The Business Times

United Continental, Delta bet on long oil slump

Published Wed, Nov 25, 2015 · 09:50 PM


TWO of the world's biggest airlines are betting that oil prices won't rally any time soon, growing more cautious after losing hundreds of millions of dollars on hedges.

United Continental Holdings Inc and Delta Air Lines Inc have reduced fuel hedging as oil plunged close to a six-year low. They've become more like American Airlines Group Inc, the biggest global carrier, which closed its last hedging position in 2014.

"There is a growing realisation that American's approach was the smarter one," said Bob Mann, president of airline consultant RW Mann & Co. "These programmes have not met expectations, costs are very high and the results have underperformed."

Getting it wrong has been costly. Hedging losses over the past three quarters totalled US$1.95 billion for Delta, the world's third-largest airline; US$650 million for United, the second largest; and US$326 million for Southwest Airlines Co, the fourth-biggest US airline, according to data compiled by Bloomberg. The companies locked in fuel prices before the price of crude collapsed over the past 17 months. Losses were calculated by totalling the settled hedging results for each quarter as provided on company releases and conference calls. The hedging figures were confirmed by spokesmen at all three airlines. The airlines, all US based, are ra…

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