yeah i agree with Iklatmy , airline needs alot of fuel, and little of the price change does affect them alot.

Looks like TRANSMILE 3 years ago. Better sell now before it goes penny.

Research report by AmInvestment Bank:

[attachmentid=1024033]

The reason why I said they acted like oil traders is because :

1. They don't hedge in their history aka never or little hedge before oil price spike.
2. They only hedge when oil over 100.
3. Now the question, they got any hedge or not when oil price fall below 50 to as low as 35 during March and April? If the answer is no, their act is not different than a oil trader/speculator.

Although those fuel is indeed needed for their plane, you can't make decision (hedging) according the oil market price movement totally.

Doing business, it is not right trying to be clever or speculate your raw material is going to rise or not, then make decision (especially with billion of hedging) based on your prediction/speculation about the trend.

Do't mean company cannot hedge, but hedging must have some proper strategy and appropriate, not like suddenly no hedge, now hedging for 2 years, then no hedging again.

What should a company focus on is to maximise the capacity, cost controlling, which maximise the efficiency of runnig a company.
Whatever price increase/decrease in raw material, generally company can pass the cost to your customers one.

If the particular industry cannot pass the cost of raw material to customers which is to achieve some profit margin on long term basic, then this industry doesn't deserved to survive in the first place.

Any price increase in raw material could impact the company profit margin, but it is temporary as soon and later, this cost increase can pass to the customers/consumers one.

Before any company embarked on hedging program,surely there must be a proposal put up to the top management on the reason,timing and quantity.Only a badly managed company will leave such important function to one single person or department without proper checks and balances.

Whether MAS have their own hedging strategy or program,only their management will know.I tend to give them the benefit of doubt that they do since oil did at one stage went up to around 140 per barrel.

In real life,it is not that easy to pass on increase in raw material cost on to customers,there are always restrictions and competitors there waiting to grab your customer ,especially if your direct competitor made a right hedge ,he will undercut you.

We are all looking and commenting at the whole thing after it has happened ,what if you and I are the person in charge of buying the fueloil and we now have to buy for the next two years requirement,are we going to buy all at the current prices of around 70 per barrel?We may be right,or we may be wrong.Whatever decision we make now,as long as it falls within the predetermined framework and criteria set,and in the best interest on the company,should be alright.

Also,if we buy all the requirement for the next two years now,we can quote our ticket prices to our customers for the next two years,but is the ticket price attractive?very subjective, right!

Another case in point,HapSeng plantation sold forward their CPO at around 2000+ per metric tonne.It may appear ok now,but when cpo shot up to 4000+ previously,their shareholder were cursing.

Just my view,lets have a vitual beer

MAS hedging is the same used by almost all airlines in this region. That means, SIA does this, Air Asia, maybe Transmile, and many other airline that operate in this region.

Air Asia paid to get out of this clause. Remember what Tony said when he released the report in April? He said the loss is to pay the penalty to escape the fuel hedging thing.

Ofcourse there is always the "what-if?"

Oil companies are not dumb. Of course they wont let airlines hedge at below 50. If i own a oil company i know i wont them hedge at this price.

Random note: If the crude oil price is 140, aviation fuel will be around 160. Its higher by 15-20%.

This post has been edited by koopa: Jun 15 2009, 03:43 PM

Taken from MAS 2005 Annual Report
<<<<<
As at 31 December 2005, the Group and the Company have entered into various fuel hedging transactions from 1 January 2006 to 31 December 2007 in several lots totalling 13,635,000 (31.3.2005: 5,445,000) barrels. The cumulative estimated proceeds from hedging of marked to market value on the existing fuel hedging position (from 1 January 2006 to 31 December 2007) stands at RM350,707,890 (31.3.2005: RM240,471,000).
>>>>>

I fully understand your view.

I am in manufacturing line/business. I fully understand somehow, cost cannot passed straight away to customers in poor environment, but it is matter of time, it will happen finally (cost being passed around), if not the company or particular industry need to close shop.

If I am Hapseng shareholder, I won't be cursing the management to sell CPO at 2000+ as long as it already generate good enough profit and give good dividend. You still can produce more to sell at 4000+ forward!

As business out there is quite simple, if a particular industry/product is having high profit margin (like CPO at 4000+), it will lure a lot of new investment and company venture into it, soon or later, supply will creep out to offset the high profit margin.
That's why people in this industry never view at 4000+ is a sustainable level because profit margin is simply too much.

I understand it is a difficult decision for the management board or CFO to decide to hedge or not to hedge at 100. Just as I said before, they need to have consistent and proper strategy for it. If got hedge, then all the time hedge it. If not, then stay as no hedge. At least you either have outcome of +1 or -1, not the like -2 currently they are suffering.
I have no problem for the unrealised hedging loss, but the most issue is about how the company plan for it.

Let have a virtual beer
Cheers.

I tried to queue below RM3 but never get it. Just wandering why the share price still so high even though with bad announcement last Friday ?

Majority shareholders not wanting it to drop below RM3. So don't sell, or just sell to buy....EPF sell at high, EPF buy at high...as an example. We are merely the ikan bilis trading this stock. 52% owned by Penerbagan Malaysia. 17% owned by Khazanah and 13% owned by EPF.....

Its no wonder this stock price can steady.....The world red, I won't surprise it can still green...haha

Plus virtual fried ikan bilis,nice

YEs, we're ikan bilis and waitying for other ikan bilis to sell also. I think no hope to but below RM3.

so what now? right time to move in?

MAS to order up to 25 A330 aircrafts

Malaysian Airline System Bhd (MAS), the national carrier, will order up to 25 A330 aircraft from Airbus SAS, a statement from the airline said.

This follows a memorandum of understanding signed with Airbus in December, it said.

The agreement comprises 15 firm plane orders and 10 options, it said. - Bloomberg

What's up with MAS, it keeps getting distributed lately

Hi guys... other than AirAsia, anyone following MAS?
seems v tempting to me....

any sifu any ideas?

Im a technical trader...soo i only aim for short term profits of 7-10%
i like the area of 1.80 IMO
still very sideways with mas ..but 1.8 is a very important level
-Not ment for advice-

This post has been edited by stockpick dickinson: Mar 3 2011, 03:04 PM

I'm kinda like you! short term + 5-10%!
i've done it with MAS before, last Nov. went in at 1.95 n came out at 2.10 in 3 days...

and looking at its current price, its quite tempting... hoho...
for long term i think it's still a good bargain i suppose...

i'm queing at 1.83..

I bought at RM2 before the quarter report released last week... And now I am making paper loss...
^^"
Still hope it would rebound soon...
Anyway, the price would not fall sharply like Airasia but of course would not surge as much as Airasia too...