New Delta CEO is Going Hedgeless on Oil

Fuck hedges, says the incoming chief, Ed Bastian, from Delta.

“The reason we haven’t hedged for the last year and a half is there’s just too much volatility, and we’ve been burned,” Bastian said in an interview with Bloomberg TV. “We’ve lost over the last eight years about $4 billion, cumulatively, on oil hedges.”

Wow, these clowns are probably the single worst energy traders in the world. How on earth did they manage to lose $4 billion on their hedges over the past 8 years?

The airline wouldn’t hedge again “until we saw a point where there was some longer-term stability to know what to expect,” Bastian, 58, said. “Right now with the volatility and the cost of a premium to hedge, I just don’t think it’s worth the risk.”

In the first quarter, Atlanta-based Delta paid $1.33 a gallon for fuel, down from $2.29 a year earlier. American Airlines Group Inc. has benefited the most among the U.S. airlines eschewing hedging. In the last quarter, American’s fuel costs were $1.21 a gallon, compared with $1.83 a year earlier.

“Just as we saw oil get down to $25 in January, there were people calling for it to go down into the teens,” Bastian said. “I don’t get paid to make those types of bets.”

Crude oil is at historically low levels, which, seemingly, would be an ideal price point to lock in low rates, no? You’d think the CEO would want to put this issue of price volatility to rest, in order to focus on operations. By not hedging, essentially, the incoming Delta chief is gambling on lower prices. This isn’t a decision born out of conservatism for the balance sheet, lamenting the losses endured, erewhile, by his predecessors as evidence of hedging being a scheme that has wasted valuable company resources.

No. This is a greedy man of the very first magnitude. Should oil skyrocket from here, Delta will, once again, enter into the trashbin of bankrupted airlines.