Archive for the 'Finance' CategoryPage 3 of 3

Upcoming Fourth Quarter Results

Published
by
Dan Webb
on January 24, 2009
in Finance
. 0 Comments

This week, American, Southwest, and United released their results. Next week will be a bit busier. Like the last post, the airline names link to their respective investor relations pages.

Tuesday, January 27

Delta

Wednesday, January 28

AirTran

Thursday, January 29

Alaska
Continental
JetBlue
US Airways

Airlines Releasing Earnings Reports This Week

Published
by
Dan Webb
on January 19, 2009
in Finance
. 0 Comments

Well, it’s that wonderful time of year again – earnings season! There are a few airlines reporting this week, clicking on their names will lead you to their respective investor relations pages where you will be able to see the results when they come out and listen to the analyst call. Please let me know if I forgot any!

Wednesday, January 21

American
United

Thursday, January 22

Southwest

For Those Who Like to Follow Energy

Published
by
Dan Webb
on January 18, 2009
in Finance
. 0 Comments

This week’s episode of Consuelo Mack WealthTrack is all about energy and covers many issues from the price of oil ot the future of green initiatives. Very worthwhile, in my opinion You can watch it here.

Yet Another Look at Oil

Published
by
Dan Webb
on January 8, 2009
in Finance
. 1 Comment

I figured it would be worthwhile to take a look at oil prices now that a new year has started. Here’s graphs of the latest EIA data of the spot prices for oil and jet fuel from January 2006 to January 6, 2009. As one would expect, the graphs are pretty similar in shape (click on the graphs to see larger versions).

So, where will oil go in 2009? Well, in my completely unprofessional just-finished-my-first-semester-of-college opinion, a rise over the next twelve months would not surprise me in the least. While I do not think $140/barrel oil is coming back this year, anything in the $60-$80 range seems feasible. There are a few reasons why I think oil will rise again:

  1. Prices went down due to a shift in demand. Oil did not go down due new sources of oil coming into the market, nor did a new alternative fuel become popular. The global recession brought down prices, and once something resembling a recovery begins, demand will still increase, especially from developing countries like India and China.
  2. Inflation. Has anyone checked out the money supply lately? More money going after the same amount of goods and services will lead to higher prices. Yes, the CPI has been negative. I would not be surprised to see that change later on in the year.

Of course, I’m cheating a bit with my $60-$80 prediction. Crude oil for December delivery is already trading near $60/barrel at NYMEX, as of Wednesday evening.

On the bright side, the airlines are better equipped to deal with higher oil prices, as many of the changes they made to deal with higher prices are staying put. It’s not like all of the airlines that installed winglets on aircraft to save on fuel are going to remove them all of a sudden. The airlines have maintained those extra fees to help boost revenues as well.

Not Too Fast, ATA

Published
by
Dan Webb
on January 7, 2009
in Finance
. 1 Comment

Yesterday’s ATA SmartBrief (a free newsletter that is well worth subscribing to) linked to a letter to the editor of Crain’s Chicago Business from Air Transport Association President James C. May about oil speculation. (The letter can be found here, but registration for a trial subscription is required.)

The letter was in response to the publication’s assertion that the ATA’s efforts to stop oil speculation were “unsuccessful.” While May notes that “we do not count success or failure based on a single event,” he is sure to mention that “just the threat of regulation contributed greatly to the swift drop in price, beginning well before today’s economic crisis.”

Of course, just because the ATA says that’s what happened doesn’t make it true. Click here to see a chart I made on Yahoo Finance, comparing some PowerShares funds:

  • DBA tracks corn, wheat, soybeans, and sugar
  • DBB follows aluminum, zinc, and copper
  • DBC tracks crude oil, heating oil, gold, aluminum, corn, and wheat
  • DBO follows crude oil

A look at the aforementioned chart reveals that all of these funds began to move down around the same time. Why shouldn’t the ATA take credit for the decline in the prices of agricultural commodities as well?

May also writes that “with nearly 90 organizations, concerned members of Congress and others in government supporting the call for more monitoring, speculative money started flowing rapidly out of the oil futures market.” This effect isn’t necessarily as good as May makes it sound. Speculative money leaving the market means less liquidity exists, making it harder for the market to work efficiently, potentially causing difficulty for oil traders like airlines trying to hedge fuel.

The drop in price in oil isn’t necessarily bad for all speculators, either. Those who decided to short oil did quite well. But there is one group that did not fare was well with the drop in price supposedly caused by “threat of regulation” – those members of the ATA that have lost millions in hedges.

The Risks of Hedging

Published
by
Dan Webb
on September 18, 2008
in Finance and United
. 1 Comment

First, it’s great to be here at BoardingArea. Thanks to everyone who helped me get set up and transfer my old posts over to the new site!

If you read my other blog yesterday, this graph should look very familiar. As I mentioned, new EIA data was coming out, so here’s a fresh graph with spot prices for WTI Crude that go up to September 15. Quite a dramatic drop!

Yesterday I mentioned how Continental, made some hedges with the expectation that oil would continue its rise. Apparently United is in the same situation. Based on a SEC Filing from yesterday, is forecasting a $544 million loss on the hedges, all made over $100/barrel. This number can change, though as this number is based on contracts United is still holding, so current prices are used. If the price of oil goes back up, the loss goes down, but if oil goes down even more, then the loss gets worse.

Business Week has a good article about the situation, and it makes a good point: “even if United loses money on fuel hedges, it will save money because the fuel itself is cheaper.”

Anyway, I’m excited to be here at BoardingArea, and I’m looking forward to many more posts in the future.