Tony still denies it!
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Tony still denies it!
Interesting interview with our Tone.
Tony Tyler: plane speaking from a merger sceptic - Telegraph
Tony Tyler: plane speaking from a merger sceptic - Telegraph
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From the article
One reason for the latest profits warning is that Cathay is taking a HK$7.6bn bath on its fuel hedging policy, having been caught unawares by an oil price yo-yoing from $30 a barrel to $147 and back again. Is he going to fire the finance director? I wonder. "No," he laughs. "The decisions on hedging are collective decisions." He reckons Cathay will not be the only airline to have loused up fuel hedging. "We are just the first to put our hand up." .
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"No," he laughs
ups.
He reckons Cathay will not be the only airline to have loused up fuel hedging.
Haven't you learnt ,CX managers can never admit to mistakes,its part of their job description
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HKfooey
"...but most smart airlines did not.."
So which smart airlines are these?
Not that I am in the habit of defending Tyler & Co; but how smart are you selling tickets and freight deals based on a Fuel Price of X and the price then rises to 2X. Surely fixing part, not all, of your future fuel burden at a known price is sensible? If your shareholders want to gamble on the future price of fuel, there are plenty of other investment vehicles out there offering just that (if they are still solvent!!!)
So which smart airlines are these?
Not that I am in the habit of defending Tyler & Co; but how smart are you selling tickets and freight deals based on a Fuel Price of X and the price then rises to 2X. Surely fixing part, not all, of your future fuel burden at a known price is sensible? If your shareholders want to gamble on the future price of fuel, there are plenty of other investment vehicles out there offering just that (if they are still solvent!!!)
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So which smart airlines are these?
Enjoy the LWOP, I'm sure Tony and co will appreciate it
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HKfooey
Firstly, CX hasn't hedged all their fuel at $147, far from it. Indeed, NC makes the very valid point (repeatedly), the lower oil price is very welcomed news at CX.
A bit of googling reveals articles suggesting the following USD losses for your "smart airlines" in the third quarter of 2008 when oil was $70.
UAL $519m, Southwest $120m, AMR (AA) $360m, Continental $140m Delta $26m.
As for leftof's Air NZ mate, he obviously didn't google and a see a local analyst estimating Air NZ to lose $NZ333m on Fuel Hedge positions. Now that strikes me as being HKD1.3m, a bit larger than CX's reported loss. Equally, I would wager CX is fair bit bigger than Air NZ and so to lose that amount on a smaller Fuel useage causes me to think of a phrase involving glasshouses and stones .....
The interesting one is Qantas, they may have got it right... but then the news is doom and gloom about them as well.....
A bit of googling reveals articles suggesting the following USD losses for your "smart airlines" in the third quarter of 2008 when oil was $70.
UAL $519m, Southwest $120m, AMR (AA) $360m, Continental $140m Delta $26m.
As for leftof's Air NZ mate, he obviously didn't google and a see a local analyst estimating Air NZ to lose $NZ333m on Fuel Hedge positions. Now that strikes me as being HKD1.3m, a bit larger than CX's reported loss. Equally, I would wager CX is fair bit bigger than Air NZ and so to lose that amount on a smaller Fuel useage causes me to think of a phrase involving glasshouses and stones .....
The interesting one is Qantas, they may have got it right... but then the news is doom and gloom about them as well.....
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http://www.airnewzealand.co.nz/resou...on-22jan09.pdf
It would make it easier if all the airlines reported in the same way...not necessarily this way but a way that would make it easier to compare apples with apples.
It would make it easier if all the airlines reported in the same way...not necessarily this way but a way that would make it easier to compare apples with apples.
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That is right, Leftof,
Air New Zealand seem to have adopted an impressive honesty since the lying and attempted cover up of the Antarctic Erebus disaster.
As pilot investor, not spending all my money on wine, women and song , I have been known to invest sometimes in airline shares, but I sell out when the fuel price rises, because I am assuming no hedging because no information
Hedging must be done through a middle man who gets his cut, so really hedging is a loss of efficiency. There is no free lunch and nobody really knows where fuel prices are going, so it is more efficient not to hedge at all if the company has reserves to weather a storm.
Air New Zealand seem to have adopted an impressive honesty since the lying and attempted cover up of the Antarctic Erebus disaster.
As pilot investor, not spending all my money on wine, women and song , I have been known to invest sometimes in airline shares, but I sell out when the fuel price rises, because I am assuming no hedging because no information
Hedging must be done through a middle man who gets his cut, so really hedging is a loss of efficiency. There is no free lunch and nobody really knows where fuel prices are going, so it is more efficient not to hedge at all if the company has reserves to weather a storm.
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Managers mess
CX management decision on fuel hedging is exactly the same as it was when SARS happened......a complete over reaction and panic like decision making. SARS was only a virus thant went away, fuel prices too were never going to be sustained at those levels otherwise no one would be flying today including CX.
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Cathay and Swires and now paying the price for losing a lot of their really bright boys at the end of the 90s. These guys would be the directors of today however I believe most of them bailed out because the pay was crap and the possibility of Philip Chen becoming CEO. Considering the history of CX the recent f@#$ ups are completely out of character. Interesting what some of the more senior guys think!
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I didn't realize there was so many "Monday morning quarterbacks" on prune; I think I recall you all posting last year saying oil was going to drop (fair play to 404 Titan; he picked it!!).
I would imagine that CX read the same analysis as 404 Titan, as they only hedged a modest part of their fuel commitment. Leftof's mate in Air NZ got it so right hedging 74% of their commitment
; really showing CX the way forward....
Guava Tree says "so really hedging is a loss of efficiency.... so it is more efficient not to hedge at all if the company has reserves to weather a storm". .... perhaps if you are solely judging efficiency by the price you buy your fuel at.
However, business is all about the use of Capital and leveraging. By sacrificing slightly on the cost of fuel they do not need to hold cash reserves for fuel price fluctuations and they are able to leverage their deployed capital to buy aircraft. So long as they can get generate a greater rate of return than the cost of borrowing, they win large....
; I think I recall you all posting last year saying oil was going to drop (fair play to 404 Titan; he picked it!!). I would imagine that CX read the same analysis as 404 Titan, as they only hedged a modest part of their fuel commitment. Leftof's mate in Air NZ got it so right hedging 74% of their commitment
; really showing CX the way forward....Guava Tree says "so really hedging is a loss of efficiency.... so it is more efficient not to hedge at all if the company has reserves to weather a storm". .... perhaps if you are solely judging efficiency by the price you buy your fuel at.
However, business is all about the use of Capital and leveraging. By sacrificing slightly on the cost of fuel they do not need to hold cash reserves for fuel price fluctuations and they are able to leverage their deployed capital to buy aircraft. So long as they can get generate a greater rate of return than the cost of borrowing, they win large....
Last edited by Liam Gallagher; 3rd Feb 2009 at 04:45.
Liam Gallagher
Thanks for the compliments.
Some people here really need a reality check and stop believing all the doom and gloom coming from the 6th floor. HKD$7.6 billion mark to market hedge loss over two years is a piss in the bucket when you realise the company budgeted this financial year for a fuel bill of HKD$47.0 billion but have saved about HK$20.0 billion because of the drop in oil prices. If the oil price recovers over the next two years this will then be reflected as a mark to market profit. Not all airlines have come out and mentioned their hedging losses yet but most will have one. A couple of my mates in Qantas have told me that Qantas have hedged most of their fuel for the next twelve months at USD$107.00 per barrel yet I don’t recall hearing Qantas advising the market of this potentially mammoth hedging loss.
Thanks for the compliments.
Some people here really need a reality check and stop believing all the doom and gloom coming from the 6th floor. HKD$7.6 billion mark to market hedge loss over two years is a piss in the bucket when you realise the company budgeted this financial year for a fuel bill of HKD$47.0 billion but have saved about HK$20.0 billion because of the drop in oil prices. If the oil price recovers over the next two years this will then be reflected as a mark to market profit. Not all airlines have come out and mentioned their hedging losses yet but most will have one. A couple of my mates in Qantas have told me that Qantas have hedged most of their fuel for the next twelve months at USD$107.00 per barrel yet I don’t recall hearing Qantas advising the market of this potentially mammoth hedging loss.
Last edited by 404 Titan; 3rd Feb 2009 at 06:46.
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Titan404
I was a bit disappointed that you replied so quickly.
A bit like the downtrodden POW's in Stalag 13, I had taken solice in your post ($80 oil) like the POW's took solice from a postcard received from an aunt in Switzerland. I thought, here is a guy that made it out. Here is a guy that studied and toiled and pick the markets, fronted up the cash and made it large. Please tell me it is true and and you are on a beach somewhere with something cold in one hand and something hot in the other and logged onto to Pprune purely for perverse amusement.
Sorry... I digressed... with the benefit of 20/20 hindsight what else are the rest of the Masterminds forecasting... a Black President?
A bit like the downtrodden POW's in Stalag 13, I had taken solice in your post ($80 oil) like the POW's took solice from a postcard received from an aunt in Switzerland. I thought, here is a guy that made it out. Here is a guy that studied and toiled and pick the markets, fronted up the cash and made it large. Please tell me it is true and and you are on a beach somewhere with something cold in one hand and something hot in the other and logged onto to Pprune purely for perverse amusement.
Sorry... I digressed... with the benefit of 20/20 hindsight what else are the rest of the Masterminds forecasting... a Black President?
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Southwest Airlines on Thursday reported a loss for the quarter, but a profit for the year.
The airline said that it lost $56 million in the fourth quarter, including special items, compared with a $111 million profit in 2007. Without one-time charges, the airline earned $61 million, compared with $87 million in the 2007 quarter.
Full-year profit fell to $178 million, from $645 million in 2007. Southwest's profit without special items was $294 million, compared with $471 million for all of 2007. It was airline's 36th straight profitable year.
Southwest has been one of the industry's leading purchasers of fuel hedging contracts, which lock in the price of fuel. When prices rise, as they did in 2008, the contracts protect against losses. But when prices fall, companies must take charges to reflect the difference between the price they locked in, and the actual price of fuel.
Maybe you should try reading Reuters, instead of googling the Daily Post ?
Anyway, being a fan of TT and his mob, you will obviously be happy to take leave, without pay and without everything else that would normally accumulate during that time.....enjoy
PS. if you think ( as I do ) 404 is a bit of a wiz in this stuff, maybe listen to all he says, not just your selections :
The airline said that it lost $56 million in the fourth quarter, including special items, compared with a $111 million profit in 2007. Without one-time charges, the airline earned $61 million, compared with $87 million in the 2007 quarter.
Full-year profit fell to $178 million, from $645 million in 2007. Southwest's profit without special items was $294 million, compared with $471 million for all of 2007. It was airline's 36th straight profitable year.
Southwest has been one of the industry's leading purchasers of fuel hedging contracts, which lock in the price of fuel. When prices rise, as they did in 2008, the contracts protect against losses. But when prices fall, companies must take charges to reflect the difference between the price they locked in, and the actual price of fuel.
Maybe you should try reading Reuters, instead of googling the Daily Post ?
Anyway, being a fan of TT and his mob, you will obviously be happy to take leave, without pay and without everything else that would normally accumulate during that time.....enjoy
PS. if you think ( as I do ) 404 is a bit of a wiz in this stuff, maybe listen to all he says, not just your selections :
Some people here really need a reality check and stop believing all the doom and gloom coming from the 6th floor.
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Hkfooey
There are 49 reasons why I will never be in TT's fan club.
We seem to be reading different stuff. Southwest were the darlings of the Fuel Hedge, however google reveals
Aviation firms not yet hedging on jet fuel costs - Corporate News - livemint.com
Which has quotes like....
"Southwest Airlines posted losses in the September quarter for the first time since 1991 as it took on part of its estimated $300 million charges related to fuel hedging arrangements.
The carrier, which posted its second straight loss in the three months to December, had been feted in the industry just months before as a role model to follow as it used hedges to control fuel costs when its peers bled.
The airline, otherwise considered a role model in the industry for how it manages to keep costs low, may burn cash further as it has already hedged 75% of its estimated 2009 fuel purchases at prices set to $73 a barrel of oil and 50% of its 2010 purchases at $90 a barrel—exposures the airline is trying to pare rapidly."
and then a quote...
“...we substantially reduced our net fuel hedge position to approximately 10% of our estimated fuel gallons in each year from 2009 through 2013. The current market value (as of 20 January) of our net fuel derivative contracts for 2009 through 2013 reflects a net liability of approximately $1 billion,” Gary C. Kelly, Southwest chief executive said in a statement announcing the December quarter results"
So it sounds like Southwest got caught like everyone else and took a hit in its Sept quarter of $HKD2bn. However, contracts through to 2013, that it is trying to unwind, are valued by the CEO, in today's terms, as a $HKD7.7bn liability.
As for believing the doom and gloom. The world economy is not in great shape and air travel and freight are discretionary spending. Do you have a contrary view? However, I believe Airlines should Fuel Hedge and CX have done better than most.
Which part of.... "Indeed, NC makes the very valid point (repeatedly), the lower oil price is very welcomed news at CX".... do you not understand..
We seem to be reading different stuff. Southwest were the darlings of the Fuel Hedge, however google reveals
Aviation firms not yet hedging on jet fuel costs - Corporate News - livemint.com
Which has quotes like....
"Southwest Airlines posted losses in the September quarter for the first time since 1991 as it took on part of its estimated $300 million charges related to fuel hedging arrangements.
The carrier, which posted its second straight loss in the three months to December, had been feted in the industry just months before as a role model to follow as it used hedges to control fuel costs when its peers bled.
The airline, otherwise considered a role model in the industry for how it manages to keep costs low, may burn cash further as it has already hedged 75% of its estimated 2009 fuel purchases at prices set to $73 a barrel of oil and 50% of its 2010 purchases at $90 a barrel—exposures the airline is trying to pare rapidly."
and then a quote...
“...we substantially reduced our net fuel hedge position to approximately 10% of our estimated fuel gallons in each year from 2009 through 2013. The current market value (as of 20 January) of our net fuel derivative contracts for 2009 through 2013 reflects a net liability of approximately $1 billion,” Gary C. Kelly, Southwest chief executive said in a statement announcing the December quarter results"
So it sounds like Southwest got caught like everyone else and took a hit in its Sept quarter of $HKD2bn. However, contracts through to 2013, that it is trying to unwind, are valued by the CEO, in today's terms, as a $HKD7.7bn liability.
As for believing the doom and gloom. The world economy is not in great shape and air travel and freight are discretionary spending. Do you have a contrary view? However, I believe Airlines should Fuel Hedge and CX have done better than most.
Which part of.... "Indeed, NC makes the very valid point (repeatedly), the lower oil price is very welcomed news at CX".... do you not understand..
Liam Gallagher
Sorry for my promptness in replying.
Dam you’ve caught me out though. I was at the beach.
PS: Just to clarify my last post, my opening comment was tongue in cheek. The rest of the post wasn’t directed at you.
hongkongfooey
Don’t get me wrong. Any hedging loss is bad but to be fare no one knew exactly when oil prices were going to fall and even I’m surprised by how much and how quickly it has fallen. For CX only to be in the red on paper for HKD$7.6 is a clear indication to me their hedging last year was small. If they had hedged as much as some other airlines have we would be talking of a loss ten fold larger and for that we should be greatful.
Sorry for my promptness in replying.
Dam you’ve caught me out though. I was at the beach. PS: Just to clarify my last post, my opening comment was tongue in cheek. The rest of the post wasn’t directed at you.
hongkongfooey
Don’t get me wrong. Any hedging loss is bad but to be fare no one knew exactly when oil prices were going to fall and even I’m surprised by how much and how quickly it has fallen. For CX only to be in the red on paper for HKD$7.6 is a clear indication to me their hedging last year was small. If they had hedged as much as some other airlines have we would be talking of a loss ten fold larger and for that we should be greatful.
Last edited by 404 Titan; 3rd Feb 2009 at 11:39.
One reason for the latest profits warning is that Cathay is taking a HK$7.6bn bath on its fuel hedging policy, having been caught unawares by an oil price yo-yoing from $30 a barrel to $147 and back again. Is he going to fire the finance director? I wonder. "No," he laughs. "The decisions on hedging are collective decisions."
...until at least, the Swire Manoeuvres begin...jolly fine sport old chap!...watch your back!...if he was man enough, he would resign!"