[Speculation] Risk of AS Bankruptcy and Liquidity for Ticket Refunds
Mar 24, 2020, 9:36 am
#16
Join Date: Mar 2002
Location: SJC
Programs: AS MVP
Posts: 2,117
Their response to this looks to be VERY slow compared with DL/UA/AA. In a couple of weeks when they start saying that they cannot pay their employees, I hope people remember, that they choose to operate their full block for far far longer than any other US airline in some of the earliest worst hit cities. Does anyone really think that we need more than 1x SFOxSEA right now!
Mar 24, 2020, 9:42 am
#17
Join Date: Sep 2008
Posts: 7,875
Mar 24, 2020, 10:36 am
#18
Join Date: Apr 2003
Programs: B6 Mosaic, Bonvoy LT Titanium (x SPG LT), IHG Spire, UA Silver
Posts: 5,845
50% contracted at $70/barrel for Q1
50% contracted at $67/barrel for Q2
40% contracted at $67/barrel for Q3
30% contracted at $65 for Q4
That has to hurt--flying around planes with an average load factor of 10% AND paying 2 to 3 times the current price of oil at the same time. What are they waiting for?
Mar 24, 2020, 11:57 am
#19
Join Date: Dec 2007
Location: SF East Bay
Programs: 189 miles short of AS MVP, SPG Gold, Marriott Gold
Posts: 1,226
Unfortunately AS also made a very bad hedging bet with fuel according to their 10K filing.
50% contracted at $70/barrel for Q1
50% contracted at $67/barrel for Q2
40% contracted at $67/barrel for Q3
30% contracted at $65 for Q4
That has to hurt--flying around planes with an average load factor of 10% AND paying 2 to 3 times the current price of oil at the same time. What are they waiting for?
50% contracted at $70/barrel for Q1
50% contracted at $67/barrel for Q2
40% contracted at $67/barrel for Q3
30% contracted at $65 for Q4
That has to hurt--flying around planes with an average load factor of 10% AND paying 2 to 3 times the current price of oil at the same time. What are they waiting for?
What has SWA locked into?
Mar 24, 2020, 12:13 pm
#20
Join Date: Oct 2010
Location: San Diego, Ca
Programs: AA 2MM LT PLT; AS MVP Gold75k; HHonors Diamond; IHG PLT
Posts: 3,502
https://www.hawaiinewsnow.com/2020/0...t-spread-virus
Wednesday is the last day to arrive before 14-day quarantine is imposed on all arrivals, currently through May 20. Feedback from locals - at least on the Big Island - is that visitors are being "encouraged" to leave.
Wednesday is the last day to arrive before 14-day quarantine is imposed on all arrivals, currently through May 20. Feedback from locals - at least on the Big Island - is that visitors are being "encouraged" to leave.
Mar 24, 2020, 12:32 pm
#21
Join Date: Apr 2003
Programs: B6 Mosaic, Bonvoy LT Titanium (x SPG LT), IHG Spire, UA Silver
Posts: 5,845
They don't include their exact prices as they have contracts at various prices but they are 59% hedged for 2020 and 54% in 2021. For the 1st quarter, they were expecting to pay a 5 cent premium per gallon due to their hedges with an assumption that oil would be at $2.05 to $2.15. March 23rd, jet fuel was 67 cents per gallon. Yikes. Thus, SWA is likely in just as bad a situation.
Mar 24, 2020, 4:21 pm
#22
Join Date: Jun 2011
Posts: 200
Unfortunately AS also made a very bad hedging bet with fuel according to their 10K filing.
50% contracted at $70/barrel for Q1
50% contracted at $67/barrel for Q2
40% contracted at $67/barrel for Q3
30% contracted at $65 for Q4
That has to hurt--flying around planes with an average load factor of 10% AND paying 2 to 3 times the current price of oil at the same time. What are they waiting for?
50% contracted at $70/barrel for Q1
50% contracted at $67/barrel for Q2
40% contracted at $67/barrel for Q3
30% contracted at $65 for Q4
That has to hurt--flying around planes with an average load factor of 10% AND paying 2 to 3 times the current price of oil at the same time. What are they waiting for?
We use crude oil call options as hedges against our exposure to the volatility of jet fuel prices. Call options effectively cap our price for crude oil, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption. With call options, we are hedged against spikes in crude oil prices, and during a period of declines in crude oil prices, we only forfeit cash previously paid for hedge premiums. We begin hedging approximately 18 months in advance of consumption
So if I understand correctly if the price is lower than the hedge AS only forfeits the cash they paid for the premium. Still will be bad especially with the reduced flying but not as bad as it could be.
Mar 24, 2020, 4:27 pm
#23
Join Date: Sep 2008
Posts: 7,875
The main question is whether they already paid the premium or not. And for how long? 18 months means they hedged into late 2021?
Mar 24, 2020, 4:34 pm
#24
Join Date: Apr 2003
Programs: B6 Mosaic, Bonvoy LT Titanium (x SPG LT), IHG Spire, UA Silver
Posts: 5,845
Yes, if you do options it is different than futures, and you pay a premium/fee for the option but don't have to exercise it (futures you have to).
The main question is whether they already paid the premium or not. And for how long? 18 months means they hedged into late 2021?
The main question is whether they already paid the premium or not. And for how long? 18 months means they hedged into late 2021?
Mar 24, 2020, 4:37 pm
#25
Join Date: Sep 2008
Posts: 7,875
Mar 24, 2020, 4:47 pm
#27
Join Date: Jun 2011
Posts: 200
Mar 24, 2020, 6:33 pm
#28
Suspended
Join Date: Aug 2010
Location: DCA
Programs: UA US CO AA DL FL
Posts: 50,262
Bottom line is that there is zero risk of inability to pay refunds if one pays with a credit card. Not debit cards, not anything else.
The rest of who requires a bailout and for how much is pure speculation and AS is the tail wagging the dog.
The rest of who requires a bailout and for how much is pure speculation and AS is the tail wagging the dog.
Mar 24, 2020, 6:46 pm
#29
FlyerTalk Evangelist
Join Date: Dec 2002
Location: Danville, CA, USA;
Programs: UA 1MM, WN CP, Marriott LT Plat, Hilton Gold, IC Plat
Posts: 15,717
Personally I have zero concern with AS or any other legacy USA airline. Most of the airlines went through Chapter 11 bankruptcy process at some point after 9/11 - they all honored ticket obligations to customers (including refunds) and FF mileage obligations (the only profitable part of the operation for some). All of them are in the same boat during the current crisis, so I expect that any bailout will cover all of them as nobody in Congress wants their constituents to be slammed by an airline liquidation (including the Senators from Alaska and Washington states).
Yes, there have been Chapter 7 airline liquidations - Braniff, TWA, PanAm, National etc. but these were all one-offs following a gradual deterioration of financial condition, not the result of an unexpected sudden event that negatively affected the entire industry.
That said I would always use a credit card to buy a ticket (why would you not unless you are a narcotrafficker or a terrorist) which comes with certain protections.
Yes, there have been Chapter 7 airline liquidations - Braniff, TWA, PanAm, National etc. but these were all one-offs following a gradual deterioration of financial condition, not the result of an unexpected sudden event that negatively affected the entire industry.
That said I would always use a credit card to buy a ticket (why would you not unless you are a narcotrafficker or a terrorist) which comes with certain protections.
Mar 24, 2020, 6:52 pm
#30
Original Poster
Join Date: Dec 2018
Location: Seattle
Programs: Alaska airlines 100k
Posts: 923
Personally I have zero concern with AS or any other legacy USA airline. Most of the airlines went through Chapter 11 bankruptcy process at some point after 9/11 - they all honored ticket obligations to customers (including refunds) and FF mileage obligations (the only profitable part of the operation for some). All of them are in the same boat during the current crisis, so I expect that any bailout will cover all of them as nobody in Congress wants their constituents to be slammed by an airline liquidation (including the Senators from Alaska and Washington states).
Yes, there have been Chapter 7 airline liquidations - Braniff, TWA, PanAm, National etc. but these were all one-offs following a gradual deterioration of financial condition, not the result of an unexpected sudden event that negatively affected the entire industry.
That said I would always use a credit card to buy a ticket (why would you not unless you are a narcotrafficker or a terrorist) which comes with certain protections.
Yes, there have been Chapter 7 airline liquidations - Braniff, TWA, PanAm, National etc. but these were all one-offs following a gradual deterioration of financial condition, not the result of an unexpected sudden event that negatively affected the entire industry.
That said I would always use a credit card to buy a ticket (why would you not unless you are a narcotrafficker or a terrorist) which comes with certain protections.