Remember when the airlines banded together to encourage customers to help them lobby Congress to ban “speculation,” i.e., hedging, or futures contracts, in the oil market? Well, obviously some of these airlines know how to play the market better than others. Case in point:

At the conference, Delta Air Lines Inc. president and chief financial officer Ed Bastian told investors that Delta should report a third-quarter gain from its fuel hedging activities. That contrasts with UAL Corp., parent of United Airlines Inc., which warned Wednesday that it will record noncash hedging losses of more than $500 million as it records the drop in the market value of its hedges.

A-ha. That helps explain why United is raising fees even in the midst of dropping oil prices. Brilliant. They mess up their investments, but they penalize the customer and blame the oil market. Spin, spin, spin.

So where’s the bailout for the airlines that lost money?

I’m only half-kidding. Given what’s happened in the last week in our financial markets, I would be dismayed, but unfortunately not surprised, if United (or other airlines that are hemorrhaging cash) would come to the US Treasury, hat in hand, asking to be relieved of their debts and obligations.

While they’re at it, why not shut down the oil futures market, like they were lobbying for a few weeks ago?

The taxpayer would be on the hook for another $700 billion blank check of good money chasing after bad. After all what’s another currency-crushing socialization of corporate losses that saddles future generations with unimaginable debts, when you’re already knee-deep bailing out your corporate friends?

- Oil is lower. Will airline fees be dropped?
- Airlines, unable to manage risk, scapegoat oil markets
- United, addicted to oil excuse, raises checked bag fee

pixel United Airlines makes a wrong bet on oil: You pay for it.

3 Responses to “United Airlines makes a wrong bet on oil: You pay for it.”

  1. Karan M Says:

    With oil jumping back near its highs it should be interesting to see how quickly fuel surcharges come back.

  2. Philster Says:

    I really used to hope that United would make it, in part because they’re (nominally) employee-owned, in part because they pretty much serve everywhere rather than cherry-picking.

    But man, I gave up on that some time ago. They just seem incapable of making good business decisions, whether it’s in cases like this, or in their long list of customer-service insults. (United, with more hidden fees! And less valuable miles!)

    Thank god I live in a Southwest hub. If only they’d stop being quite so cutsey.

  3. Seth Says:

    Continental is ~40% hedged at $120-140/bbl. It isn’t good for CO customers, either. I don’t know that is is $500MM bad, but it is going to be bad there, too.

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