Who actually hedges fuel?

[Krinkle]

Just wondering - do the Gulf airlines make public whether or not they hedge fuel?

I remember in his previous incarnation at GF Hogey saying their mistake not to hedge fuel cost them a couple of hundred million dollars

Was curious as to whether there are two schools of airline in the region - those that hedge and those that don't - and who falls into what category.

Or do most of them not have the need because they are getting fuel at subsidised rates? :confused:

If they haven't hedged, and following the Goldman Sachs prediction of $200 oil, it must be 'squeaky bum time' for a certain airlines...:ooh:

[fractional]

Who actually hedges fuel?None will disclose numbers publicly. They will all say they do; NOT! The tap is just next door...
Gulf Air may come forward a little more open and because they have little oil. They refine more than they pump out.

[330 Man]

Sorry fractional but that is incorrect regarding Emirates. EK does announce their hedging results as part of the annual report. And if you look on the financials you will see that the fuel cost, as a percentage of total expenses is no lower than anyone else. In the most recent report (2weeks ago) fuel was 30.6% of total expenses, and it was 29.1% the year prior. Emirates buys from the local fuel company at whatever price they can negotiate. The tap is not next door. And correct me if I am wrong but I do not think that aviation fuel is refined anywhere in the UAE. If I am wrong then please tell me where it is done, because that will be a stock to own.

Regarding the original question, EK has a fuel hedging office in Houston Texas. It is manned every day by one guy. He has admistrative support from Dubai and has I think one secretary there. In the 2007-2008 financial year we saved 242 Million dollars with fuel hedging. ALL of this was disclosed publicly the end of April.

330 man

[Billy Madrid]

And we burnt 200 million bucks worth leaving all the Apu's running whilst aircraft where on the ground.

Now boys don't start the Apu until you turn on to stand or we won't have enough fuel to run them all night with nobody onboard.

Anybody seen the Ek head office at night. Not one light or computer turned off. A real team effort!!!!

[fractional]

330 ManEK does announce their hedging results as part of the annual reportIt isn't mentioned it's the result of hedging... You are assuming the 1.6% increase is part of the hedging strategy. Well, I don't think it's so clear as you say. Is it then a yearly strategy? There is a lot of "engineering" to make it look good, is there not?
I enjoy the perks, but I'm not blind.
The UAE refines JET A1. It wouldn't be prudent if the Gulf did not have a source of this important ingredient for the much antecipated growth. There must be other major oil producers in the Region doing so too.

Billy, the APU running, it's another story. They care...

[330 Man]

Fractional,
You are correct. Takreer (The Abu Dhabi Refining Company) does indeed refine Jet A-1. I did not know that but it does make sense. Now I will find out if their stock is listed yet. With the growth of aviation it should be a good growth stock.

You are correct also in that the word "hedge" is not in the annual report. What it says is "fuel risk management program". I am not sure that it could mean anything other than hedging. It is not fuel savings, or usage. The only risk we have from fuel is it's price.

This is from page 35 of the annual report:

Fuel price risk
"The airline industry is exposed to fluctuations in the price of jet fuel. Emirates closely monitors the actual cost of fuel against forecasted cost. Emirates utilises commodity futures and options to achieve a level of control over jet fuel costs so that profitability is not adversely affected. As a general principle, not more than the forecasted fuel consumption is hedged with percentage of cover being significantly higher in the near term than in latter period."

We have been hedging fuel for the last 3 years that I am aware of. I am sure that it is more, but yes it is a yearly strategy.

And yes there is alot of "engineering" at emirates. But this is an audited financial statement, audited by PricewaterhouseCoopers. We can hide some stuff but nothing major.

The APU thing is another story. Power and air on the air bridge but DNATA will not hook it up. Go Figure!

330 Man

[fractional]

Tks 330 Man.