Something I've wondered about since UA unveiled their POR - since your CEO is a former oil industry exec, was the $50 forecast for oil a NYMEX futures contract price forecast (essentially the price of WTI), a domestic average price forecast, a world average price forecast, or even a refinery crude average cost?
Doesn't matter. It was probably the lowest WAG (wild a$$ guess) the banks providing the exit financing would accept! And I think many people got really wrapped around the axle when the $50 forecast was initially revealed.
The point is that UAL management, and more importantly, our good friends at Citigroup and JP Morgan (have you hugged a Citigroup or JP Morgan banker today?) agreed that they would base their projection over the up and coming years at around 50 bucks a barrel. If crude oil (or really Jet A) averages go below the forecast levels, all the better. If they don't, they probably feel that fare increases or airlines going away (due to not being able to cover their costs) will make up the difference and air fares will rise to cover this higher cost.
One way or another, the industry will have to cover their costs as they can't go on losing billions forever. Since we probably won't be the first to go away if fuel prices keep rising or something really bad happens, they figure whoever goes first will decrease supply enough to give everyone else the power to raise airfares. So I guess one could say that it really doesn't matter if they're "exactly" right with their crude oil estimates.
P.S. When I was talking NET profits before, I'm talking no #### real NET profits that cover non-cash items (like depreciation) as well as operational and interest expenses for 2006. To me, that's when you're really making money!