Why airfares won't drop so much....

[JF Mezei]

Reuters has an article on the fuel hedging by various USA airlines.
http://www.reuters.com/articlePrint?articleId=AFN2353983720081223

AIRLINE PERIOD PCT HEDGED PRICE
Delta Air Lines Q1 09 63 $2.87-$3.39/gln
Q2 09 36 $2.71-$3.33/gln
Q3 09 40 $1.32-$2.70/gln
Q4 09 20 $0.80-$2.70/gln
FY 09 37 $2.09-$3.06/gln
American Airlines FY 09 34 $71-$99/bbl oil
United Airlines FY 09 28 $101-$114/bbl oil
Continental Airlines FY 09 22 not disclosed
US Airways no guidance for 2009
Southwest Airlines FY 09 75 $73/bbl oil average
FY 10 50 $90/bbl oil avg
FY 11 40 $93/bbl oil avg

Anyone know how to convert the Delta numbers into the price per barrel
of oil ? I assume the price quoted is that of jetfuel instead of crude oil ?

A barrel of oil is define as 42 US gallons.

Interesting that Southwest, not so long ago, was laughing all the way to
the bank because it then ultra low hedges, but is now stuck with 75% of
its fuel needs at $73 when market is at $40
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[A Guy Called Tyketto]

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Post by JF Mezei
Reuters has an article on the fuel hedging by various USA airlines.
http://www.reuters.com/articlePrint?articleId=AFN2353983720081223

AIRLINE PERIOD PCT HEDGED PRICE
Delta Air Lines Q1 09 63 $2.87-$3.39/gln
Q2 09 36 $2.71-$3.33/gln
Q3 09 40 $1.32-$2.70/gln
Q4 09 20 $0.80-$2.70/gln
FY 09 37 $2.09-$3.06/gln

Anyone know how to convert the Delta numbers into the price per barrel
of oil ? I assume the price quoted is that of jetfuel instead of crude oil ?
A barrel of oil is define as 42 US gallons.

Doing the simple math, if it is 2.87 for 1 gallon, multiply 42
by 2.87. You get $120.54/bbl on the lean side for Q1, $142.38 on the
expensive side. For the entire fiscal year, you're at
$87.78 - $128.52/bbl. They appear to be as variable as UAL. I don't
know if it was Reuters or the airline, but they tried to spin it nicely
to appear that they are getting a good deal. They failed. ;)

Post by JF Mezei
Interesting that Southwest, not so long ago, was laughing all the way to
the bank because it then ultra low hedges, but is now stuck with 75% of
its fuel needs at $73 when market is at $40

$73 still looks a bit better than the others, and especially
now, when they can hedge for FY 10 at $33/bbl. If the others don't try
their hardest to match that now, they will be screwed. I wouldn't
expect fares to drop until this time next year. That is when the
consumer will see the impact of the fall in oil prices.

BL.
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[JF Mezei]

Post by A Guy Called Tyketto
Doing the simple math, if it is 2.87 for 1 gallon, multiply 42
by 2.87. You get $120.54/bbl on the lean side for Q1, $142.38 on the
expensive side.

It depends on what substance is being measured.

A barrel of crude oil will make far less than a barrel of jet fuel once
it is refined. Aka: a barrel of jetfuel would be far more expensive than
a barrel of crude.

So if the Delta number are for jetfuel at $120.54/bbl, while the
Southwest numbers are $73/bbl of light sweet crude, then one would still
need to know some conversion factor for crude to jet fuel in terms of
costs.

.
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