AA indeed hedged oil at high price, but I guess still lower than in earlier quarters.
If you read quarterly report carefully, you will notice that much of its 'loss' was caused by unrealized forex loss. Thing is not as bad as many thought.

Then again, AA Indon disaster is likely to have an averse effect this year. And who knows ebola/MERS may spread to SEA

Hedging is useful in most businesses......

But if done wrongly....
Or as gark said 'terbalik'....
U can lose money one.


The bigger elephant for AirAsia is the USD....

And the bulk of their borrowings (12 billion) is in USD.

Not as bad?
Did they even know it would be bad in the first place?

Two words...
Financial costs...

Go see and then do the quarterly comparisons.....

so.. for every 1 sen higher on the RM/USD exchange rate .. means they MAY have unrealized forex loss of RM 120 million..

But the REAL amount is going to be smaller as they SHOULD hedge USD too.. but overall not good..

Big elephant indeed..

This post has been edited by gark: Mar 6 2015, 04:44 PM

woah, AA tis time really bad.. Tony the so-called legend gone

Problem is AirAsia track record in hedging is piss poor!!!



The other thing is...
There was a time when USD was weakening like hell and AirAsiabmade ton of forex gains...
100+ million pwr quarter.....
And these bloody analysts never once discounted them gains...
So why when losses...they talk the different ayam?

For a market player....
Thinking of legends is not healthy...

Nope I didnt know about that

My bad

no need say like that leh....

you see if you are a market player...
what kind of player do you want to be?
Answer? A rational player, right?

now...
what are some stuff that might hinder your judgement?
Biased thinkings....
right?

And wouldn't stuff like legends sway your thinkings?
Like for example...
say you think Ah Boon....
is bloody legend in talking wind...
talking ayam......
so if you regard this bugger as a legend...
your thinking process is already in his favor...
cos he can do no wrong...
if Ah Boon can do no wrong....
how then can his company do any wrong?

just sharing some nonsense leh.....

the other thing I was thinking......

1) how much more can AirAsia hedge?

I remember after recent report, Tony was quoted saying that the company has already hedged half of its full year consumption of jet fuel...
which was hedged around on average 80+ (singapore jet fuel )
which means half of AirAsia fuel needs for the year is bought at a much more expensive price....

anyway... the point is....
in the account....
AirAsia got left 1 billion ....
loans 12 billion....

how much money can AirAsia use to continue to gamble on hedging?

2) the USD debt itself is not constant.
it's expanding cos of AirAsia's commitment to buy new planes.....
this itself is not the elephant...
it's the whale....

and since the debt itself is expanding......

I have never read reports on airline industry.

But by right all forex and impairment should not be taken into account as it is not consider a core business earnings.

woah so "deep" your statement..

Boon gor, what do you mean when you said singapore jet fuel? singapore jet fuel that they hedge at 80+? What about MAS? what country jet fuel?

See this article:

http://www.theedgemarkets.com/my/article/a...-swings-4q-loss

4th last paragraph....

current prices:

http://www.barchart.com/commodityfutures/S...%29_Futures/JKS

AA Hedge @ 80, but current pricing all below 80

btw which one is the petrol one.. the one our gomen use to set retail price

Gasoline RBOB?

This post has been edited by nexona88: Mar 6 2015, 06:01 PM

Errr..... it should be for AirAsia case.....
this is because the bulk of AirAsia's earnings is in USD.
any movement will create huge profits/gains.

I mentioned earlier Financial cost as an indicator.

last month report, AirAsia said it paid 153 million in financial cost.
last year same period, AirAsia said it paid only 106 million.

why paid so much?
loans increased. last year same period, loan was 10 billion. Now it is 12 billion.
can 2 billion extra cost AirAsia so much more in interest?
I say, AirAsia paid so much more cost of the USD factor....

and these financial interests.... cost by the huge swing in forex.... is REAL.
it is money paid to the banks already.......


hope my understanding of accounts is correct.................

errr..... I dunno the answer to that.

According to the article, 50% of fuel hedged at $88. The remaining 50% un-hedged. Average was $80.

(just an example)
Let's say in 3Q14, AA was paying for jet fuel at $95, and it hedged at $88. In 4Q14, when the hedged fuel was delivered, the price had dropped to $75.

It may look like AA lost $13/barrel. But in reality its cost for 4Q14 was down by $7/barrel compared to previous quarter.

(AA would only lose $13/barrel if it had resell the fuel. Traders buy and sell, AA doesn't.)

So, the ANALysts think low oil price is a boon (no-pun intended) to airlines. But the problem is, when competitors like MAS and Lion Air scrap fuel surcharge, AA has to follow. In the end the margin is as low as ever. Coupled with the (yet-to-realized) forex loss and the disaster, AA's near term future is not great.

Thanks Boon gor.