UAL Loses $520 mil on fuel hedges

[Cheeta]

Who is running that arline...Get rid of them!

 

[SpauldingSmails]

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.

 

[bluefin]

Source?

 

[curtaindriver]

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.

 

[CAL to T-1A]

http://biz.yahoo.com/ap/080917/airlines_fuel.html?.v=1

 

[On Your Six]

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]

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

 

[habubuaza]

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]

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]

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!

 

[WalterSobchak]

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

 

[Raoul Duke]

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]

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]

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

 

[Whataburger]

Just think how well United will do when their hedges run out!!

 

[StopNTSing]

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]

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]

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

 

[FatesPawn]

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]

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

 

[nosoupforyou!]

I am quite confident United will be around for our lifetime at least. 4 years in BK, goatf**king everyone they owed money to, all the while undercutting competitors prices. Yep, that's the way it works.

When you get to be that big and owe so many massive corporations so much money, you get propped up until the key players get thier money back. Small fries lose though. I have no pity on the investors though! Especially those shorting motherf@@kers.

It's OK, UAL is playing with monopoly money. It won't affect you..............that much........well maybe it'll cost you your job but you'll be fine.

 

[123]

Airlines and the financial markets are two entirely different markets and impacts to the public. I do not believe that the government would attempt to bail out any airline, especially right now. After these last few takeovers by the government, they are looking for a few companies to make an example of. Notice they have not saved Lehman. They will need to convince corporate executives that the govt will not come running to the rescue for their mistakes. The takeovers by the govt this week and last are supposed to be viewed as saving the public and not saving the company. The Fed does not want a repeat of the Saving and Loan defaults decades ago.

 

[spciii]

Just think how well United will do when their hedges run out!!

That . . . . . was hilarious

 

[QCappy]

I think this is even worse news than the fuel hedge loss:

UAL anticipates it will end the quarter with $2.9 billion in unrestricted cash, down from $4.4 billion at the end of the second quarter.

http://www.marketwatch.com/News/Sto...12-3E96-4D28-ABCB-F51A4BE79A47}&siteid=yhoof2

 

[PlaneDrvr]

First, I want to say that I am not here to bash UA, as I know that ALL airlines are in a Bad Way; with the high (and unstable) fuel costs and the slowing economy.

That said, I look at yahoo and marketwatch finance/airline business news almost everyday to keep up with what's going on in the industry; and came across this article. I will put the link here (hope it works for you guys), but the last part of the article talks about UA's 'pre-announce' of 3rd Qtr results.

http://www.marketwatch.com/news/sto...910-33EC-4365-B4EC-F499ECA70109}&siteid=yhoof

Here is the interesting (or surprising) quote from the last part of the article;

"UAL anticipates it will end the quarter with $2.9 billion in unrestricted cash, down from $4.4 billion at the end of the second quarter. "

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????

The 2nd. and 3rd Qtr. are normally the best for most airlines (the bread and butter); and with one more Qtr. like that, and UA could be close to default on the covenants of their debt?? I believe they have to have about $1.2Bil. to avoid a default, but could be wrong on that issue.

Again, not trying to bash UA or any other airline, just thought it was noteworthy. I will be really interesting in about a month to see what All #s all the airlines put up, probably won't be pretty.

Anyway, for what its worth.

PD

 

[PlaneDrvr]

I think this is even worse news than the fuel hedge loss:

UAL anticipates it will end the quarter with $2.9 billion in unrestricted cash, down from $4.4 billion at the end of the second quarter.

http://www.marketwatch.com/News/Sto...12-3E96-4D28-ABCB-F51A4BE79A47}&siteid=yhoof2

Cappy,

You beat me to it; we must have been typing at the same time. A different article, but said the same thing.

 

[satpak77]

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.

and you my brother, are 100% correct. they should have had a trailing stop order in place and shorted the pi** out of it as it fell on heavy volume

they could have made more money on a short sale than they do selling tickets !!!!

(true statement !)

 

[satpak77]

FYI that trading requires credit worthiness and if they are loosing millions trading futures they can be forced to LIQUIDATE if they cannot cover their losses.

Look at all the "hedge fund blowups" recently, same thing. Except now the fund is called "UAL"

 

[GoodTimes]

If only UAL could find someone from the oil industry to be CEO :nuts:

 

[CubsFan]

UAL cash

For what it's worth, I think the $4.4 bil in cash for UAUA at the end of the second quarter is inaccurate. According to this PR news release from UAUA regarding quarterly financials they ended the 2nd quarter with $2.9 bil, not 4.4 bil in unrestricted cash.

Here's the link to the UAUA press release for the second quarter:

http://clearstation.etrade.com/cgi-bin/bbs?post_id=8750887