iahphx

I'm not sure what's done in Europe, but the US airlines rarely hedge fuel these days. Doug Parker and Scott Kirby kind of proved to everybody that hedging was a sucker's bet (largely because the hedges were so expensive that it pays to just "self insure").

There's no doubt that Norwegian should have about the most fuel-efficient fleet because they've been taking a crazy number of new aircraft deliveries (which is a problem, but not a fuel problem!). That said, they do seem to be raising their prices, leaving the $69 sales to airlines like WOW (they had one today). You can't make money at $69 (especially Norwegian, that actually gives some stuff to its pax that WOW doesn't, like a free carry-on bag). So pricing a little more rationally is probably a good thing. But the problem is there's unlikely to be enough demand for their product at rational (aka, non-money-losing) prices. Which is why I think they have an incurable problem.

itsallgood

AFAIK, European airlines have historically not hedged.
Here's a pretty recent article: https://www.bloomberg.com/news/artic...er-fuel-prices

oliver2002

WN traditionally hedges in the US, DL &AA are off and on. The EU3 all hedge, LH even tries to hedge 85%.

LupineChemist

Well DL has the unconventional hedge of just owning its own refinery.

jbfield

itsallgood

In Delta's refinery's case, they were getting N Dakota fracked oil. That was a change from the previous owners who were getting Nigerian bonny light. The change in demand caused a drop in price for Nigerian bonny light. That information's dated, so I'd imagine Nigerian prices have since stabilized.

Delta bought the refinery because there was no good hedging tool for jet fuel; they had to use a blend of various synthetic (for lack of a better word) hedges using crude and heating oil hedges.

LupineChemist

You should go tell the CME that the crack spreads they are selling are useless, then.

itsallgood

New product? - I haven't read any airline 10K/Qs indepth lately but never read that product in any airline's hedging strategy.
Daily volume? - if the trading's thin, they're pretty worthless.

The term 'crack spread' was not listed in Southwest's latest 10K

LupineChemist

Crack spread is basically the amount of money that goes to the refiner compared to the price of oil and is incredibly variable. I was responding to the assertion that owning a refinery doesn't mitigate price for fuel, and while there are certainly times when refiners are squeezed, there are plenty of times when the refiners are making loads of money and that's all money DL is saving (assuming they are any good at running a refinery and I have no reason to believe they wouldn't be).

Of course you are somewhat limited by the price of the raw material but a good refinery team may or may not have its own futures contracts to purchase oil which wouldn't count as fuel hedging but is still a hedge.

itsallgood

OK, I see where you're coming from now.
Delta fine tuned the refinery to produce a higher percentage of jet fuel than the past. A big reason for buying the refinery was due to the jet fuel crack spread being so high on the east coast. Since Delta has two east coast hubs, driving down jet fuel crack spreads on the east coast is to Delta's advantage. A whole lot of reasons behind the higher crack spread in the east coast, including Amsterdam's(?) refinery exporting auto gasoline to the US east coast ... they did (or maybe still do) that because Europe has had a higher percentage of diesel cars vs gasoline cars. That in turn drove down demand for US east coast refineries and led to more scarcity of other refining byproducts on the east coast. I'm probably muddling some of the details but I found the articles I read on the subject (too long ago so finite details escape me) fascinating, especially Delta's tinkering with the refining 'recipe' (for lack of a better term) to end up with a higher percentage of jet fuel in the end products.

usbusinesstraveller

Norwegian has restated its 2017 numbers in its annual report.

In the Q4 earnings statement net loss for the year was reported as NOK 298.6 million ($37.8 million at today's exchange rate).
https://www.norwegian.com/globalasse...017-report.pdf

Net loss in the 2017 Annual Report is NOK 1.793 billion ($227 million)
https://www.norwegian.com/globalasse...eport-2017.pdf

The Q1-18 earnings release and conference call is tomorrow at 8.30am CET - https://www.norwegian.com/us/about/c...tor-relations/

southpac

just read in May 2018 edition of Airliner World ... Norwegian carried over 30 million passengers in 2017 & made a loss of $27.4 British pounds, so if they had simply collected 1 pound more on average per passenger, they would have made a a few million dollars profit instead. Maybe they should push up the cost of add ons, minutely, so as not to effect sales ?

itsallgood

First quarter 2018. EBITDA -1.85B NOK. That's a quarterly loss of 230 million USD. That's a 50% higher loss than 2017.

Quarterly report here; ugly stuff: https://www.norwegian.com/globalasse...018-report.pdf

Here's the 1Q slide deck: https://www.norwegian.com/globalasse...esentation.pdf

One thing that really caught my eye was slide 18 from the slide deck. There have been claims that once NAS gets past its big CAPEX expenditures in 2018, they'll be OK. However, on slide 18, it shows CAPEX accelerating in 2019. That's backed up by slide 9 which shows NAS taking delivery of a bunch of 737 Max 8s and some A321LRs in 2019 and 2020.

Time to start a deathwatch? Let's say they scrape through the summer. I don't think they'll last much longer than that without significant additional cash. Their losses are accelerating faster than their growth.

CPH-Flyer

That's the loss before before the restatement. After they restated the loss it is more like 200 million pounds.

usbusinesstraveller

That was before they had to restate their financials after the creative accounting was ruled wrong by the Norway regulators. See post above,

The actual restated net loss for 2017 (converted to GPB) was £162 million.