The US is a LONG way off it's peak, and if they reopen on 1 May, there will be total chaos.
Something to think about;
I was a jet fuel trader when 9/11 happened. Initially the jet fuel price collapsed because no jets were flying in the US for A FEW DAYS.
Now think about very few jets flying WORLDWIDE for months.
Then think about no one driving much in USA and Europe....
That is a HUGE demand drop, and the market has been awash with crude for the last month.
The current OPEC cut is needed just to clean up the excess swilling around.
Oiluser;
1) deaths and infections have plateaued in SOME countries but not in UK, US, Russia, Japan, etc. etc. And even a country like Spain or Italy, slowly coming out of it, lockdown will continue for a LONG time yet.
2) Demand is coming back? How so? The last few planes are now being grounded. The USA is in almost total lockdown now. ANy idea how much gasoline use that represents? Industry is mothballed., etc. etc.
3) I find this very hard to believe; a recent Goldman Sachs report suggested NEGATIVE crude prices for some US producers as they simply nowhere to put the barrels. Storage has never been so full worldwide. The contango play has been there for a long time now.
It doesn't really matter how much they cut.
The issue is a massive drop in demand that is totally unprecedented and will continue much longer than many seem to think.
No amount of cutting is going to offset this lack of demand.
No one is buying jet fuel, so refiners are putting it into the diesel pool, so much so you can smell the jet when you fill up your car. So diesel pool up a good 20% but vehicular activity is down enormously globally, as is industrial activity.
Oil HAS to go down to 10$/bbl to shut down the most expensive producers. Only then can then price start to recover.
It doesn't really matter how much they cut.
The issue is a massive drop in demand that is totally unprecedented and will continue much longer than many seem to think.
No amount of cutting is going to offset this lack of demand.
Not an expert either although I am a mechanical engineer by degree.....!
AFAIK, planes are maintained on a usage and a on a time basis.
For example, turbines must be inspected/stripped down after x hours of use. But also framework etc. must be inspected on an annual or bi annual, etc. basis.
So the timed maintenance doesn't change, whether the plane flies or not. It sill has to have yearly or biannual inspections.
No savings there.
Savings could be made on the lack of hours flown. Does it make sense to do a 1000 hour engine service now if the plane has only flown 500? I don't see why, because when they do start flying again, it will be on a very reduced network / service, so they will have plenty of spare capacity.
I'm still waiting for a refund from BA from early Feb.
Refunds will NOT be priorities for airlines fighting for survival.
IMO they will be shelved for as long as they can get away with it. Or pull a fast one like Ryanair and make people rebook at double the price....
True.
Every day there are wild fluctuations in almost every stock. No one seems to know how to value things at the moment, and one small snippet of news can send an SP soaring or tumbling. Intra day volatility is huge and trying to guess it is like trying to nail jelly to the wall.
People here need to learn what a hedge is.
The airlines buy paper, futures to protect themselves. They are NOT buying physical jet. They have to pay the banks whatever happens.
Normally this is offset by them buying extra cheap physical jet. But they can't cos they're not flying. Double whammy.
That's the first I've heard of a test that efficient. Why isn't everyone being tested then? As I understand it, only those in hospital get tested and this is true of UK, France and Spain.
Great if such a test does exist, but a bit odd I haven't seen it reported anywhere..?
Yes, money talks and countries will be keen to start their tourism again, but they know full well that a fresh outbreak would cost them far, far more than a couple of months of activity.
Have to say I agree with most of that, although I think October is a bit pessimistic for getting back to work and seeing friends.
Spain just instigated an even tougher lockdown, where NO ONE can go to work for 2 weeks. Economic disaster.
But this could be lifted mid April and then in May, perhaps a lighter lockdown, and by June mostly gone. But flights? I just don't see it. No country is going to risk importing cases. The only way it might work is if they can develop a super fast test where all air passengers are required to test negative BEFORE embarking on the aircraft.
Sorry to divert from the fascinating linguistics discussion but,
How do people think flights will work post lockdown?
When they reopen, will all arrivals to say Spain, France, Italy, have to possess a COVID 'all-clear' card? Will they be subject to 14 days quarantine? Or will they just be let in with a cursory temperature check?
These questions are important in working out what the Ryan SP will do because if there is no way to ensure that new COVID cases are once more flying around the globe, it seems unlikely that flights will look anything like they once did.
YEah I'd agree with most of that.
It's the last man standing that takes the prize, assuming there is a last man....
And people may well want to fly, but will countries let them? Places like Spain have taken a huge hit to the stomach here and will be ultra nervous about a fresh outbreak of COVID. Given that they CANNOT control the people flying in from outside of Spain, why on earth would they let anyone in? Until this is really put to bed once and for all.
I don't wish for that because my daughter has a flight to see me from France on 22 April, and that sure as sh*t ain't gonna happen. I just hope I get to see her in May, June or will it be later?
It is quite possible that they are seen as the 'strongest' airline in Europe, the best placed to ride out the storm.
But if you're the 'best' turkey at Xmas, you're still gonna end up on the dinner table.....
Meaning that ALL airlines will be hit very hard, irrespective of their dominance, reputation or position. To my mind, it's quite simple. The one with the most cash reserves or the friendliest bank manager survives....
Airlines have supply contracts at major airports with the like of BP, Shell etc. They commit to buying a certain amount of tonnes of jet per month, per year.
But they cannot take it. So they are in breach of contract. The BP refinery is backing up and they want rid of it. But it has nowhere to go.
Possibly the airlines can declare force majeure and renege. Possibly not.
I found this;
Percentage of anticipated requirement hedged
Six months to 31 March 2020 Average rate
Full year ending 30 September 2020 Average rate
Full year ending 30 September 2021 Average rate
Footnotes
Fuel requirement
74%
$632 / metric tonne 68%
$655 / metric tonne 45%
$643 / metric tonne
The formatting is all out but basically as of 30 Sep they were 68% hedged until 30 Sep 2020 at 655 $/tonne. Current price is 230 $/tonne. Ouch
Ouch.
I would tend to agree although;
a) the share price has shown remarkable resilience so far, far more so than Easyjet, not sure why. Maybe I'm missing something.
b) the air cargo market will be busier than normal so DHL etc. may need to lease planes. But there are already 'take up the slack' airlines (one is Portugese, I forget the name) that provide planes to hire on a spot basis. And Ryan's planes will be far less efficient at transporting cargo as they have far less space than a proper cargo plane. eg. if a cargo 737 can carry 100, a Ryan one could carry maybe 30?
I am no viroligist, but as I understand it, any potential vaccine has various known 'components' that Glaxo make. So I would say they are fairly well positioned.
I just posted a message on the Ryan air thread to point out that Ryan has hedged 90% of their 2020 jet consumption at 60$/bbl (27 now). And hedged well into 2022 too at similar prices.
This is going to hurt....A LOT.
Anyone have an idea of Easyjet's hedging position?
New here, but interested in the airlines and their plight.
Interested to hear your thoughts on this; I found Michael O'Leary's press conference from early Feb where he discounts Corona as inconsequential for Europe and his airline. First mistake.
Second one is rather larger. He says they have hedged 90% of 2020 jet fuel at the equivalent of $60/bbl and also hedged out to 2022.
Normally the losses of these hedges are offset by cheap spot fuel purchases. But Ryan isn't flying.
So they cannot compensate their hedge losses. So basically their mark to market on their hedges is frightening. They will have huge bills to pay the banks. Can they handle it?