How do you plan for the future with the most uncertain backdrop for airlines since COVID?
Lisa
Scott Kirby
We prepared by tripling cash, improving margins, and getting our best credit rating in 30+ years to have financial resources to look through any crisis and continue investing.
Other airlines are upgrading forecasts due to strong demand. Why is your forecast different?
Lisa
Scott Kirby
Demand is strongest ever, but I think oil prices are higher for longer. Our forecast of oil going to $175 and staying through up to $100 to end of next year is reasonable.
Are the 5% capacity cuts in Middle East routes enough, or will there be more if prices go higher?
Lisa
Scott Kirby
If our fuel forecast is correct, there will likely be an impact to the economy. We're cutting marginal routes that would lose money when oil prices double.
Are you considering hedging against oil prices?
Lisa
Scott Kirby
We're too big to effectively hedge - we'd move the market. The crack spread has gone up even more than oil prices, making hedging difficult.
How much do prices need to rise to adjust to oil prices?
Lisa
Scott Kirby
If oil stays where it is today, that's $11B expense for us, requiring prices up ~20% to break even and cover that cost.
Scott Kirby
This will be a stress event for the industry if our fuel forecast is right. Others start with weak income statements and balance sheets, and we'll be there to pick up assets.