can draw a moral distinction between speculators playing the ups and downs and corporations securing hedges to lock in known costs, but both activities put pressure on the cost of the commodity. That's why some say there is irony in airline execs bemoaning speculation on the one hand while they go out in the market and speculate with hedges on the other hand.

 

[AAflyer]

Has AMR hedged up there also?

I know CAL and UAL did, but AMR could be the wild card in all of this. If they didn't hedge yet, it could become quite a windfall for them in '09.

AMR did not.....

AAflyer

 

[WalterSobchak]

disregard...

 

[UAL-GSO]

Not sure if this has been posted before. Please feel free to use this link to let Tilton know exactly what you think of his leadership ability. Try it -it's fun!

http://www.glenntilton.com/write-glenn-tilton/