Target: Net Fuel Cost of Zero
This little treatise was prompted, in the beginning, by recurrent published stories having to do with the airlines’ difficulties in coping with extraordinarily high, and “volatile,” jet fuel costs. Even so, it applies with equal force to users of Heating Oil and Diesel fuel, which of course also are refined products derived from Crude Oil, and which are somewhat similar to jet fuel, which itself is most akin to kerosene. User groups other than airlines would include railroads, trucking companies, garbage collection companies whether public or private, school districts which operate school bus fleets, taxicab fleets, bus lines, courier services which operate airplane fleets, Governments, shipowners and cruise lines, hotel and motel companies, and owners or operators of office buildings, industrial buildings, and apartment buildings. For the moment, however, let’s focus on the airlines, about which most has been written and spoken, by themselves and by others.
Historically, the airlines’ greatest single cost has been the cost of labor. However, in recent years – especially during the great price advance of jet fuel in 2007 and 2008 – the equation was turned on its head, whereby the cost of fuel became the single largest line item of operating cost. That still holds true, we are told, in spite of the massive decline in fuel prices following their peak in the summer of 2008.
Some airlines were (relatively) prepared for the price spike in 2008 by virtue of certain hedging programs, which had the effect of reducing their net cost of fuel. Others had no hedging programs at all, and were left exposed when prices surged.
Some airlines have fuel price-hedging programs in place right now. One wonders whether they are purely defensive, or whether an effort is being made to positively realize trading gains. One large airline has announced a fuel hedge loss of close to $400 million for the latest quarter. Do we rightly read that to mean that the actual cost of fuel was in addition to the hedging loss? If the program is entirely defensive, it isn’t working very well; and if it contains elements of an offensive-type strategy, it isn’t working very well, either.
It occurs to me that, in order for a fuel hedging strategy to be truly successful, it must be geared not only to a strategy of defense against catastrophic fuel price increases, but also to a strategy to make a profit on fuel trading. A basketball game cannot be won by playing defense only; you actually do need to put the ball in the basket at the other end of the floor once in a while. It also occurs to me that it is necessary to understand our probable location within the wave cycle at any given time, which in turn requires a knowledge of the wave principle in the first place.
The whole aspect of an airline’s fuel hedging department has to change from that of a necessary evil which consumes dollars in a purely defensive effort to that of a profit center.
The profit center’s stated target, its Mission, would be a net fuel cost of Zero.
It is not reasonable to expect that a target of Zero would be attainable. Such a result, while theoretically possible, might well require an allocation of funds wildly beyond the realm of possibility. Even so, and even if the investment were to be scaled down to a realistic level, the principle is still valid. The profit center would be graded on measurable results monthly, quarterly, semi-annually, and annually, based on several criteria, among which might be (1) Return on Investment and (2) Attained Percentage of the Target for the Period, the target being Zero. For example, if the fuel bill for the month were $10,000,000 and trading profits (in Heating Oil, for example) for the month were $1,000,000, the Attained Percentage of the Target for the Period would be .10. It might be that an Attained Percentage of .10 would be considered to be a good result. It might also be that an Attained Percentage of .010 would be considered to be a good grade. The important points are that there would be a target at which to aim, month by month by month, and that the results would be measurable and subject to comparison, period by period.
Of course, such an approach would likely entail turning an airline’s present fuel hedging approach upside down and inside out. It would necessitate a reversal of the thought process. Some people could do it; some could not. It might well require the importation of different trading skills. The transition might be difficult. It would require the total commitment of Management.
I hear the sound of applecarts being upset. But before the word “can’t” comes to the fore, perhaps we could find a voice or two who say “maybe.”
Respectfully submitted.
William Kurtz
July 30, 2009
About the Author
The author owns CandleWave, LLC, which publishes his investment newsletter twice weekly at http://www.candlewave.com/ and publishes, three times weekly, his Action Suggestions for the major Indexes including a review of Gold, Silver, Crude Oil, five Forex pairs, and the Dow 30, individually. He is also the creator of the “Candelaabra” system of technical analysis for use in all financial markets. “Candelaabra” spots trend reversals even before they emerge! “Candelaabra” is available on a money-back Guarantee basis in a 30-day Joint Trial of Genesis’ “Trade Navigator” platform and of Candelaabra, together. They’re both available in a single package at http://www.candelaabra.com/ Money-back Guarantee! Come and get them before this offer expires!
William Kurtz
info@candlewave.com
CandleWave, LLC
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How to start a coin collection without spending too many coins?
The hobby of coin collecting is unlike any other hobby. It is an entertaining past time that millions of people around the world enjoy. When your collection grows, you start to discover that there is a story behind each and every coin. Special coins can take you on a special tour through the past and provide you with better understanding of our history. Other coins tell you the journey they’ve been through. But most off all you can enjoy wonderful memories and have a legacy that lasts generations to come.
If you’d like to get into the coin collecting business there are a few things you should know - that’s why we’ve got this list together so you can have an easy start.
- Which coins you would like to collect? There are many and many different types of coins from all over the world and from different time frames. It’s better for you to start by focusing on a theme that interests you most. You can collect coins by years or by countries. You can collect themed coins like coins that depict your hero or a subject you’re interested in, like nature or airplanes.
- Start with collecting coins that are available or in circulation and see if you like it. Collect the State quarters or ask from friends that travel abroad to bring you back some coins. This is an exciting and inexpensive way to start a coin collection.
- If you see that coin collecting is your calling, start with doing some homework. You can find information online or in various magazines about coins and professional collectors.
- Get a protective album or book where you can safely store your coin collection. These albums are great when you want to display your collection and they also keep the coins protected.
- Finish a set before moving on to the next. Once you start a collection, you can get easily tempted to get other coins and different themes. When you finish a set, it makes it easier to have an organized and valuable collection.
- When your coin collection starts to gain scope and value, you should think about safe storage. Buy or rent a safe because coin collections are the first thing thieves are looking for. If you don’t have a safe, make sure that the collection is kept in a well hidden place, and not displayed around the house.
Another benefit of collecting coins is the fact that it can become pretty valuable with time. Try and work with metals that will rise in value like silver and gold but don’t go over the top. It takes time for your collection to gain value and in the meanwhile you should know your budget.
If you are looking for more information about coins and coin collections, head on to www.ContinentalMint.com were we help Coin Collectors start and expand their collection with a wide selection of coin sets and collectors’ supplies, at the best prices available. At www.ContinentalMint.com we are dedicated to bring you a memorable piece of U.S. history, a professional, knowledgeable Customer Service and discounted prices and shipping rates.
Continental Mint helps Coin Collectors to expand their collection with a wide selection of coin sets and collectors’ supplies, at the best prices available.
About the Author
Mark Etinger is a business strategist at Ajax Union Marketing Ajax Union specializes in Business Development and Internet Marketing
