AMR has hedged 18% of 2006 fuel at $60/bbl

[FWAAA]

This is good news. Well, not for everyone - there will no doubt be some group of employees who are unhappy at this good news:

AMR Corp.'s (AMR.N: Quote, Profile, Research) American Airlines has taken positions to buy 30 percent of first-quarter consumption at $63 a barrel for crude oil and 18 percent of its full-year fuel needs at $60 a barrel, up from between 5 and 8 percent, respectively, in 2005.

"We clearly started doing more toward the end of last year," company spokesman Tim Smith said.

http://yahoo.reuters.com/stocks/QuoteCompa...ol=LUV.N&rpc=44

My prediction is that oil goes higher this summer than last - hedging at $60 or $65 may be a very good idea.

 

[Hopeful]

This is good news. Well, not for everyone - there will no doubt be some group of employees who are unhappy at this good news:
http://yahoo.reuters.com/stocks/QuoteCompa...ol=LUV.N&rpc=44

My prediction is that oil goes higher this summer than last - hedging at $60 or $65 may be a very good idea.

Just think how mych better off AA would be had they not sold their hedging to SWA when they needed cash!

 

[jimntx]

Yeah, yeah, yeah. Coulda, woulda, shoulda.

"The saddest words known to man are those that say it might have been." Robert Burns

Personally, I'm really getting tired of posts that say if only, what if, and they shoulda. The fact is that they didn't and we are now where we are. Not where we might like to be, but then that ain't reality is it?

Living in the past and moaning about past sins of omission and commission is non-productive and does not change the present one iota.

And, you hit the nail on the head without realizing it--"when they needed cash." The hedges would have done us no good anyway if we had gone out of business due to lack of operating cash.

 

[FWAAA]

Yeah, yeah, yeah. Coulda, woulda, shoulda.

Personally, I'm really getting tired of posts that say if only, what if, and they shoulda. The fact is that they didn't and we are now where we are. Not where we might like to be, but then that ain't reality is it?

I agree completely.

With advance apologies to Jim, my favorite in the "coulda, woulda, shoulda" category is AA's failure to team up with Priceline. Delta cleared slightly over a billion dollars selling its Priceline stock - one reason DL's financial crisis was delayed compared to AA's.

Of course, AA avoided selling all those seats to Priceline for pennies on the dollar, so maybe it was a good miss.

 

[Hopeful]

I agree completely.

With advance apologies to Jim, my favorite in the "coulda, woulda, shoulda" category is AA's failure to team up with Priceline. Delta cleared slightly over a billion dollars selling its Priceline stock - one reason DL's financial crisis was delayed compared to AA's.

Of course, AA avoided selling all those seats to Priceline for pennies on the dollar, so maybe it was a good miss.

Coulda? Woulda? Shouldda?
Of course history had a major impact on this industry.

Deregulation, PATCO, Lorenzo, Icahn, People Express....


Yea,,WOULDA, COULDA, SHOULDA,

Just think of this country had 9-11 not happened!

Yea,,COULDA WOULDA SHOULDA

 

[TIME FOR CHANGE]

Yeah, yeah, yeah. Coulda, woulda, shoulda.

"The saddest words known to man are those that say it might have been." Robert Burns

Personally, I'm really getting tired of posts that say if only, what if, and they shoulda. The fact is that they didn't and we are now where we are. Not where we might like to be, but then that ain't reality is it?

Living in the past and moaning about past sins of omission and commission is non-productive and does not change the present one iota.

And, you hit the nail on the head without realizing it--"when they needed cash." The hedges would have done us no good anyway if we had gone out of business due to lack of operating cash.

It is a good thing upper mgmt is getting those bonuses for all that great decision making. All the coulda woulda shoulda and a bonus for it also. What a job. Make disasterous decisions and get rewarded for all those coulda woulda shoulda...

They should all get sitcanned

 

[AMFAMAN]

This is good news. Well, not for everyone - there will no doubt be some group of employees who are unhappy at this good news:
http://yahoo.reuters.com/stocks/QuoteCompa...ol=LUV.N&rpc=44

My prediction is that oil goes higher this summer than last - hedging at $60 or $65 may be a very good idea.

Back in October and during the hurricanes, AA was reporting jet fuel of around $100/barrel. What would be the hedge cost per barrel of jet fuel being that they are reporting the hedging as oil barrels?
I did find one site of interest on jet fuel...
http://www.iata.org/whatwedo/economics/fue...nitor/index.htm

 

[Skymess]

Right on, Jim,

Reality check, party of 100,000.

Yeah, yeah, yeah. Coulda, woulda, shoulda.

"The saddest words known to man are those that say it might have been." Robert Burns

Personally, I'm really getting tired of posts that say if only, what if, and they shoulda. The fact is that they didn't and we are now where we are. Not where we might like to be, but then that ain't reality is it?

Living in the past and moaning about past sins of omission and commission is non-productive and does not change the present one iota.

And, you hit the nail on the head without realizing it--"when they needed cash." The hedges would have done us no good anyway if we had gone out of business due to lack of operating cash.

 

[local 12 proud]

My prediction is that oil goes higher this summer than last - hedging at $60 or $65 may be a very good idea.

yes this may be a wise move considering the volatile situation in the middle east, but is 18% really enough to offset the loss if oil should spike to over $100 per barrel?

I mean this could be one of those...coulda,..shoulda,..woulda type scenarios when we might wish to hedge a little more. I doubt we ever see $40 dollar oil again, anybody else see it this way?

 

[FWAAA]

Back in October and during the hurricanes, AA was reporting jet fuel of around $100/barrel. What would be the hedge cost per barrel of jet fuel being that they are reporting the hedging as oil barrels?
I did find one site of interest on jet fuel...
http://www.iata.org/whatwedo/economics/fue...nitor/index.htm

Excellent question - I don't know the answer. At one point, the crack spread grew so large (with all those gulf coast refineries shut down due to the hurricanes) that AA reported that a barrel of jet fuel (42 US gallons) was running about $120 - $130/bbl. Fortunately, the crack spread (refining margins) has dropped significantly this winter.

 

[FWAAA]

yes this may be a wise move considering the volatile situation in the middle east, but is 18% really enough to offset the loss if oil should spike to over $100 per barrel?

I mean this could be one of those...coulda,..shoulda,..woulda type scenarios when we might wish to hedge a little more. I doubt we ever see $40 dollar oil again, anybody else see it this way?

Good point - I don't know the answer. My wildass guess (WAG) is that an airline burning 3 billion gallons of jetA per year can't suddenly enter into hedging transactions covering most of that annual consumption at favorable prices. But every little bit helps.

Unfortunately, as has been posted before, effective hedging requires tying up large amounts of cash - which AMR does have (or possessing a good credit rating - something AMR does NOT have right now) - and perhaps AMR is limited in its hedging percentages by the amount of cash it is willing to tie up.

I'm also assuming that AA is currently transacting to fix the price of its second thru fourth quarter consumption: notice that 30% of the first quarter consumption was hedged at $63/bbl. I expect that as the year progresses, AMR will report hedges at higher percentages of the later quarters' consumption.

 

[AMFAMAN]

Excellent question - I don't know the answer. At one point, the crack spread grew so large (with all those gulf coast refineries shut down due to the hurricanes) that AA reported that a barrel of jet fuel (42 US gallons) was running about $120 - $130/bbl. Fortunately, the crack spread (refining margins) has dropped significantly this winter.

Found some of the answers I think. $64 a oil barrel is about $78 a barrel in jet fuel or around $1.85/gallon. Just still not sure why they don't just state their hedges in jet-fuel per barrel so it's an accurate number that we can put a price per a gallon on.

Chart on prices...

 

[Connected1]

Just still not sure why they don't just state their hedges in jet-fuel per barrel so it's an accurate number that we can put a price per a gallon on.

They quote it in crude oil per barrel because crude has a more widely publicized spot market. If they quoted in jet fuel per barrel, the general public wouldn't have a good spot market to judge the number against.

 

[Skymess]

My wildass guess (WAG)