US Airways will report loss, cut capacity

'US Airways Group Inc. was hurt by hedging some of its jet-fuel purchases last year. Then when fuel prices fell, the airline was locked in by fuel prices it hedged in advance. US Airways said it hedged 60 percent of jet fuel used on mainline flights in the fourth quarter and lost 77 cents a gallon on those hedges, for a hedging loss of $122 million.'

I want names.

What halfwit approved this $122 million dollar mistake.

Will it be taken out of their paycheck?
 
Dog Wonder said:
I want names.

What halfwit approved this $122 million dollar mistake.

Will it be taken out of their paycheck?
Click to expand...

In all fairness, I don't think that anyone expected crude prices to fall as much as they did as fast as they did; their hedging strategy was probably reasonable for the conditions at the time and had the price of fuel gone the opposite direction, we'd probably now be angry at them for not having hedged more.

I'd be surprised if US was the only airline burned in this manner by sharply falling fuel costs.

It's one thing to criticize the decisions of management when upsetting patterns are seen within them and further difficulties emerge from them, but the reality is that nobody has a crystal ball...
 

I agree completely. When oil hit $147/bbl in July, the consensus was "How high will it go?" Had US not hedged and if oil had hit $200/bbl, I suspect that employees like Dog Wonder would be "demanding names."

Damned if they do, damned if they don't. I fault lousy airline management all the time for poor decisions. Hedging as oil went skyward wasn't (IMO) a poor decision worthy of criticism.

Delta and United have both had to post over a billion dollars of cash collateral with their hedging counterparties because of the severe price decline. If oil stays down, that represents the counterparties' winning bets. AA has deposited over a half billion dollars and even Southwest has had to return billions of cash to its counterparties. All airlines' fourth quarter results will be ugly, even Southwest.

The good news is that no airline hedged 100% at the high prices and thus is benefitting from the drop in fuel prices (albeit not as much as if they had been unhedged).
 
ChockJockey said:
their hedging strategy was probably reasonable for the conditions at the time.

the reality is that nobody has a crystal ball...
Click to expand...

Predicting fuel costs seemed like a good idea at the time, but no one can predict the future.

We will just eat this $122 million loss speculating in fuel prices.

Ummmm, ice cream with chocolate syrup.
 
Dog Wonder said:
'US Airways Group Inc. was hurt by hedging some of its jet-fuel purchases last year. Then when fuel prices fell, the airline was locked in by fuel prices it hedged in advance. US Airways said it hedged 60 percent of jet fuel used on mainline flights in the fourth quarter and lost 77 cents a gallon on those hedges, for a hedging loss of $122 million.'

I want names.

What halfwit approved this $122 million dollar mistake.

Will it be taken out of their paycheck?
Click to expand...


bigbusboy said:
This is the reason why SW lost so much money.
Click to expand...

First, the $122 million represents not quite 7% of LCC's total loss (assuming the $1.77 billion figure is correct). Small potatoes.
Second, as with Southwest and the rest of us caught in that precipitous drop in fuel prices, it is an on paper loss. No money actually went out the door. Accounting rules require that being upside down in a fuel hedge, or similar transaction, must be handled as a liability and a loss. By the same token, having a fuel hedge for $.50/gal while fuel is $2.00/gal must be treated as an asset and a profit--whether the hedge has been executed or not.

The truth of Southwest's "loss" is that they made a substantial, real, "dollars in the bank" profit from operations. The fuel hedge writedown on paper is what caused the "loss."
 
Anyone have any idea where the capacity cuts are going to happen? Mainline and/or Express? What cities? Anyone in the know?
 
Mrs Doubtfire said:
Anyone have any idea where the capacity cuts are going to happen? Mainline and/or Express? What cities? Anyone in the know?
Click to expand...

This thread is running concurrently and has more info. As far as I know, there's been no flight- or station-specific information regarding capacity reductions as of yet.
 
jimntx said:
First, the $122 million represents not quite 7% of LCC's total loss (assuming the $1.77 billion figure is correct). Small potatoes.
Click to expand...

I read somewhere else tonight (can't find it again) that the 1.7 billion figure was what LCC reported as a loss for the first three quarters, and that year-end figures were not yet available. Yikes! Can anyone clarify?
 
Dog Wonder said:
'US Airways Group Inc. was hurt by hedging some of its jet-fuel purchases last year. Then when fuel prices fell, the airline was locked in by fuel prices it hedged in advance. US Airways said it hedged 60 percent of jet fuel used on mainline flights in the fourth quarter and lost 77 cents a gallon on those hedges, for a hedging loss of $122 million.'

I want names.

What halfwit approved this $122 million dollar mistake.

Will it be taken out of their paycheck?
Click to expand...
Dave Baer
he is from usair
no wonder you in bk so many times
HF
 
The consensus of analysts is for ~$200 million 4th quarter loss before special items. For the full year, the consensus if for ~$1 billion loss before special items.

Jim
 
Are we inline with everyone else for Obama's next great government give-a-way? :rolleyes:
 
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