United Airlines Parent Posts $1.3 Billion Loss
UAL, the parent company of United Airlines, said this morning that it lost $1.3 billion in the fourth quarter of 2008, partly from operating losses but also from bad bets on fuel hedges.
Airlines typically try to hedge against high fuel prices by buying futures at a set price, anticipating that the prices will actually rise higher. When oil was trading at $147 per barrel in July, buying futures for, say, $100 per barrel looked like a good idea.
But with oil trading now at $40 per barrel, the bets go terribly wrong: Airlines still have to pay the equivalent of $100 per barrel for oil, losing $60 for each barrel that is turned into jet fuel.
As a result, UAL recorded more than $900 million in hedging losses in the fourth quarter.
Even without the hedging losses, though, UAL would have posted a loss as the ongoing recession hammered the travel industry.
United said it would let go another 1,000 workers by the end of the year in addition to the 1,500 already announced.
January 21, 2009; 10:14 AM ET
Categories: The Ticker | Tags: UAL, United Airlines, recession
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Posted by: hisroc | January 21, 2009 10:09 PM | Report abuse
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