Hedging on oil prices: Airlines lose billions

[GoFlyKiteNow]

Almost all airlines are losing huge amount of money.

During the time of high oil prices, these airlines have
hedged fuel prices on quarterly basis.
Price and quantity wise.

Now that the prices have dropped to 35 US$ a barrel, they
still have to pay the hedged prices they contracted earlier.

One prominent airline in S.E. Asia had hedged prices at 110 USD
a barrel till March 09,.and they are now obliged to buy at that price
while the crude oil prices are so tantalisingly low.

This airline is reported to lose over 500 million US dollars during this contractual hedging period.

In PRC, most airlines there are losing billions due to the same reason.

 

[Leckmichamarsch]

Almost all airlines are losing huge amount of money.

During the time of high oil prices, these airlines have
hedged fuel prices on quarterly basis.
Price and quantity wise.

Now that the prices have dropped to 35 US$ a barrel, they
still have to pay the hedged prices they contracted earlier.

One prominent airline in S.E. Asia had hedged prices at 110 USD
a barrel till March 09,.and they are now obliged to buy at that price
while the crude oil prices are so tantalisingly low.

This airline is reported to lose over 500 million US dollars during this contractual hedging period.

In PRC, most airlines there are losing billions due to the same reason.

& Air Asia claims it is making money!! Another blowup coming soon??

 

[Cestbon]

& Air Asia claims it is making money!! Another blowup coming soon??

AirAsia have report loses for the 1st time in the last quarter 2008 due to fuel price peg at higher price. Just same as most of the Airline only renew the new price on March. The news already out in the media and paper few days ago la.

 

[soikee]

Almost all airlines are losing huge amount of money.

During the time of high oil prices, these airlines have
hedged fuel prices on quarterly basis.
Price and quantity wise.

Now that the prices have dropped to 35 US$ a barrel, they
still have to pay the hedged prices they contracted earlier.

One prominent airline in S.E. Asia had hedged prices at 110 USD
a barrel till March 09,.and they are now obliged to buy at that price
while the crude oil prices are so tantalisingly low.

This airline is reported to lose over 500 million US dollars during this contractual hedging period.

In PRC, most airlines there are losing billions due to the same reason.

SIA is the airline who hedged big at US$110 per barrel.

 

[GoFlyKiteNow]

AirAsia have report loses for the 1st time in the last quarter 2008 due to fuel price peg at higher price. Just same as most of the Airline only renew the new price on March. The news already out in the media and paper few days ago la.

AirAsia's hedge loss is not large....being a budget carrier wth smaller planes (mostly A320s), their fuel consumption is relatively low compared to main Airline operators with 777s and 747s.

 

[tommyh]

Majority of revenues for Chinese airlines are for domestic flights. As we know, the domestic market in China is huge. Chinese airlines buy all their fuel from the Chinese gov.

Chinese fuel like the fuel prices in most 3rd world countries is subsidized to make domestic travel affordable.

I doubt if Chinese airlines are losing billions given that the external sector is but a tiny portion of their business.

I suspect that the combined external passenger/miles for all Chinese airlines is less than the the mentioned SE Asian airline which reportedly lost $500M.

Almost all airlines are losing huge amount of money.

During the time of high oil prices, these airlines have
hedged fuel prices on quarterly basis.
Price and quantity wise.

Now that the prices have dropped to 35 US$ a barrel, they
still have to pay the hedged prices they contracted earlier.

One prominent airline in S.E. Asia had hedged prices at 110 USD
a barrel till March 09,.and they are now obliged to buy at that price
while the crude oil prices are so tantalisingly low.

This airline is reported to lose over 500 million US dollars during this contractual hedging period.

In PRC, most airlines there are losing billions due to the same reason.

 

[scoobyhoo]

500 millions is less than billions

 

[red amoeba]

no worries, SIA has deep pockets.