Doom and gloom is just around the corner
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Doom and gloom is just around the corner
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How ironic....
Just when oil starts to hit the lower edge of the Hedge, the Hedge unwinds. For the 3 year period of the lowest oil price in living memory, we were paying $80-120 a barrel for 50% of our fuel. Learning their lesson, they abandoned all the principles of risk management and stopped hedging when oil was down at $30-40, so from 2019 we have no hedging in place. There's always geopolitical risk out there (sanctions against Iran for example). Back in 2015-16, you could buy oil at $30-40, why would you not secure some? Is oil really going to drop any lower than $30; even if it does, your downside risk is $30.....
Management could not have got this more wrong if they tried..... Makes you wonder what they were trying to do?
Time to win.... time to try? Trying times?
Just when oil starts to hit the lower edge of the Hedge, the Hedge unwinds. For the 3 year period of the lowest oil price in living memory, we were paying $80-120 a barrel for 50% of our fuel. Learning their lesson, they abandoned all the principles of risk management and stopped hedging when oil was down at $30-40, so from 2019 we have no hedging in place. There's always geopolitical risk out there (sanctions against Iran for example). Back in 2015-16, you could buy oil at $30-40, why would you not secure some? Is oil really going to drop any lower than $30; even if it does, your downside risk is $30.....
Management could not have got this more wrong if they tried..... Makes you wonder what they were trying to do?
Time to win.... time to try? Trying times?
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I don't think the question that was asked, as to which company or companies were utilized for the fuel hedging contracts, has ever been answered.
So whilst it's not hard for the names and ultimate ownership of fuel hedging companies to be unearthed, hiding behind "commercial in confidence" does little to dissuade the conspiracy theorists that there is/was a link with Swires/CX and their theory that this was all creative accounting to deliberately shuffle money from one regime to another.
So whilst it's not hard for the names and ultimate ownership of fuel hedging companies to be unearthed, hiding behind "commercial in confidence" does little to dissuade the conspiracy theorists that there is/was a link with Swires/CX and their theory that this was all creative accounting to deliberately shuffle money from one regime to another.
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You are telling me that a company that has two oil related businesses, does not know what the projected oil price will be in 2-5 years. All you needed to do was to subscribe to a few finaincial news letters. For $100 a year and they were predicting the low oil price 2-3 years before it happened....they are not that stupid!
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The Swires are stupid when it comes to running an airline, NOT stupid when it comes to pulling accounting tricks to drain the liquidity from the airline so it doesn’t have to be shared with other stockholders and employees.
My sources tell me that Merlin forced the hedges through at the board level. Fishy??? This Company has been syphoning profits off CX to subsidiaries for decades.
My sources tell me that Merlin forced the hedges through at the board level. Fishy??? This Company has been syphoning profits off CX to subsidiaries for decades.
Last edited by cxorcist; 8th May 2018 at 14:05.
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Please be respectful, the proper name is Delta Air Lines. And yes this is a true statement.
Chairman Chu’s message was semi factual, with the high fuel price, they tacked on a fuel surcharge at a fixed rate to cover their fuel cost. This helped bump their margins across the board. It all came apart when they budgeted to keep that surcharge with a higher hedge rate but the government stepped in.
Chairman Chu’s message was semi factual, with the high fuel price, they tacked on a fuel surcharge at a fixed rate to cover their fuel cost. This helped bump their margins across the board. It all came apart when they budgeted to keep that surcharge with a higher hedge rate but the government stepped in.
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Delta hasn't exactly had a lot of success with its fuel hedges:
https://www.forbes.com/sites/uhenerg.../#53d984fa3383
Even with the earlier fuel hedging losses, the Deltoids got a good bonus this year:
JUN 2, 2016 @ 11:08 AM
University of Houston Energy Fellows , Contributor
Delta CEO Admits To $4 Billion Lost In Hedging Fuel Costs
POST WRITTEN BY
Ed Hirs, Energy Economist
Ed Hirs, Energy Economist
University of Houston Energy Fellows , Contributor
Delta Airlines’ new CEO Ed Bastian admits glibly “We’ve lost over the last eight years about $4 billion cumulatively on oil hedges” in a recentBloomberg interview. When asked if he would consider hedging, or locking in oil prices in the future, he states “I don’t get paid to make those kinds of bets.” Given that fuel accounts for between 23% and 33% of Delta’s costs from year to year, that is an incredulous statement.
Delta Air Lines Boeing 767-300 landing at Stuttgart Airport, Germany. By Juergen Lehle
To be profitable Delta must price its airline tickets above its costs. Revenue from tickets can generally be forecast with reasonable accuracy, and labor costs are easy to forecast. How much jet fuel its airplanes will consume is also easy to forecast.
The challenge is in predicting the cost of jet fuel, or, alternatively, hedging against price increases. It is not a “bet.” Hedging is easily accomplished by buying futures contracts or call options at fixed prices on an options exchange. It can also be accomplished by acquiring the commodity producer such as U.S. Steel did with Marathon Oil
MRO -1.16% Corporation and Texas Oil & Gas Corporation, or as R. J. Reynolds did with Aminoil. The buyer then profits from rising oil prices to offset its increased fuel costs.
Delta Air Lines Boeing 767-300 landing at Stuttgart Airport, Germany. By Juergen Lehle
The challenge is in predicting the cost of jet fuel, or, alternatively, hedging against price increases. It is not a “bet.” Hedging is easily accomplished by buying futures contracts or call options at fixed prices on an options exchange. It can also be accomplished by acquiring the commodity producer such as U.S. Steel did with Marathon Oil
MRO -1.16% Corporation and Texas Oil & Gas Corporation, or as R. J. Reynolds did with Aminoil. The buyer then profits from rising oil prices to offset its increased fuel costs.
Even with the earlier fuel hedging losses, the Deltoids got a good bonus this year:
FEB 14, 2018 @ 10:17 AM
Delta Air Lines said Wednesday that it will pay employees $1.1 billion in profit sharing for 2017, the fourth consecutive year for which the carrier will pay profit sharing of more than $1 billion.
While the Valentine’s Day payout is no doubt cheering Delta’s 80,000 employees – it amounts to an average of about $6,000 for each of them -- pilots at American Airlines are concerned because their profit sharing rate is less than at either Delta or United.
A Delta captain will get a payout of $29,000 to $59,000, according to the Allied Pilots Association, which represents 15,000 American pilots, while a United captain gets between $9,300 and $20,500 and an American captain gets $3,600 to $7,500.
American Pilots Say 'What About Us?' After Delta Pays Out $1.1 Billion In Profit Sharing
Ted Reed , CONTRIBUTOR Opinions expressed by Forbes Contributors are their own.
This story was updated at 11:45 a.m with a comment from the United chapter of the Air Line Pilots Association.Delta Air Lines said Wednesday that it will pay employees $1.1 billion in profit sharing for 2017, the fourth consecutive year for which the carrier will pay profit sharing of more than $1 billion.
While the Valentine’s Day payout is no doubt cheering Delta’s 80,000 employees – it amounts to an average of about $6,000 for each of them -- pilots at American Airlines are concerned because their profit sharing rate is less than at either Delta or United.
A Delta captain will get a payout of $29,000 to $59,000, according to the Allied Pilots Association, which represents 15,000 American pilots, while a United captain gets between $9,300 and $20,500 and an American captain gets $3,600 to $7,500.
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So, on average a pilot at Delta is getting 2 months profit sharing. And their CEO isn't bickering about their own fuel hedging losses as an excuse to screw employees. I suppose that highlights the difference between a management that respects and values their employees, and a management that cynically justifies only looking after the executives, and screwing their employees. Might be worth remembering that as we continue with the "negotiations". Needless to say, there is NO chance of us dropping CC/TB until ALL issues have been settled to the employees satisfaction. Stand strong everyone.
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What we need to all be aware of, is swine is a conglomerate and it charges the businesses it owns management fees for the revenue, not the profit or loss thus it makes money no matter what!
More revenue more $$$.
Have a look at wiki Advantages and disadvantages of Conglomerates and see how Hong Kong and its lack of oversight makes the big ticket disadvantages irrelevant.
Seems to be swine only practices this under the swine Pacific limited rather than John Swire & Sins
https://en.m.wikipedia.org/wiki/Conglomerate_(company)
Edit: autocorrect fails
More revenue more $$$.
Have a look at wiki Advantages and disadvantages of Conglomerates and see how Hong Kong and its lack of oversight makes the big ticket disadvantages irrelevant.
Seems to be swine only practices this under the swine Pacific limited rather than John Swire & Sins
https://en.m.wikipedia.org/wiki/Conglomerate_(company)
DisadvantagesEdit
- The extra layers of management increase costs.[5]
- Accounting disclosure is less useful information, many numbers are disclosed grouped, rather than separately for each business. The complexity of a conglomerate's accounts make them harder for managers, investors and regulators to analyze, and makes it easier for management to hide issues.
- Conglomerates can trade at a discount to the overall individual value of their businesses because investors can achieve diversification on their own simply by purchasing multiple stocks. The whole is often worth less than the sum of its parts.
- Culture clashes can destroy value.[6]
[7] - Inertia prevents development of innovation.[8]
- Lack of focus, and inability to manage unrelated businesses equally well.[9]
- Brand dilution where the brand loses its brand associations with a market segment, product area, or quality, price or cachet.
- too big to fail
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Delta: 2 months profit share (even with a fuel hedge loss)
CX: Captains, "0" profit share. The rest of the pilots a small bone. Cabin crew and ground staff, full month (plus pay raise for the CC).
Conclusion: Our management treat the pilots with contempt, and contempt is what we will show them in return. No (NO) lifting of CC and the TB until there is a proper, industry standard contract in place. With full 13th month like our KA brethren. Otherwise, this management can continue to count the resignations, day by day.
CX: Captains, "0" profit share. The rest of the pilots a small bone. Cabin crew and ground staff, full month (plus pay raise for the CC).
Conclusion: Our management treat the pilots with contempt, and contempt is what we will show them in return. No (NO) lifting of CC and the TB until there is a proper, industry standard contract in place. With full 13th month like our KA brethren. Otherwise, this management can continue to count the resignations, day by day.
