Posted on 01/10/2009 9:40:27 PM PST by TigerLikesRooster
Cathay Pacific fuel hedge losses nearly $1 billion
By Chris Oliver, MarketWatch
Last update: 11:41 p.m. EST Jan. 7, 2009
HONG KONG (MarketWatch) -- Shares of Cathay Pacific Airways fell more than 5% in Hong Kong Thursday after the airline said late Wednesday that it lost nearly $1 billion in wrong-way bets on fuel hedges in 2008 and reiterated its financial results for the year would be "disappointing". The Hong Kong-based carrier (CPCAY cathay pac awys ltd sponsored adr News , chart , profile , more Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: CPCAY) (HK:293: news , chart , profile ) said its unrealized losses on the fuel hedges widened to HK$7.6 billion ($980 million), up from its earlier estimate in November for a HK$2.8 billion loss.
It said the mark-to-market losses are unrealized, but will be included in its consolidated profit and loss account for the year ended Dec. 31, 2008.
The losses as booked exceed the airline's 2007 net profit of HK$7.02 billion.
Cathay noted that the fuel-hedging losses were being accounted for in one year rather than being spread over the next few years in which they mature. The actual losses will depend upon future fuel-price movements.
(Excerpt) Read more at marketwatch.com ...
Ping!
I think they are teamed with Delta for asian routes. I never take Cathay, United is our company prefered airliner to Asia
Cathay: Good food and service, even way back in Coach, APR 2000.
I used Catahy’s lounge at Chaing Kaichek International
Didn’t this hedge actually work?
If you buy oil long, and it crashes, you are covered because your fuel costs are that much lower.
If your long oil wins, it mitigates the higher fuel costs incurred.
Isn’t that the definition of a hedge?
he is long Oil at $60 and it goes all the way down to $30 then he will lose money
I can’t decide which of Cathay Pacific, Thai Airways, or JAL has the best looking stewardesses. They put any airline in America to shame in that category.
Oh, but I guess that’s not relevant to this thread...
Well if you can tie it in to Oil Futures in some way...
“I’m Tracy......Come fly me.”
};^)
It depends on how they actually hedged and how they elected to account for it, but if they’re accelerating the losses and taking it all right now, then it wasn’t really a “hedge” in the first place. It sounds more like a speculative bet with financial swaps that they were going to offset against their spot fuel purchases. They’ll take all of the unrealized “losses” right now while the fuel price is so cheap so that in the future when all of the swap payments start rolling in they can count that extra money as “income”. So really, this sounds like a big accounting gimmick.
Boiling Pots...
Is anyone reading your post? Seems like a commodity trader out there should be responding. I agree.
That being said, I have seen farmers put on hedges that were exactly backwards from the stated intent. Bingo...BK followed soon thereafter.
pointsal
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