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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (29075)	3/22/2005 9:22:24 AM
From: kailuabruddah	Read Replies (2) \| Respond to of 110194

The main problem for airlines such as Delta Air Lines Inc. and AMR Corp.'s American Airlines is that -- despite growing demand -- they have been unable to raise fares to profitable levels due to intense competition from carriers with much lower operating costs, such as Southwest Airlines Inc. and JetBlue Airways Corp. This may be true, but what about hedging fuel costs? news.airwise.com The following is a summary of what the leading airlines, ranked by size in terms of passenger traffic, have said about the impact of fuel prices: American: 15 percent hedged in first quarter, not at all in remaining quarters. Negative impact on fuel costs from 33.7 cent a gallon increase in jet fuel in 2004: USD$1 billion. United Airlines: 11 percent hedged for 2005, at about USD$1.27 per gallon, excluding taxes. Delta: Not hedged. Every one-cent rise in the average jet fuel price per gallon will increase its liquidity needs by about USD$25 million per year. Business model assumes an average 2005 jet fuel price of about USD$1.22 per gallon. Northwest Airlines: Hedged about 25 percent for the first quarter, and 6 percent for the full year. Said a one cent change in the cost of each gallon of fuel would impact operating expenses by about USD$1.6 million per month. Continental: Not hedged. Annual fuel costs seen increasing by USD$40 million for each USD$1 increase in crude oil prices, which have risen by about USD$14 a barrel so far this year. Also contractually liable to pay regional carrier ExpressJet's fuel costs above 71.2 cents a gallon. ExpressJet's fuel and fuel taxes exceeded that cap by USD$126 million in 2004. Southwest: 85 percent hedged with derivatives that cap prices at USD$26 a barrel, compared with current market prices of over USD$57 a barrel. Expects first quarter fuel costs with hedge to exceed fourth-quarter's 89.1 cents average price per gallon. US Airways: No fuel hedged as of December 31, 2004, but added it will recognize about USD$2 million a month for previously liquidated hedges, representing about 4 percent of its 2005 jet fuel requirements. America West: 45 percent hedged for the rest of this year, and 2 percent hedged for 2006. A one cent per gallon increase in jet fuel prices will increase its annual operating expense by USD$5.7 million. Alaska Air: 50 percent hedged for 2005; A one-cent per gallon increase in jet fuel prices will increase its annual operating expenses by about USD$4.0 million. JetBlue Airways: 22 percent hedged for 2005.