Ten Airports Face Closure Due 2 Fuel Shortage

EyeInTheSky

Veteran
Dec 2, 2003
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Pittsburgh
This is getting really ugly.

http://www.airportbusiness.com/article/art...ction=1&id=3343

At Least Ten U.S. Airports Face Closure Due to Jet Fuel Shortages The Latest from Airport Business

August 31, 2005… Airlines and oil companies are working on plans to supply jet fuel to at least ten U.S. airports that could be shut down due to a lack of jet fuel caused by refinery and pipeline shutdowns from hurricane Katrina. The airports in most jeopardy for closure include Atlanta, Charlotte, Ft. Lauderdale, Ft. Myers, Orlando, Tampa, Washington Dulles and West Palm Beach.

AAG has learned that ChevronTexaco and Shell had cargoes loaded prior to the shutdowns destined for Florida ports. However, with the Colonial and Plantation pipelines shutdown due to a lost of power it could be sometime for shipments to reach airports from Atlanta to Washington D.C.

With future supply uncertain, airlines are working on plans to allocate jet fuel at critically short airports. “While some airports may have up to five days of supply we have to expect that we won’t receive additional shipments for some time. We either run down to flumes or we try to make it last as long as possible,â€￾ said one airline fuel manager. Today, airlines are working on plans to allocate fuel in hopes of extending available supply at problem locations.

Initial reports vary as to the extent of damage to Gulf Coast refining. But a longer term problem may not be refining infrastructure but providing shelter for refinery workers. “One of our refineries is scheduled to be back up soon but our real problem is finding housing for our workers. Most of their homes are destroyed or under water. Unless we can solve the housing problem we will not be fully operational for some time,â€￾ said one major oil company representative.
 
I predict $3/gallon jet fuel in the next week or two, maybe even higher ($3.50, anyone?). Doubt that any airline (other than WN) can survive more than a few weeks with prices like that unless significant domestic legacy capacity is removed.

Every airline is gonna wish they had locked in $2/gallon jet fuel last week.
 
isn't hedging fairly commonplace among the airlines? are there any airlines that are not hedged? raw exposure to these prices could be catastrophic, it seems?!?
 
Au contraire - most airlines have little or no hedging in place....

WN, as in most things, is the leader with extensive hedging in place for this year and some hedges in place through 2008-2009. Most of the LCC's have some hedging in place this year. The legacies are pretty much exposed to market prices.

Jim
 
I'm just guessing, but WN may not be out of the woods either. Back in the "good ole days" when I was in the awl bidness, hedges usually had an "out" clause for both sides. I.E., if hedged at $2.00/gal and price drops below $1.75/gal, purchaser may opt out of hedge. If hedged at $2.00/gal, and price goes above $2.50-/gal, seller may opt out.

There is a point at which it would be cheaper for the seller to face lawsuits from WN than to honor the hedge. Because we all know how long it takes civil suits to wind through the courts, the oil companies in the past (or, at least the one I worked for) have had the attitude of "we can afford to pay our lawyers longer than they can afford to pay their lawyers."

P.S. On the 10pm last night, there was a piece on a Pilot (for crissakes) station in North Dallas County that had posted prices that were something like $3.29/gal for regular unleaded! (Pilot is an off-brand "discount" chain.) If we can't quite seem to make Iraq "safe" for Halliburton, at least we can make it profitable.
 
May only be the northern portion of the line that is up and running. All the pipelines have off-loading and storage stations located at various points along the line. It is possible to operate one portion of the line while another portion is down. The supplies being delivered to NYC were probably stored somewhere along the pipeline before the hurricane.

Colonial line begins in the Houston area. At some point, it will have to be operable from there through LA and MS or no more supplies in the line.

Graphic map of Colonial system
 
jimntx said:
I'm just guessing, but WN may not be out of the woods either. Back in the "good ole days" when I was in the awl bidness, hedges usually had an "out" clause for both sides. I.E., if hedged at $2.00/gal and price drops below $1.75/gal, purchaser may opt out of hedge. If hedged at $2.00/gal, and price goes above $2.50-/gal, seller may opt out.

[post="295516"][/post]​
WN uses future contracts in other things, i.e. pork bellys, soy beans, gold, etc, then oil. The profits they make from these contracts offset the cost of fuel. They pay the same as everyone one else for fuel, it's just that their hedge department makes enough money to offset the cost of fuel. They will have to do some pretty good investing to keep their costs of fuel down in the future.
 
Borescope said:
WN uses future contracts in other things, i.e. pork bellys, soy beans, gold, etc, then oil. The profits they make from these contracts offset the cost of fuel. They pay the same as everyone one else for fuel, it's just that their hedge department makes enough money to offset the cost of fuel. They will have to do some pretty good investing to keep their costs of fuel down in the future.
[post="295546"][/post]​

For now, WN has fixed the price of most of its 2005 consumption of jet fuel by engaging in various transactions with heating oil and jet fuel; NOT pork bellies, soybeans or gold.

WN may in fact speculate about the prices of those other commodities, but your explanation is a little short in the area of facts.
 
Some positive news from the FAA....

Statement from the Federal Aviation Administration Concerning the Fuel Supply for Commercial Aviation

Officials with the Federal Aviation Administration are continuously canvassing airports, airlines, and jet fuel providers to ensure sufficient supplies are on hand to support normal commercial operations.

Notwithstanding inaccurate speculation by some individuals quoted in media reports, current information received by the FAA indicates airports and airlines have enough jet fuel to support continued full commercial operations. Given that a number of major pipeline operators have now resumed operations, we believe the aviation industry will not face any immediate disruptions relating to the supply of jet fuel.

###
 
i hope no crap happens in CLT !
BTW, my dad wanted to know, any info on mobile aerospace's hangar out in mobile, alabama,
are US planes still there ?
 

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