United Airlines: Hedge Funds Hurt Us on Fuel

[Robbien]

Source: The Street

Caught in a vicious cycle as hedge funds and other financial players ratcheted the price of oil steadily higher, United parent UAL(UAUA Quote - Cramer on UAUA - Stock Picks) on Wednesday reported a $547 million fourth-quarter loss, primarily due to fuel hedging losses.

On an earnings conference call, CEO Glenn Tilton pointedly noted that Goldman Sachs had predicted fuel prices of $200 a barrel by year-end.

"Today, crude oil is not $147 a barrel. nor is it $200 a barrel, but rather $40 a barrel, but yet we are in a financial crisis," he said.

"The implosion in price established a huge commodity bubble, just as we had a huge credit bubble," Tilton said. ""If there is one thing I have learned about commodities, it is that high prices beget low prices. What was unusual was the amount of financial institutions and hedge fund participating in the bubble.

"You've seen those positions unwind," he said, noting that the groups' participation "created the rapidity of the decline," imposing a burden on companies that must purchase large quantities of fuel to do business.

Going forward, Tilton said, "we are hearing from the (Obama) administration and from and various exchanges that there is going to be more disclosure require, more transparency required, and I think that's going to be a good thing."

Read more: http://www.thestreet.com/story/10458868/1/ual-hedge-funds-hurt-us-on-fuel.html?cm_ven=GOOGLEN

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