Fuel Hedge Losses Further Proof of Misdirection of Airline- Board of Directors Campaign Launched
Chicago, Ill., October 21, 2008-- United Airlines’ announced $779 million loss for the third quarter, $519 million attributable to poor fuel hedges, is yet another example of incompetence and lack of fiscal responsibility by its CEO and his executives, according to the pilots of United Airlines.
OLYMPIC AIR - ΟΛΥΜΠΙΑΚΗ "Η ΕΛΛΑΔΑ ΨΗΛΑ" "GREECE FLYING HIGH"
Alphascan From United States of America, joined Nov 2003, 936 posts, RR: 14 Reply 3, posted (4 years 7 months 1 day 4 hours ago) and read 7228 times:
I would rarely if ever side with the UAL ALPA MEC after they ruined UA in the "Summer of Hell". But I gotta say Tilton has done little to bring this once great carrier back in spite of its considerable strengths. There has been a string of short-sighted decisions followed by the lining of managemnt's pockets. An investor would have to be crazy to put capital into such an organization. Tilton has got to go. Until then I'm afraid UA will continue to deteriorate.
"To he who only has a hammer in his toolbelt, every problem looks like a nail."
PanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 10 Reply 5, posted (4 years 7 months 1 day 3 hours ago) and read 7077 times:
Side note: Is UA still operating in bankruptcy? I can't remember if there were any threads about it here.
If it did, was its reorganization plan substantially different?
If not, how long will it be allowed to operate in chapter 11?
United is a great airline that certainly has great strengths. Hopefully great leadership, such as those at DL and CO, can come on board and return the airline to great health.
But then again, maybe CO joined Star Alliance in order to facilitate scooping up UA's routes and passengers when they finally go under. I really hope not, but that concept cannot be completely ruled out.
Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
Flighty From United States of America, joined Apr 2007, 7435 posts, RR: 2 Reply 7, posted (4 years 7 months 1 day 3 hours ago) and read 6994 times:
I agree with these pilots. UA took an absurd risk, and in times like this such devil-may-care financial gambling needs to be viewed through the prism of executive risk management. Obviously they misunderstood their jobs and lost quite a bit of money, unprovoked. Hedging may be stylish (like baccarat) but it's not always smart. Overall expected returns are negative. This quarter is a case in point. They are literally borrowing money to pay down these debts. Wild.
Jacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 61 Reply 8, posted (4 years 7 months 1 day 3 hours ago) and read 6942 times:
Quoting Flighty (Reply 8): I agree with these pilots. UA took an absurd risk, and in times like this such devil-may-care financial gambling needs to be viewed through the prism of executive risk management. Obviously they misunderstood their jobs and lost quite a bit of money, unprovoked. Hedging may be stylish (like baccarat) but it's not always smart. Overall expected returns are negative. This quarter is a case in point. They are literally borrowing money to pay down these debts. Wild.
MadameConcorde From San Marino, joined Feb 2007, 10243 posts, RR: 40 Reply 10, posted (4 years 7 months 1 day 2 hours ago) and read 6846 times:
I was given a "Gleen must go" bracelet on my flight from IAD to EZE by the chief purser, a very nice man and excellent professional. Not certain that Glenn WILL go, though!
There was a better way to fly it was called Concorde
United1 From United States of America, joined Oct 2003, 5337 posts, RR: 8 Reply 11, posted (4 years 7 months 1 day 2 hours ago) and read 6848 times:
Quoting Jacobin777 (Reply 8): Quoting Flighty (Reply 8):
I agree with these pilots. UA took an absurd risk, and in times like this such devil-may-care financial gambling needs to be viewed through the prism of executive risk management. Obviously they misunderstood their jobs and lost quite a bit of money, unprovoked. Hedging may be stylish (like baccarat) but it's not always smart. Overall expected returns are negative. This quarter is a case in point. They are literally borrowing money to pay down these debts. Wild.
Other carriers lost money on hedges as well..
All of the airline industry execs were kind of dammed if they did and dammed if they didn't when it came to hedges. If they didn't act and fuel continued to increase in price they would have had even higher fuel bills then they already had, if on the other hand the price of fuel dropped they could have been in the position where they had to pay out to the other party on the hedges. The fortunate bit is that UAs hedges do not extend much past 1st quarter 2009, and as the price of oil drops UA generates a better margin which will help make up the difference.
Apodino From United States of America, joined Apr 2005, 3635 posts, RR: 6 Reply 12, posted (4 years 7 months 1 day 1 hour ago) and read 6716 times:
As much as I don't like Glenn Tilton, I have to defend him on this one. Oil prices were rising like crazy due to rampant speculation, and with Goldman Sachs predicting $200 oil, this would have been crippling to the airlines. Taking out hedges is the only way to guarantee and lock in a fuel cost. When you have certainty, it makes it much easier to plan and work the budget around. If you have a plan for 50 dollar oil, but nothing to lock it in, when it spirals out of control, you have to dig into cash reserves to pay for the fuel. Its kind of like buying an insurance policy, with the difference in price being the premium. Hedging guarantees that your costs won't go higher, and in effect, it is much easier to plan your business around a certain cost, rather than a cost constantly fluctuating so much its hard to know what will happen.
BAW716 From United States of America, joined Nov 2003, 1994 posts, RR: 31 Reply 14, posted (4 years 7 months 20 hours ago) and read 6379 times:
Quoting EXAAUADL (Reply 13): Tilton sucks but he isnt responsible for the financial crisis that caused oil prices to fall
True enough.
He IS responsible, however, for the dismal mismanagment of the airline that has them with a fleet that is going to drag them down the rathole, no cohesive vision of what the airline should be...simply a "we have to be number one" or "we have to get those customers" attitude. He has done NOTHING to make the carrier better for its passengers, especially those who bring in the big bucks that keep the airline running. I could go on and on, but I don't necessarily agree with ALPA and their tactics....but I do agree that Glen must go....and the sooner the better.
baw716
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
N505FX From United States of America, joined Aug 2008, 191 posts, RR: 0 Reply 16, posted (4 years 7 months 17 hours ago) and read 6183 times:
Quoting BAW716 (Reply 14): a fleet that is going to drag them down the rathole,
A320/A319, 777, 767, 757, 747-400? How is that fleet going to drag them in to a rathole?
Also, aren't all of you (and most labor groups) the same people that, just about 8 months ago were griping that UAL had blown it, and were inept because they hadn't hedged enough fuel and that WN was the golden child for hedging so much fuel????
United1 From United States of America, joined Oct 2003, 5337 posts, RR: 8 Reply 17, posted (4 years 7 months 17 hours ago) and read 6162 times:
Quoting Chgoflyer (Reply 15): Does anyone know if there has been a UA CEO the UA pilots have not taken issue with? Ever?
Pat Paterson back in the early days was well liked think he retired in 1963 after that I can't think of one. In all seriousness this time it may be deserved, but I do think that UAALPA tends to be a ~little~ prone to throwing a hissy fit if UA Mgt. does not worship the ground ALPA walks on.
Legacytravel From United States of America, joined Aug 2005, 1067 posts, RR: 2 Reply 18, posted (4 years 7 months 6 hours ago) and read 5882 times:
I did my part. I sent a letter explaining how I wont book any of clients on united anymore. It is sad but they are not even in the same ball park price wise on any markets that I have had clients interested in.
Not to mention sick outs etc.. I dont feel I should chance my clients or my business reputation on that.
I love UAL when I fly I get great service but right now to many unkowns.
FWAERJ From United States of America, joined Jun 2006, 3172 posts, RR: 1 Reply 19, posted (4 years 7 months 6 hours ago) and read 5687 times:
I have to agree with ALPA... United is, as they say here in the American Midwest, "being flushed down the Kohler".
They make too many bad management decisions... when every other US legacy is beginning international refleeting, UA isn't ordering new planes. As soon as the credit crunch is over and the Airbus and Boeing order books fill up again, UA will be at a significant disadvantage.
Domestically, they're a mess... look at FWA. For example, they refuse to add FWA-DEN or FWA-IAD even though the markets are there, feeling that "we can serve the markets just fine through overcongested, delay-prone ORD". Never mind that you backtrack to get to IAD from ORD and that people have been screaming for FWA-DEN for years despite Eagle's FWA-DFW and 9E's FWA-MSP.
And UA's in-flight service is behind the times... UA still hasn't installed credit/debit card readers for buy-on-board, which is unacceptable due to the fact that almost every other US airline (save for NW and US, but those are non-issues as NW is merging with plastic-happy DL and US is going cashless soon) accepts credit/debit in some form. Doesn't Chase want UA to encourage customers to use their Mileage Plus Visa on the plane for those $6 snackboxes, too, so customers get double miles and Chase gets more interchange revenue? And doesn't UA and the AFA want their FAs to act like FAs and not bank tellers? I don't get it...
BAW716 From United States of America, joined Nov 2003, 1994 posts, RR: 31 Reply 20, posted (4 years 7 months 5 hours ago) and read 5636 times:
Quoting N505FX (Reply 16): A320/A319, 777, 767, 757, 747-400? How is that fleet going to drag them in to a rathole?
It's not the aircraft themselves that are going to drag them down the rathole, it is the number of aircraft types in the fleet that could have been consolidated....UA could have brought their fleet types down from seven (you are forgetting the 737s they still have in their fleet...yes, they are being grounded as we speak, but they were operating them until recently) to four: 757, 767, 777 and the 747-400.
Rationale:
Dropping the Airbus fleet in its entirety would eliminate the costs of maintaining spares for an aircraft type that is inconsistent with the rest of the fleet. It has been clearly shown that a common manufacturer fleet (be it Boeing or Airbus) is less expensive to operate then a blended fleet.
Dropping the A319/A320 creates certain problems for United in short haul routes. However, I do believe that the Express carriers can pick up the slack by placing regional jets in places where the A319/A320 were operating, especially on segments less than three hours.
The 757-200 has excellent economics for UA, and the flexibility to be used on routes from 1500-3500 miles (I would advocate winglets for some of the fleet to gain some range for use on overwater segments across the Atlantic).
Here is the route spread:
Domestic USA: 757-200, backed up on certain high density routes by the 767/777.
Hawaii: 757-200/767-300ER and some markets the 777-200ER high density aircraft.
Atlantic: 757-200/767-300ER/777-200ER
Pacific 767-300ER/777-200ER
South America: 767-300ER/777-200ER
Ultra Long Haul: West Coast-Australia, West Coast-China/HKG, Chicago-HKG/NRT...777-200ER/747-400.
While I recognize this is a radical notion, here are the economic arguments:
UA needs to downsize its route net...but not by much. The short haul flying can be turned over to the Express Carriers, who can fill in the gaps with aircraft such as the E170/E190...which btw AC uses between YYZ and points on the west coast very effectively. UAX could do some of the same.
The 757-200 has the flexibility to be profitable on routes between 1500-3500 miles, which means Chicago-West Coast, near South America, some transcon routes (expand PS) and adding winglets, across the Atlantic on routes in which the 767-300ER may be too big.
The 767-300ER can be used on 1) Hawaii - the higher density version, 2) Atlantic routes, some thinner Pacific routes (e.g. SEA/SFO to secondary points in north Asia), as well as South America routes. It can also be used on higher density domestic routes.
The 777-200ER can be used:
a) High Density US markets'
b) Atlantic
c) Pacific
d) South America
The 747-400 can be used on the ultra long haul routes where range and seats become an issue: US-Australia, US-China, high density routes across the Atlantic...
The reduction of fleet types will save millions of dollars in maintenance, training, operations, fuel and a littany of other areas, not to mention the fact that the inherent ability of one manufacturer to provide common support to its airlines would give UA a leg up on carriers like Delta, who will face a HUGE fleet problem when Delta and Northwest are integrated, Delta being primarily a Boeing airline and NW primarily being an Airbus airline.
I have always stated that UA missed a huge opportunity by not taking advantage of the bankruptcy filing to restructure their fleet. Now, the writedown costs of removing these aircraft from there fleet would be horribly stiff. I still believe, however, that in this age of high fuel costs, gaining commonality in fleet operations is one of the major areas that carriers can achieve significant cost savings that can result in easing some of the nickel and diming that is occuring in the industry right now for passengers.
If we look at carriers that have done well, WN, CO, and to a lesser degree Delta...why have they performed better? Simply stated, they don't have fleet types that cross manufacturers and the fewer aircraft in the fleet, the lower the fleet costs. In this respect, if we compare airlines, CO has performed the best in this regard...if we compare their loss to UAs, and look at fleet costs, I believe you will find that CO has saved significantly by operating three aircraft types on long haul and operating the 737 on short haul services. This is four aircraft types....and they don't even have the 747-400.
In my view, UA should follow this example.
baw716
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
AirNZ From , joined Dec 1969, posts, RR: Reply 21, posted (4 years 7 months 5 hours ago) and read 5589 times:
Quoting BAW716 (Reply 20): Rationale:
Dropping the Airbus fleet in its entirety would eliminate the costs of maintaining spares for an aircraft type that is inconsistent with the rest of the fleet. It has been clearly shown that a common manufacturer fleet (be it Boeing or Airbus) is less expensive to operate then a blended fleet.
Yes, but if one wants to be accurate, your "Rationale" could equally be applied to the Boeing fleet, couldn't it??? Won't happen obviously, but just pointing out the inconsistency in your 'rationale'.
PanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 10 Reply 22, posted (4 years 7 months 5 hours ago) and read 5556 times:
BAW716, I think you did a great job of explaining your fleet rationalization plan!!
Let me ask you this, though - do you think that the 757 is too much capacity for some routes?
I ask this based on the SFO hub that has mainline flights where frequency is the rule, not size. Bay Area - Southern California is highly competitive with Southwest, especially with business traffic. 757's on that route all day might be too much capacity and offer less flexibility.
The A319/320 combo has proven its worth for United in terms of fuel efficiency and flexibility. It is a great set-up that allows longer-thinner routes to be offered, and if demand increases, UA can switch to a 757. It happens frequently at SAN for routes that need an increase in seats.
Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
413X3 From United States of America, joined Jul 2008, 1983 posts, RR: 0 Reply 23, posted (4 years 7 months 5 hours ago) and read 5518 times:
Quoting AirNZ (Reply 21): Yes, but if one wants to be accurate, your "Rationale" could equally be applied to the Boeing fleet, couldn't it??? Won't happen obviously, but just pointing out the inconsistency in your 'rationale'.
I don't understand what you are trying to say. United already have Boeing for mid and long haul, why would they want to drop that and go to all Airbus, having to buy entirely new airplanes?
N505FX From United States of America, joined Aug 2008, 191 posts, RR: 0 Reply 24, posted (4 years 6 months 4 weeks 1 day 20 hours ago) and read 5317 times:
Quoting BAW716 (Reply 20): It has been clearly shown that a common manufacturer fleet (be it Boeing or Airbus) is less expensive to operate then a blended fleet.
Really? Show me. Where has is been shown that buying from one manufacturer trumps other economics, including finance deals and the a/c fitness for mission. If your "clearly shown" includes most of the major airlines that are profitable and operate mixed manufacturer fleets, then I don't get your logic.
Quoting BAW716 (Reply 20): he 757-200 has the flexibility to be profitable on routes between 1500-3500 miles,
Uh, where are you getting this unequivocal statement from? A 757 can be profitable on any route, as long as revenue management is up to snuff.
Quoting BAW716 (Reply 20): I have always stated that UA missed a huge opportunity by not taking advantage of the bankruptcy filing to restructure their fleet.
So let me get this right, you expected UAL to negotiate down existing leases, reject a lot of leases, and cancel deliveries in BK and commit to more capex under the watchful eye of a BK judge? What fantasy world do you live in?
Quoting BAW716 (Reply 20): I still believe, however, that in this age of high fuel costs, gaining commonality in fleet operations is one of the major areas that carriers can achieve significant cost savings that can result in easing some of the nickel and diming that is occuring in the industry right now for passengers.
Lets see, entering in to new leases and purchase finance on new metal, which costs more, is a way to save costs, just so you can say you have a common fleet? Hmmm...
Lastly, you are wrong on your assumptions about fleet types and commonality, it is more than just airframe - you are forgetting about the most expensive part of the plane, powerplant - and when you look at that, UAL (after 737 retirement) will be exclusively (in a way) PW.
The A320/319 is one fleet type - same engines and pretty much all the same parts
The 757/767 from a flight operations stand point is opperated as a common fleet. Airframe and engine support of course is different, but there are economies gained from things like 757/747 engine commonality
777 is its own fleet
747 is its own fleet
So if you look at it logically (stay with me here) after the 737 are gone, they will operate, effectively a 4.5 a/c type fleet.
25 Papatango: Easy to see why Delta chose Northwest over United for their merger partner.
26 N505FX: Obviously, it was for fleet commonality!
27 Olympic472: Unless I am reading incorrectly here. Considering fleet types, but not engine types, DL has more types that are common with UA (3) than NW (1). 319 /
28 Bongodog1964: Whilst it has been shown to be beneficial to operate a single type fleet , as with Southwest in the USA or FR & U2 in Europe, I have never seen such
29 N505FX: ??? what are we supposed to notice about their weight or mission profitability by their ramp presence?
30 Bongodog1964: If you look carefully, you can see the extra weight in the undercarriage alone, the 757 is far beefier in its structure. Thet weight requires fuel to
31 Jmc1975: The website is a magnificent and beautiful representation of what employees can do when they are empowered to stand up to tyrannical fascism.
32 Xxcr: ya, even thought this is old news! it'll be around till glenn leaves!!! i even sent a letter to the CEO!!! don't even think mine got read! haha! but b
33 ExFATboy: You make a good case for fleet rationalization, but I do see one concern - if you make the 757 the smallest mainline plane in the fleet, you're putti
34 Rightrudder: Although it is perfectly legal to register a distinctive domain name, diluting or using a name in bad faith would constitute unlawful intent. The pla
35 BAW716: What inconsistency? UA has far fewer Airbuses in its fleet than Boeing aircraft. If the reverse were true, I'd be arguing for the elimination of the
36 Singapore_Air: It's all very well trying to get Tilton to go, but do they have a replacement in mind ?
37 BAW716: There's the rub...they really need to go outside the airline, but they need to get an airline guy, not someone like Tilton who comes from another ind
38 Singapore_Air: Well I'm available and I'd be able to do a damn good job methinks.
39 BAW716: I am as well...perhaps with our combined brain power, we could bring a global solution, what you think?? cheers, baw716
40 Singapore_Air: haha - yeah why not? Let's go for it! Unfortunately, I think our "combined brain power" would come to similar conclusions that would cause 'pain' req
41 DingDong: Historically, airline debt can be roughly divided into three segments: 1) aircraft leasing/ownership costs [debt service, maintenance, etc.] 2) fuel
42 Apodino: Your argument makes absolutely no sense. Yes the A320 is a different manufacturer from the other types. That being said, you still have five differen
43 N505FX: It is called sarcasm. Additionally, you still haven't explained how you would have handled fleet standardization and renewal while in BK proceedings.
44 PVG: He is also responsible for the timing of the hedges. What I don't understand is why they wouldn't have hedged at say $75/bbl as far forward as possibl
45 AirNZ: I wasn't trying to say anything specific, and certainly not what you have assumed. I was merely pointing out a somewhat inconsistency......if the Air
46 AirNZ: The 'inconsistency' in that in my opinion your argument is completely invalid and, to be honest, without much thought although you describe yourself
47 PanAm747: Logistics question about fuel hedging: If UA has hedged at let's say $120 a barrel, and the price drops enormously for a long period of time, is it po
48 DingDong: That's likely an option, but would have to be a final resort. For one thing, if you do that, suppliers may then insist on advance cash payment before
49 Luv2cattlecall: Found this interesting...they flew a sign in front of his Chicago Penthouse: I know we aren't supposed to judge by appearances....but compared to Neel
50 BAW716: Yeah, those significant sacrifices would first come from the executive suite, in which I would cut everybody salaries to something that the unions wo
51 BAW716: Not really, since that figure used to be in the mid 40s... baw716
52 BAW716: Your statement is nonsensical in that you have included the 320 in your statement. My goal was to get down to four aircraft types: 757/767/777/747-40
53 BAW716: Since your entire argument is based on sarcasm, there is little point to explaining how I would have done things in the BK process; although I do hav
54 Apodino: Again, your argument is flawed. Cross training pilots on different aircraft is just totally impractical for a number of reasons. One, in order for pi
55 N505FX: typo. I meant can't and I wasn't talking about a pilots point of view.
56 Bistro1200: Not to mention a violation of FARs. In a Part 121 operation, you CANNOT be cross-trained to operate more than one type in 121 operation. This even ap
57 BAW716: Having reread my statement, I see where the statement conveys the wrong idea. I recognize, both as a pilot and a business manager, to train pilots on
58 LAXintl: United 757-767 pilots are indeed cross qualified and fly them interchangeably in their monthly patterns. And interestingly the 757-767 is the only ty
60 Luv2cattlecall: See though....if someone does Driver's Ed in a Caddy, they'll be perfectly capable of driving a Bimmer....in fact, it'll probably take less time to g
61 AirNZ: Firstly, lets get this straight....I am not attacking you in any way! I have pointed out that the argument you are putting forward is completely inco
62 Apodino: No, but my job requires me to know the systems and performance of every plane in our fleet, which right now is only the CRJ-200.
63 DocLightning: Well, yes. That And I believe that UA was one of the airlines who specifically requested this feature from Boeing.
64 BAW716: To those of you who believe I don't have facts to back up my position, I ask that you please have a look at my latest blog on MySpace.com. You will fi
65 Apodino: That pretty much sums up everything thats wrong with this once great airline in my opinion. But as I said before, with the 737's being retired, UA ha
66 BAW716: You may disagree with this one as well, but I also believe that UA should do away with its 747-400s, and replace them with 777-300ERs (presuming, of
67 Jacobin777: B77W's come only with GE engines. I think B77W's would do great for UA on many routes, but I think the B748I would do great on certain trunk routes a
68 BAW716: I agree with everything you say....on the last point, I did say "most". SYD is obviously problematic and probably the longer Asia routes would be a p
69 Apodino: I was just thinking, if they were to do that, Contiental and United would have pretty similar and complimentary fleets, (Save for the A320/737). I kn
70 Pyrex: So UA management is responsible for not implementing your braindead airmchar CEO scheme of creating a massive gap in their fleet between 90 seat regi
71 Jacobin777: I think there might be other possible routes where the B744/B77W/B748I would do well for UA over the B772's. The B739ER comes somewhat close..though
Sponsor Message: 
From Ireland, joined Nov 2006, 24891 posts, 
From United States of America, joined May 2000, 22026 posts, 
From San Marino, joined Feb 2007, 10243 posts, 
From , joined Dec 1969, posts, 
Printer friendly format 
