Last Updated Oct 24, 2008 10:51 AM EDT
This is, of course, the ugly side of hedging. When fuel was at $140, this looked pretty good. But now, it seems overly aggressive. For next year, the airline has about a quarter of its needs hedged at no less than an average of $101 a barrel, but they also won't pay higher than $114 a barrel (unless oil spikes above $135 or $145). It's too early to know if this will be a bad move, but considering the state of the economy, it would likely take an external shock to make these hedges worth something.
United's Hedge Positions as of October 17, 2008
|Hedging Instrument||% of Expected Consolidated Consumption||% of Expected Mainline Consumption||Average Price Where Payment Obligation Stops||Average Price Where Payment Obligation Begins||Average Price Where Protection Begins||Average Price Where Protection Stops|
|4th Quarter 2008|
|4th Qtr 2008 Total||49%||58%||N/A||$104bbl||$112bbl||N/A|
|Full Year 2009|
|Full Yr 2009 Total||28%||34%||N/A||$101bbl||$114bbl||N/A|