US Airways is expected to report the second-biggest loss among domestic carriers

[BoeingBoy]

Could have been 08 or 09, when fuel was near $4 a gallon

It was the 2nd half of 2008 when US stopped putting hedges in place but those already in place finally settled between then and the 3rd quarter of 2009. WN stopped in late 2008 also, but they had the money to buy their way out of the losing hedges they had in place then when the price of crude crashed started putting new hedges in place.

US didn't have the available cash to do what WN did. They had to renegotiate the cash requirement in the credit card processor agreement to keep from defaulting on that. So they came up with the "natural hedge" spin.

Jim

 

[flyus2]

I left usairways last october and let me tell you life is GREAT! There is life after flying. I can't believe how relaxed and peaceful my life is now. I am traveling the country interning to learn about organic food production..or in laymans terms... Im farming! When they say being a Flight Attendant gets in the blood I think they are talking about the traveling part, not the crappy hotels, passengers and management. There are so many ways to travel! Yes you will not make the money you make and you will have to downsize, but if you can let go of the need for useless things, you can truly liberate your life. I plan on traveling to Italy to work at a winery later this year! Not only will I be in a beautiful area but i will get to learn Italian. One of the best parts about my new life is the opportunity to meet amazing people and form true relationships.
I leave this message to simply say... when you have finally had enough it is ok to walk away. I too wanted to hang in there and one day fly the best line, but lets face it, I would have been 60 and no hot italian guy would want me then.🙂 Life is just so much more like, well...life....
i wish you all the best!!

I'm so happy for you that life is great and that there is life after flying.................my only question is..............then why are you still participating in Airline Forums??....................in your blood perhaps?????

 

[john john]

I don't disagree, but will say that US doesn't really have the available cash to spend on hedging fuel. That's really why they stopped - betting wrong in late 2008 cost a bunch and they don't want to be caught by that mistake again. All this about "natural hedges" is spin. That "natural hedge" works OK as long as the price of oil/fuel changes gradually over time and US can raise fares/ancillary income to match.

The way US hedged (and (presumably HP before the merger) was the wrong way to hedge. US shot for about 50% of a quarters needed fuel hedged when the quarter started. 6 months before they have little or no hedges in place for that quarter. In short, they hedged short term, which is why they lost a bundle on the hedges when the price of oil collapsed in mid-2008 - the short term strategy meand they had hedges at $120, $130, $140 when the price went to less than $40/bbl.

There are two ways to hedge, and the first is no guarantee. 1 - accept that the price of oil will tend to increase over the long term so hedge long term. WN has some hedges in place 3-4 years out but even they were caught by the price collapse in late 2008, just not as badly as US. 2 - Don't worry about cutting fuel expense by hedging but use hedges to get a known cost for a major item on the expense side of the P&L statement. That's what AS does, again using longer-term hedges. They effectively fix a big chunk of their future cost of fuel using instruments that don't lose money if oil prices drop.

Jim

Does US did not hedging have ulterior motives ?

 

[davo77]

I'm so happy for you that life is great and that there is life after flying.................my only question is..............then why are you still participating in Airline Forums??....................in your blood perhaps?????

I wish someone had posted what I posted to give me a little nudge. Or at least to let me know it can be done. Even being miserable at a job can be comfortable. At least you know your miserable and why. Stepping out of the box is scary, but once you do it life just opens up!. Best wishes to all of you!

 

[BoeingBoy]

Does US did not hedging have ulterior motives ?

Every airline that hedges has a reason. For most it's to make a profit on the hedges and use that to offset some of the fuel cost, for some it's only to have a known cost for a significant percentage of fuel cost, and for others it's some combination of the two. Having a reason doesn't automatically mean that a carrier's hedging method is the best way to accomplish the goal, however.

The problem US had is that it hedged for the near term and had the goal of having 50% of a quarter's fuel need hedged at the start of any quarter. In 2008, that resulting in US having fuel hedged at prices as high as $140/bbl equivalent crude price. WN, with their long term strategy, stopped putting hedges in place when the crude equivalent price topped $100/bbl because they already had a significant percentage of upcoming quarters fuel hedged 1-2 years in advance.

Jim

 

[SparrowHawk]

Every airline that hedges has a reason. For most it's to make a profit on the hedges and use that to offset some of the fuel cost, for some it's only to have a known cost for a significant percentage of fuel cost, and for others it's some combination of the two. Having a reason doesn't automatically mean that a carrier's hedging method is the best way to accomplish the goal, however.

The problem US had is that it hedged for the near term and had the goal of having 50% of a quarter's fuel need hedged at the start of any quarter. In 2008, that resulting in US having fuel hedged at prices as high as $140/bbl equivalent crude price. WN, with their long term strategy, stopped putting hedges in place when the crude equivalent price topped $100/bbl because they already had a significant percentage of upcoming quarters fuel hedged 1-2 years in advance.

Jim

So more of US's short term thinking at play?

 

[BoeingBoy]

So more of US's short term thinking at play?

With one caveat - US doesn't have the cash or credit to tie up in hedges that settle 2-3-4 years in the future. So all they can do is hedge intelligently instead of mostly on autopilot. Just imagine how much better the bottom line would have been in 2009 if , in the 1st half of 2008 someone had said "Why add hedges at $100, $120, $140/bbl equivalent? Save that cash for hedging when prices drop." The pain would have been worse for a 2-3 months but a lot less for the next year. US' hedging strategy works well when prices are slowly but steadly increasing, but was absolutely wrong for dealing with large spikes.

Jim

 

[Justme]

Net loss excluding special items for the first quarter 2011 of $110 million, or ($0.68) per share. This compares to the first quarter 2010 net loss excluding special items of $89 million, or ($0.55) per share.

On a GAAP basis (generally accepted accounting principles), the company reported a net loss for the first quarter 2011 of $114 million, or ($0.71) per share. This compares to the first quarter 2010 net loss of $45 million, or ($0.28) per share.

 

[Career Reserve]

Net loss excluding special items for the first quarter 2011 of $110 million, or ($0.68) per share. This compares to the first quarter 2010 net loss excluding special items of $89 million, or ($0.55) per share.

On a GAAP basis (generally accepted accounting principles), the company reported a net loss for the first quarter 2011 of $114 million, or ($0.71) per share. This compares to the first quarter 2010 net loss of $45 million, or ($0.28) per share.

and how much was paid out in bonuses to the Executives during this time (of Loss)? <_<

 

[700UW]

disregard

 

[UPNAWAY]

disregard

Came in about .04 cents above analysis expectations. Fuel was 271 million more than YOY, so to lose only 114 is not too bad.
Cash on hand increased 500 million.
As long as the high fuel proce doesn't go dramaticly higher I think we will be ok, I was fearing much worse.

Delta lost 318 million

 

[robbedagain]

I thought it said something like 110 mill or is that exlucidng special or one time items? still not bad say compared to DL or AA

 

[FWAAA]

I thought it said something like 110 mill or is that exlucidng special or one time items? still not bad say compared to DL or AA

Yep, the $110 million net loss excludes special (one-time) items; the $114 million loss includes $4 million of special items.

Not as bad a result as I was expecting given the lack of fuel hedges. US paid about 13 cents a gallon more than AA (incuding the benefit of AA's hedges) and US burned about 339 million gallons, so US spent about $44 million more than it would have if US had hedges equal to AA's hedges. Parker said in January that hedging would have cost US at least $300 million for the full year, so perhaps Parker's gamble (that fuel costs would not kill unhedged US) might pay off after all. Of course, if fuel stays way abouve $3/gal for the rest of the year (as Delta expects it to), the next three quarters could be really ugly for US.

 

[UPNAWAY]

The market likes it up 5%.

 

[rvolkcpa]

The market likes it up 5%.

Obviously a loss is not good, but "the ugly girl" didn't do so badly after all.