Volatile oil price fuels huge losses at US airlines

26 January 2009

26 January 2009 | Paul Snell

United Airlines (UA) lost $370 million (£269 million) in the last three months of 2008 because it bought fuel at the wrong time.

The company hedged its purchase of fuel earlier in 2008 when prices were rising to record levels, but was hit when the price declined rapidly as the year continued. Fuel cost the company $2.9 billion (£2.1 billion) more last year than in 2007.

"United, like many airlines, experienced significant cash pressures associated with fuel hedge positions in 2008 as oil prices declined more than $100 a barrel," said Kathryn Mikells, CFO at UA, in a statement.

"The cash impact, while significant, is now behind us, and we are well positioned to manage through a challenging 2009 with good expected cost performance building on our momentum from the past year."

The decision to hedge at the top of the market caused parent firm UAL Corporation to register a $547 million (£396 million) loss in the fourth quarter of 2008. It brings the company's total loss in 2008 to $1.3 billion (£941 million), compared to only $98 million (£71 million) in 2007.

The company also expects to lose a further $150 million (£109 million) due to the cost of fuel in the first quarter of 2009.

The rising cost of fuel also caused AMR Corporation, the parent company of American Airlines, to experience a $2.7 billion (£2 billion) jump in its fuel bill last year. AMR Corporation announced a $2.1 billion (£1.5 billion) total loss in 2008.

SMjan2009

LATEST
JOBS
Swindon, Wiltshire
upto £40K base (+ Paid overtime and corporate benefits)
Honda Manufacturing Ltd
Kew gardens, Richmond upon Thames, London (Greater)
£37,000 - £42,500 per annum pro rata, depending on skills and experience
Kew Royal Botanic Gardens
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE