Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
TAM 2008 Results: Loss Due To Fuel Hedge!  
User currently offlineLipeGIG From Brazil, joined May 2005, 11365 posts, RR: 59
Posted (5 years 3 weeks 3 days 10 hours ago) and read 2027 times:
AIRLINERS.NET CREW
FORUM MODERATOR

TAM just released their 2008 results.

A Net loss of R$ 1,12 billion (something closer to US$ 450 million) for the 2008 full year. The result was due to US$/R$ devaluation (around R$ 600 million) and mainly, to fuel hedge agreements that produced almost R$ 1 billion in loss on a non-cash basis (yet)
TAM is in fact a profitable airline at this time, but was not enough to compensate fuel hedge financial expense.

A detail on their fuel agreements
1T09 - 52% consumption - Strike US$ 107
2T09 - 33% - Strike US$ 113
3T09 - 30% - Strike US$ 110
4T09 - 22% - Strike US$ 109

1T10 - 23% - Strike US$ 114
2T10 - 25% - Strike US$ 115
3T10 - 22% - Strike US$ 114
4T10 - 19% - Strike US$ 113

1T11 - 4% - Strike US$ 107

Also, seems that TAM ordered 2 more B77W for delivery in 2013 and are expecting 2 more Airbus widebodies for 2010 and another 2 for 2011.


New York + Rio de Janeiro = One of the best combinations !
4 replies: All unread, jump to last
 
User currently offlineC010T3 From Brazil, joined Jul 2006, 3652 posts, RR: 19
Reply 1, posted (5 years 3 weeks 3 days 10 hours ago) and read 2015 times:



Quoting LipeGIG (Thread starter):
2 more Airbus widebodies for 2010 and another 2 for 2011.

But that's not new AFAIK


User currently offlineJuventus From United States of America, joined Dec 2004, 2835 posts, RR: 2
Reply 2, posted (5 years 3 weeks 3 days 3 hours ago) and read 1934 times:



Quoting LipeGIG (Thread starter):
Also, seems that TAM ordered 2 more B77W for delivery in 2013 and are expecting 2 more Airbus widebodies for 2010 and another 2 for 2011.

Hey Lipe, speaking of heavies, I've seen some photos of TAM's 777s at Santiago's airport.... At first I thought they put the 777 on that route for crew training, but it seems 777 operations will be permanent on this route......

Why would TAM use such a large aircraft on such a short route?? I have no doubt that it is one of their most important routes, I assume they actually do fill that 777-300??? we're talking about a 400 seat airplane - 4 hour flight

saludos cordiales (Saudações cordiais)


User currently offlineSumma767 From United Kingdom, joined Mar 2004, 2520 posts, RR: 6
Reply 3, posted (5 years 3 weeks 3 days 2 hours ago) and read 1916 times:



Quoting LipeGIG (Thread starter):
A detail on their fuel agreements
1T09 - 52% consumption - Strike US$ 107
2T09 - 33% - Strike US$ 113
3T09 - 30% - Strike US$ 110
4T09 - 22% - Strike US$ 109

1T10 - 23% - Strike US$ 114
2T10 - 25% - Strike US$ 115
3T10 - 22% - Strike US$ 114
4T10 - 19% - Strike US$ 113

1T11 - 4% - Strike US$ 107

Thanks for this very interesting information. It seems that TAM is in a similar situation to AF/KL, going from healthy profits one year to heavy losses the next, with an important factor being fuel hedges. Looks like TAM panicked when fuel prices were on the increase.

Quoting LipeGIG (Thread starter):
A Net loss of R$ 1,12 billion (something closer to US$ 450 million) for the 2008 full year. The result was due to US$/R$ devaluation (around R$ 600 million) and mainly, to fuel hedge agreements that produced almost R$ 1 billion in loss on a non-cash basis (yet)

450m is s a heluva loss. With over 20% of hedges at high price for the rest of the year, and the downturn that is now hitting LatAm and things getting worse, 2009 looks like 2009 will be another bad year for TAM.


User currently offlineLipeGIG From Brazil, joined May 2005, 11365 posts, RR: 59
Reply 4, posted (5 years 3 weeks 3 days 1 hour ago) and read 1874 times:
AIRLINERS.NET CREW
FORUM MODERATOR



Quoting Juventus (Reply 2):
Hey Lipe, speaking of heavies, I've seen some photos of TAM's 777s at Santiago's airport.... At first I thought they put the 777 on that route for crew training, but it seems 777 operations will be permanent on this route......

Why would TAM use such a large aircraft on such a short route?? I have no doubt that it is one of their most important routes, I assume they actually do fill that 777-300??? we're talking about a 400 seat airplane - 4 hour flight

First was for training purposes as you mentioned, but TAM realized they can capitalize on connections from SCL as well as they negotiated with LH to be their partner on LX flight. Now LH connections to SCL goes on TAM thru São Paulo. They are doing well with the 77W on SCL with loads around 300 passengers.

Quoting C010T3 (Reply 1):
But that's not new AFAIK

You're right.

Quoting Summa767 (Reply 3):
450m is s a heluva loss. With over 20% of hedges at high price for the rest of the year, and the downturn that is now hitting LatAm and things getting worse, 2009 looks like 2009 will be another bad year for TAM

And even worst with competitors (Gol, Webjet and Azul) without fuel hedges at higher levels. Tam can't match discount fares for long time without hurting it's finances. They're lucky because Gol is also facing hard times due to currency devaluation and Azul cash position isn't so strong.

Quoting Summa767 (Reply 3):
Thanks for this very interesting information. It seems that TAM is in a similar situation to AF/KL, going from healthy profits one year to heavy losses the next, with an important factor being fuel hedges. Looks like TAM panicked when fuel prices were on the increase.

Agree, they went too deep on Fuel Hedges. I have a personal view that any Hedge need to be connected to an actual activity and not to any sort of guessing. An airline sells tickets for the next 10-11 months only and i can't understand how they hedge fuel consumption for 2Q10 and ahead without any sort of revenue ! I always ask me what a company wants to protect ...they got into hedges that are closer to 70% of what they don't know yet!

For me airlines would only hedge the position related to what they sell. If advance bookings for 3 months ahead is equal to 20% of seats offered, they should do no more than 25% in hedge. If for the period from 6-9 months advance bookings are around 10%, again the hedge need to be equal to that.

Hedge means protection, not gambling.



New York + Rio de Janeiro = One of the best combinations !
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
TAM 3Q Results - Loss (R$ 112 Mm / US$ 50 Mm) posted Mon Nov 10 2008 07:05:52 by LipeGIG
BFL-GDL Suspended Due To Fuel Prices posted Tue Apr 29 2008 09:27:37 by FATFlyer
Airlines Cutting Routes Due To Fuel Prices? posted Tue Dec 11 2007 20:34:43 by Jlbmedia
Will Carriers Ground 757s Due To Fuel Costs? posted Thu Nov 29 2007 18:04:12 by AF022
WSJ: Eads Declares Net Q1 2007 Loss Due To Airbus posted Thu May 10 2007 14:26:38 by N328KF
Flights Grounded At JNB Due To Fuel Leak posted Tue Nov 7 2006 07:04:36 by Brenintw
Ticket Price Hike Due To Fuel Costs posted Sun Apr 23 2006 20:51:06 by Ncfc99
AA Cancels Flight Due To Fuel Costs posted Fri Sep 30 2005 22:50:40 by Freedomtofly
Air Canada Raising Fares Due To Fuel Costs posted Fri May 21 2004 02:07:20 by CanadaEH
SFO Closed Due To Fuel Leak? posted Sun Sep 9 2001 14:22:01 by Airbus Lover