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American Post 04Q08 Loss - $340mil  
User currently offlineLAXintl From United States of America, joined May 2000, 24902 posts, RR: 46
Posted (5 years 6 months 1 week 6 days 9 hours ago) and read 2979 times:

More red ink

Quote:
AMR Corporation Reports Fourth Quarter 2008 Loss of $340 Million

FORT WORTH, Texas, Jan. 21 /PRNewswire-FirstCall/ -- AMR Corporation, the parent company of American Airlines, Inc., today reported a net loss of $340 million for the fourth quarter of 2008, or $1.22 per share.

The current quarter results compare to a net loss of $69 million for the fourth quarter of 2007.

For all of 2008, AMR recorded a net loss of $2.1 billion, or $7.98 per share.

AMR ended the fourth quarter with $3.6 billion in cash and short-term investments, including a restricted balance of $459 million, compared to a balance of $5.0 billion in cash and short-term investments, including a restricted balance of $428 million, at the end of the fourth quarter of 2007.

"Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "We believe these actions and our fleet renewal efforts have put us on sounder footing as we face continued economic uncertainty, slower travel demand, and fuel price volatility in 2009.

http://biz.yahoo.com/prnews/090121/da60760.html?.v=2

As part of the annoucement today, AA announced further capacity cuts in the MD-80 fleet with domestic capacity expected to drop an additional 1% in 2009.


From the desert to the sea, to all of Southern California
10 replies: All unread, jump to last
 
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 1, posted (5 years 6 months 1 week 6 days 2 hours ago) and read 2704 times:

note that AA's cash position fell by $1.4B down to $3.6B. While AA's hedging has been more conservative than some airlines, AA's ability to maintain high cash levels is apparently over. Credit is tight and AA/AMR is going to be limited in its ability to add to its cash levels. AA states that its biggest cash drain is due to funding pension expenses, something that will hit AA harder than other carriers because AA has the highest percentage of employees under defined benefit rather than defined contribution plans.

User currently offlineLAXintl From United States of America, joined May 2000, 24902 posts, RR: 46
Reply 2, posted (5 years 6 months 1 week 5 days 22 hours ago) and read 2526 times:

Yah, the pensions are a ticking time bomb for AA compared to many of its peers whom did the dirty deed and dumped theirs via Ch11.

The market certainly did not like AMRs numbers today with stock tumbling 24%. Wow!



From the desert to the sea, to all of Southern California
User currently offlineLipeGIG From Brazil, joined May 2005, 11421 posts, RR: 58
Reply 3, posted (5 years 6 months 1 week 5 days 12 hours ago) and read 2286 times:
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It's interesting to see how the recent fuel prices increase driven airlines to a "hedge run".
"AMR has 45 percent of its anticipated first quarter 2009 fuel consumption hedged at an average cap of $2.58 per gallon of jet fuel equivalent ($93 per barrel crude equivalent), with 42 percent subject to an average floor of $1.97 per gallon of jet fuel equivalent ($68 per barrel
crude equivalent). AMR has 35 percent of its anticipated full-year consumption
hedged at an average cap of $2.59 per gallon of jet fuel equivalent ($94 per
barrel crude equivalent), with 32 percent subject to an average floor of $1.94
per gallon of jet fuel equivalent ($67 per barrel crude equivalent). As of
Jan. 16, the average 2009 market forward price of crude oil was more than $51
per barrel. Consolidated consumption for the first quarter is expected to be
677 million gallons of jet fuel."
AMR seems to be a little better in hedge than UA.

Quoting LAXintl (Reply 2):
The market certainly did not like AMRs numbers today with stock tumbling 24%

And seems to continue... today more 3.76% at this time, US$ 7,68 per share.

Quoting WorldTraveler (Reply 1):
note that AA's cash position fell by $1.4B down to $3.6B.

The $ 575 million in cash collateral with fuel hedge counterparties probably are part of the reduction. They said it was made in the end of 4Q



New York + Rio de Janeiro = One of the best combinations !
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 4, posted (5 years 6 months 1 week 5 days 6 hours ago) and read 2077 times:



Quoting LipeGIG (Reply 3):
The $ 575 million in cash collateral with fuel hedge counterparties probably are part of the reduction.

and like UA, it is very likely that the collateral will be sacrificed based on current oil prices.

If oil prices go down further, the hedges become more underwater.

It is ironic that the Finance Depts. of most airlines pushed for the cost cuts that have turned airlines around operationally but are now the biggest source of risk over the next several quarters. It is esp. noteworthy at AA which has had some of the best finance people in corporate America. Considering that AA has not been at the top of the game operationally for a number of years, AA's finance dept. has done wonders to keep the game going waiting for a solution to their other problems like labor.

the best thing that can happen is that these hedges unwind very quickly... but it could cost some airlines dearly until they do.

And the problem is going to be seen in every one of the financial reports that are released.


User currently offlineLipeGIG From Brazil, joined May 2005, 11421 posts, RR: 58
Reply 5, posted (5 years 6 months 1 week 5 days 5 hours ago) and read 2033 times:
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FORUM MODERATOR



Quoting WorldTraveler (Reply 4):
and like UA, it is very likely that the collateral will be sacrificed based on current oil prices.

If oil prices go down further, the hedges become more underwater.

And giving current economic situation, there's no expectation of fuel prices huge increase other than by oil exporters drastic measures (i.e. cut production)

Quoting WorldTraveler (Reply 4):
the best thing that can happen is that these hedges unwind very quickly... but it could cost some airlines dearly until they do.

And the problem is going to be seen in every one of the financial reports that are released.

Hedging was mainly used to protect against fuel prices going up and up week after week (in some moments, day after day) but despite some derivatives that allow a stop-loss point, many airlines never realize that they can't manage fuel prices moving down as if they do not reduce fares, others will do it.
In my view (i work in a financial institution where hedge is always connected to something strong like future sales or currency needs), Hedging fuel consumption of an airline should be strictly connected to the size of their advance sales aftter 60/90 days from today. If they only sold 3 to 5% of seats in advance, hedging more than that means they are gambling with their future results.
And their boards should take a lesson that, they could save billions by just establishing guidelines for hedging based on valid premises.



New York + Rio de Janeiro = One of the best combinations !
User currently offlineCrAAzy From United States of America, joined Jan 2008, 773 posts, RR: 0
Reply 6, posted (5 years 6 months 1 week 5 days 5 hours ago) and read 1978 times:
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Oil will be back above $70 per barrel by June and pushing $100 per barrel by the end of this year.

User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 7, posted (5 years 6 months 1 week 5 days 3 hours ago) and read 1868 times:



Quoting LipeGIG (Reply 5):
Hedging fuel consumption of an airline should be strictly connected to the size of their advance sales aftter 60/90 days from today.

the number of seats sold is not the metric that should be considered but rather the size and structure of the network which determines the number of gallons consumed. As soon as airlines have determined their size, they need to hedge - and airlines set their capacity size years in advance. There is no reason for an airline to have to pay market rates for fuel just because it doesn't have bookings on hand 3-6 months in advance. At 3 months out, very few domestic flights are booked heavy enough to justify hedging but the vast majority of those flights will still operate. For int'l flights, even 6 months is a long booking curve in some markets.

Quoting CrAAzy (Reply 6):
Oil will be back above $70 per barrel by June and pushing $100 per barrel by the end of this year.

and you better hope that airlines are buying hedges at TODAY's prices so they do not have to face higher fuel prices later this year. It will be a crying shame if airlines overpay for fuel because of bad hedges in the first half of the year and then can't hedge in the back half because their cash was all tied up with bad hedges - but that scenario is very possible. Based on some of the cash positions that have evaporated over the past quarter, there are some airlines that will be shut out of future hedging - and will be singularly vulnerable to huge upticks in the next round of fuel prices.

Extrapolating AA and UA's cash position out to the other airlines that have not yet reported, AA is probably still in the upper end of the spectrum of network airlines based on cash but AA has alot less financial flexibility than they did a quarter ago... and the urgency to fix some of AA's longstanding issues like its labor problems is much stronger because of that reduced cash position.


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6126 posts, RR: 34
Reply 8, posted (5 years 6 months 1 week 5 days 2 hours ago) and read 1847 times:



Quoting LipeGIG (Reply 5):
And giving current economic situation, there's no expectation of fuel prices huge increase other than by oil exporters drastic measures (i.e. cut production)

OPEC cannot afford any drastic cuts.

Quoting LipeGIG (Reply 5):
In my view (i work in a financial institution where hedge is always connected to something strong like future sales or currency needs),

The steep oil runup was due to hedge funds that were highly leveraged in crude. As soon as the credit crunch hit took hold they had to liquidate their positions and the price plumetted... even though OPEC took drastic measures (the largest production cuts in history).

Quoting CrAAzy (Reply 6):
Oil will be back above $70 per barrel by June and pushing $100 per barrel by the end of this year.

IEA and DOE both report that 2009 crude consumption will drop below last years levels... there is no way, save geopolitical incident or destructive hurricanes in the Gulf, that oil will breach $50/bbl.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineLipeGIG From Brazil, joined May 2005, 11421 posts, RR: 58
Reply 9, posted (5 years 6 months 1 week 10 hours ago) and read 1563 times:
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Quoting Planemaker (Reply 8):
The steep oil runup was due to hedge funds that were highly leveraged in crude. As soon as the credit crunch hit took hold they had to liquidate their positions and the price plumetted... even though OPEC took drastic measures (the largest production cuts in history).

Not only because of that, but also because of the economic downturn. Less activity means less consumption and will drive prices down.

Quoting WorldTraveler (Reply 7):
the number of seats sold is not the metric that should be considered but rather the size and structure of the network which determines the number of gallons consumed

I know WT, but that's the point, you can't have any metrics to establish a connection between expense and revenue. My point is that a factory for example hedges Euros against US$ over actual export sales not over your past production. Airlines try to predict the future doing hedge for 25% of their Q4 2009 needs for example because they haven't sold that much space yet.



New York + Rio de Janeiro = One of the best combinations !
User currently offlineLH423 From Canada, joined Jul 1999, 6501 posts, RR: 54
Reply 10, posted (5 years 6 months 1 week 9 hours ago) and read 1498 times:



Quoting CrAAzy (Reply 6):
Oil will be back above $70 per barrel by June and pushing $100 per barrel by the end of this year.

Maybe. But I also seem to recall analysts predicting oil to be topping $200 by this Summer. They clearly didn't foresee a global economic meltdown to cool the heels of rising gas.

So...I'll take a pass at your prediction. I'd say we'll see a tops at $55...maybe $60 if there is some economic improvement (this is barring any new wars or unilateral production shutdowns, like the 1973 oil crisis).

LH423



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