LAYOFFS

[BoeingBoy]

Actually, since the operations are still "separate", the spread should be the same, notwithstanding gaming the accounting.

Both East & West have a bigger spread between CASM & RASM now (meaning 3Q08) than then because of fuel prices and shrinking causing CASM to go up faster than RASM. One merely needs to look at the profit/loss statement to see that.

Your assertion about hedging is problematic, mainly because it is vendor-based, for the most part. That would restrict using hedging at locations other than served by a vendor, the contracts rarely being portable.

It's obvious that you don't really understanding fuel hedging, then. Generally the hedges are in fuel oil or diesel futures (with some gasoline futures thrown in by some carriers) since there hasn't been an organized liquid market for jet fuel hedges. So hedging is unaffected by who the jet fuel is purchased from.

Jim

 

[BoeingBoy]

Sharktooth,

Just for you I dug up the parts of the quarterly report that discuss jet fuel hedging. Appropriate excerpts:

The Company currently utilizes heating-oil based derivative instruments to hedge a portion of its exposure to jet fuel price increases. These instruments consist of costless collars.

As of September 30, 2008, the Company has entered into costless collars to hedge approximately 45% of its remaining projected 2008 mainline and Express jet fuel requirements at a weighted average collar range of $3.11 to $3.31 per gallon of heating oil or $108.47 to $116.87 per barrel of estimated crude oil equivalent and 14% of its projected mainline and Express 2009 fuel requirements at a weighted average collar range of $3.41 to $3.61 per gallon of heating oil or $120.95 to $129.35 per barrel of estimated crude oil equivalent.

Further declines in heating oil prices would result in additional collateral requirements with the Company’s counterparties, unrealized losses on its existing fuel hedging derivative instruments and realized losses at the time of settlement of these fuel hedging derivative instruments.

Jim

 

[Res]

Layoffs in RNO - Res / Management or both ???? Any other call center layoff news ?!

 

[sharktooth]

It's obvious that you don't really understanding fuel hedging, then. Generally the hedges are in fuel oil or diesel futures (with some gasoline futures thrown in by some carriers) since there hasn't been an organized liquid market for jet fuel hedges. So hedging is unaffected by who the jet fuel is purchased from.

While it is true "hedging" may be based on something other than jet fuel (heck, you could base it on most anything with a "futures market"), somebody gets the money, either direction, whether an actual vendor or pseudo-vendor. Does it really matter?

To the point, does CASM include fuel cost? To purchase jet fuel in say, St. Thomas (very high cost), would your virtual "hedges" apply there? Your percentages seem somewhat suspect.

 

[BoeingBoy]

While it is true "hedging" may be based on something other than jet fuel (heck, you could base it on most anything with a "futures market"), somebody gets the money, either direction, whether an actual vendor or pseudo-vendor. Does it really matter?

It does if you want to claim, as you did, that HP's fuel hedges wouldn't be useful to US (East) because the vendors are different. The fuel hedges merely produce a profit or loss as they settle and that profit/loss merely offsets/adds to the actual fuel bill.

The airlines try to hedge in commodities whose price fluctuations closely follow the fluctuations in jet fuel price. While no other commodity exactly matches, fuel/heating oil and diesel are pretty close, so that's generally the commodities used. While any commodity could be used in theory, not many have the correlation with jet fuel that those have.

To the point, does CASM include fuel cost? To purchase jet fuel in say, St. Thomas (very high cost), would your virtual "hedges" apply there? Your percentages seem somewhat suspect.

They usually report CASM both ex-fuel and total somewhere in the quarterly filings.

The amount that is paid to fuel vendors isn't affected by fuel hedging, no matter where the fuel is purchased. The hedges just produce a profit or loss when they settle, and that profit/loss is accounted for as a decrease/increase in the amount paid for fuel.

The percentages are approximations. I didn't take the time to look up the actual amount of hedges that HP had as a percentage of anticipated fuel needs prior to the merger - just used a flat 50% as that's about the figure they aimed for (as it still was until last quarter). I also didn't take the time to look HP's and US' actual fuel requirements for the quarters following the merger - just used a 1/3 for HP, 2/3 for US (East) ratio. All of that went into some approximate mental math. So I wasn't intending it, nor should it be taken, as accurate to 8 decimal places. Because the HP hedges became (new) US hedges overnight, the main point was that HP went from having about half their fuel hedged to having significantly less hedged while US (East) went from zero hedged to a significant portion hedged. So following the merger, West paid more for fuel after hedge gains were included than they would have without the merger, while East paid less for fuel after hedge adjustments than they would have.

Jim

 

[Planemx]

gee .. your sure quick to forget about the 60 day rule aren't ya ?

Also , i shouldn't have to explain to you AGAIN how in this economy if we had held out we'd be getting ZIP ... you do watch the news right ?

Layoff's SUCK and i wouldn't wish it on anyone ...

As for my silver , it's gold baby, gold! tomrrow is the first day of CHA CHING!!!!

I remember....

 

[mike33]

gee .. your sure quick to forget about the 60 day rule aren't ya ?

As for my silver , it's gold baby, gold! tomrrow is the first day of CHA CHING!!!!

Well Congrats! Yesterday was CHA CHING!!!! day for you. Have you checked ur workbrain today? Is your raise there!

Baddah Bing your CHA CHING!!! No it's not. :jerry:

 

[sharktooth]

The percentages are approximations. I didn't take the time to look up the actual amount of hedges that HP had as a percentage of anticipated fuel needs prior to the merger - just used a flat 50% as that's about the figure they aimed for (as it still was until last quarter). I also didn't take the time to look HP's and US' actual fuel requirements for the quarters following the merger - just used a 1/3 for HP, 2/3 for US (East) ratio. All of that went into some approximate mental math. So I wasn't intending it, nor should it be taken, as accurate to 8 decimal places. Because the HP hedges became (new) US hedges overnight, the main point was that HP went from having about half their fuel hedged to having significantly less hedged while US (East) went from zero hedged to a significant portion hedged. So following the merger, West paid more for fuel after hedge gains were included than they would have without the merger, while East paid less for fuel after hedge adjustments than they would have.

You should seriously consider public office.

"8 places"? You were not even in the same galaxy.

 

[BoeingBoy]

I'd be interested in your numbers then...perhaps my mental math isn't what it used to be.

Jim