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ANU Update
When overnighting in ANU, the all-inclusive amenities are complimentary to crewmembers. A fee by the crewmember is no longer required. Since this hotel is isolated, AFA approved this hotel based on the all-inclusive package being part of the room charge. The rate the Company is being charged for the room is $80, regardless of the all-inclusive benefit being thrown in by the hotel. When crewmembers paid for the all-inclusive package, the fee they paid was debited towards the $80 room charge. In essence, the crewmember was paying for part of the room charge. This was in direct violation of our contract. In order to recover any monies paid on past overnights at this facility, you must submit an expense form and cite the amended policy for this overnight.
(Local LEC Contacts HERE
www.afausairways.org/LEC.html)
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Flight Attendants Demand Protections for American Workers in Wartime
WASHINGTON, DC - Patricia Friend, International President of the Association of Flight Attendants, AFL-CIO, issued the following statement addressing the potential for devastating job losses in the aviation industry as a result of President Bush’s war with Iraq. AFA is also discussing this issue on Capitol Hill.
"If our nation engages in a war with Iraq, the government must protect the tens of thousands of airline workers who could lose their jobs. If the government does nothing, workers will never forget that our government turned its back on us twice, while big corporations were bailed out at the first sign of trouble."
"Over 150,000 U.S. airline workers have already lost their jobs. The airlines predict another 70,000 jobs will be cut if there is a war. Tens of thousands have already seen their wages and benefits reduced significantly as their carriers struggle for survival. It seems that every week another carrier asks their employees for concessions or cuts more jobs as the solution to a problem the workers did not create."
"The government has a unique opportunity to assist aviation workers, who will likely be disproportionately affected by a war, while providing stimulus to the economy in one of the most challenging periods in our nation’s history."
"Much of the $15 billion allocated to airlines as part of the Air Transportation Stabilization Act after September 11 either has not been distributed or is not targeted for distribution."
As federal money approved for loan guarantees will not actually be spent unless a guaranteed airline defaults, the unused funds should be allocated to a new fund that would provide airline workers who are negatively affected by a war with Iraq. That fund should provide workers with:
-- extended unemployment benefits for six months
-- health care coverage that would pay 75% of an eligible worker’s COBRA continuation or temporary state
Medicaid coverage for those not covered under COBRA
-- job retraining assistance
"Aid to struggling airlines in the event of war is a necessity. But while that aid may help to keep airlines flying, an estimated 70,000 additional aviation workers may lose their jobs in wartime. As members of Congress contemplate the needs of U.S. airlines in war, they must also consider the needs of U.S. airline workers. Allocating funds to assist the airlines and their employees will enable our government to provide the struggling economy and airline industry with an important stimulus. And it is the only way to continue securing an already devastated aviation system in wartime."
More than 50,000 flight attendants at 26 airlines join together to form AFA, the world’s largest flight attendant union. Visit us @ www.afanet.org.
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U.S. Airlines Show Disparity In Hedging for Jet-Fuel Costs
By MELANIE TROTTMAN
Staff Reporter of THE WALL STREET JOURNAL
Jet fuel, now more than twice as expensive as a year ago, is emerging as a major factor in survival and bankruptcy for airlines, as several carriers, including some of the weakest, find themselves with few protective price hedges in place.
Airlines typically hedge by locking in fuel at prearranged prices or buying securities that rise in value when oil climbs. Yet the industry finds itself with wide disparity in hedging, with some airlines fully hedged at low prices, and others completely exposed to huge price increases.
UAL Corp.'s United Airlines, operating under bankruptcy-court protection, has no hedges in place this year. That will likely cost the nation's second-largest airline more than $100 million in added fuel costs during the current quarter alone, estimates UBS Warburg analyst Samuel Buttrick. Analysts suspect US Airways Group Inc., also reorganizing in bankruptcy, has few hedges in place. US Air says it is hedged for 2003, but it wouldn't disclose prices or percentages.
By contrast, Southwest Airlines, the only profitable major carrier, hedged 100% of its jet-fuel needs for the current quarter at prices that are the equivalent of $23 a barrel for crude oil, compared with recent crude-oil prices hovering around $36 a barrel. Southwest has lined up more than 75% of its fuel for the rest of this year and next at $23 a barrel for crude oil.
Northwest Airlines is well-hedged with 100% of its fuel needs for the current quarter priced at the equivalent of $23 to $31 a barrel of crude oil, according to Deutsche Bank Securities Inc. Continental Airlines has 95% of its fuel for the quarter hedged at $33 a barrel, Delta Air Lines has 66% hedged at $26 a barrel, America West Airlines has 63% hedged at $24 to $31 a barrel, and AMR Corp.'s American Airlines has 40% hedged at $23 a barrel, Deutsche Bank says.
On average, U.S. carriers have hedged about one-third of their jet-fuel needs for the current quarter, estimates David Swierenga, chief economist for the Air Transport Association, a trade group for U.S. carriers.
United says bankruptcy hurt it in the hedging game. The carrier had some hedges in place at the time of its bankruptcy filing in December, but the filing put the airline in default of those hedges so they had to be liquidated. United said it filed a motion with the bankruptcy court that permitted it to hedge going forward, but by that time, prices had risen. "Given the volatility of fuel prices right now, it just didn't make any sense for us to do that," United spokesman Rich Nelson said.
Good credit, on the other hand, helps Southwest because many hedges revolve around futures contracts, and those on the other side of the contract may be gambling on the credit of the airline. "If you're not a good credit then you may not be able to find a counterparty who's willing to enter into a hedging contract with you," Southwest's chief financial officer, Gary Kelly, says. "There is a situation where you would owe the counterparty money."
Mr. Kelly's strategy at Southwest is to start early and build positions when prices look attractive. He began buying hedges for 2003 fuel needs more than a year ago, in part because of concerns about the situation in the Middle East. Southwest had hedged 80% of its fuel needs for the first quarter of this year by this past December. When political trouble flared that month in Venezuela, the airline decided to hedge all of its remaining fuel needs for the quarter.
Concern about the Middle East has prompted Southwest to hedge far into the future, as well. In addition to being hedged on 80% of the airline's fuel needs for 2004, Southwest has 32% of its needs for 2005 hedged, and 5% to 15% of its needs beyond that all the way out to 2008.
"They're modest positions, but the point is we start early, we build our position," Mr. Kelly said.
Fuel is the second-largest expense for airlines after labor, and the huge increase in price, a result of higher crude-oil prices, will likely cost the industry, which is grappling with depressed revenue and massive financial losses, several billion dollars this year.
A one-cent increase in the price of jet fuel costs the U.S. airline industry $180 million, based on 18 billion gallons of jet fuel purchased a year, Mr. Swierenga of the ATA said. Jet-fuel spot prices in New York have run up to $1.30 a gallon recently, compared with 61 cents a gallon a year ago.
Hedging can be a tricky business, and costly to an airline if fuel buyers guess wrong. There is no futures market for jet fuel, but airlines can buy contracts that lock in set prices of crude and heating oil, whose price moves most closely in line with that of jet fuel.
HEDGING THEIR BETS
Prearranged crude-oil prices in place at U.S. airlines in the first quarter of 2003
Airline Hedges (dollars per barrel)
Southwest 100%, most at $23 a barrel
Northwest 100%, from $23-$31 a barrel
Continental 95% at $33 a barrel
Delta 66% at $26 a barrel
America West 63% at $24-$31 a barrel
American 40% at $23 a barrel
US Airways hedged, undisclosed amounts
United none
Write to Melanie Trottman at melanie.trottman@wsj.com
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