Hedging losses drive UAL 4Q loss of $1.3 billion
MINNEAPOLIS —
United Airlines bet distended and bet wrong upon fuel prices, leading to its announcement Wednesday of a $1.3 billion fourth-quarter loss and 1,000 more layoffs.
United was besides hurt by dint of. declining demand, and it said it would have lost $555 million even without the bad fuel hedges. That forfeiture was actually smaller than analysts had expected.
The Chicago-based carrier said its layoffs of another 1,000 salaried and management staff by the end of this year would have being in addition to layoffs of 1,500 in that category in 2008. It related its total headcount would fall by 9,000 people compared by the origin of the last time year, including 7,000 positions it had previously announced and another 1,000 positions it eliminated through friction. The company had 49,000 employees as of last week.
Glenn Tilton, United’s chairman, president, and CEO, told workers in each e-mail on Wednesday that the layoffs are unavoidable for of reduced capacity and demand.
United defended the fuel hedges, through Tilton pointing out forward a conference call that which time oil prices spiked to $147 per barrel in July, Goldman Sachs predicted they would keep going to $200. On Wednesday oil was trading just over $41 per barrel on the New York Mercantile Exchange.
“I think in that place’s always a cost to taking any insurance policy out,” uttered Chief Financial Officer Kathryn Mikells. “I don’face to face think people should get an anticipation that when you take out insurance policies you expect them to make a good return. You take them out to mitigate volatility.”
UAL imperceptible $9.91 per share in the last three months of 2008, compared with a loss of $53 million, or 47 cents by means of share, a year ago. UAL reported return of $4.55 billion, down 9.6 percent from $5.03 billion during the same period last year.
United said without the hedging and other accounting charges, it would have lost $555 million for the quarter, or $4.22 for share.
Analysts surveyed by Thomson Reuters expected UAL to lose $4.42 per share for the fourth quarter, on revenue of $4.54 billion.
United’s hedging injury included $370 million in cash on account of fuel hedges that settled during the quarter. United also had to record non-cash charges of $566 million on fuel hedges that show a detriment but have not however settled.
When oil prices spiked, United and other carriers moved aggressively to cut out unprofitable flying. That proved contingent, because even though oil prices dropped in the fall, demand did, too, as the economy softened.
At United, fourth-quarter passenger revenue fell 8.7 percent but overall capacity fell faster, by 10.6 percent. United is in regard to halfway through shedding 100 planes, including altogether of its Boeing 737s. The capacity cuts nearly kept up through the drop-off in demand, like its load factor - the percentage of seats filled - fell just 0.3 percentage points.
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