AA fuel buying bet pays off

[robbedagain]

according to the San Angelo Standard Times news article link thru www.justplanenews.com ANALYSIS says AA fuel buying bet pays off in record profit

 

[jimntx]

I liked the comment from DP that the airline would continue to operate as if oil was still $100/bbl.  That means the updating of the fleet (including retiring the S80's) will continue.  There has been talk that the cheaper fuel will extend the life of the S80s.  Though it is my favorite a/c to work when there is a meal to serve in F/C, it's time for them to go to airplane heaven.

 

[WorldTraveler]

Crude oil posted one of its biggest gains in 3 years on news that the number of operating oil rigs in the US is down.

Airline stocks are posting one of their larger declines so far this year.

Hawaiian is down nearly 30% after a weak first quarter revenue forecast.

 

[usairways_vote_NO]

Actually most of oils move today was because of ISIS attack of Kirkuk in Iraqi.

 

[eolesen]

I liked the comment from DP that the airline would continue to operate as if oil was still $100/bbl.

It's a smart way to approach the budget.

 

[WorldTraveler]

Actually most of oils move today was because of ISIS attack of Kirkuk in Iraqi.

there are sites that say the decrease in US oil production is the bigger factor - and given that ISIS has been doing its thing for quite some time with little impact to global oil production, I doubt they are really the reason.


regardless of the reason, increased oil prices are not good for AA who is unhedged and is good for carriers that are. Increased oil prices reduce the potential exposure of those carriers to hedge losses.

 

[Hope777]

I think AA should run out and purchase a refinery....

 

[WorldTraveler]

The refinery allows DL to control the crack spread which does affect the price of jet fuel.

but nearly every other airline in the US besides AA hedge precisely because fuel prices can be very volatile - in both directions.

 

[jcw]

The refiner is doing well - DL is paying ~$2.35 per gallon and AA is paying ~$1.73
 
it's really doing a great job for DL

 

[WorldTraveler]

DL's higher fuel prices are due to hedge losses. The refinery was profitable.

and AA's fuel costs could go up Monday morning.

 

[jcw]

Sorry your wrong again - that is the DL forecast for 2015 and the AA forecast - the refinery is really helping in 2015 - great for DL - great move

 

[WorldTraveler]

no, you don't understand. FWAAA should have a conversation with you about correcting people and being wrong.

DL's fuel cost includes the hedge losses as they are expected BASED ON THE PRICE OF FUEL ON THE DAY OF THE ESTIMATE. Fuel hedges are not realized until the hedge date passes. DL has record mark to market losses based on the expected losses - which is why DL's net losses will likely be much better since you only get dinged for hedge losses one time as long as prices are stable. The loss is recorded as an operating cost when the hedge actually becomes a loss - converting the "paper loss" to a real loss. Other US airlines use the same process.

AA's fuel cost will include the price of fuel on the day they have to buy it because there are no hedges.

an increase in fuel prices will reduce the hedge losses that other carriers experience if the mark to market adjustments were based on a lower price.