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United’s fuel cost savings total $200 million in 2014

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United’s fuel cost savings

In 2014, United Continental Holdings (UAL), which operates United Airlines, achieved fuel cost savings of $200 million. That’s 20% of its fuel saving target for 2017.

In 4Q14, United’s fuel price was $2.67 per gallon. That’s ~14% lower than a year ago but still higher than its peers Delta Air Lines (DAL), American Airlines (AAL), Alaska Air Group (ALK), and Southwest Airlines (LUV), whose fuel prices for the quarter ranged from $2.52 to $2.64 per gallon. 

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Hedges can be costly

Airlines have largely benefitted from lower crude oil prices but have also incurred losses on hedged fuel positions. United recorded hedge losses of $237 million, including $80 million from 2015 positions closed in 4Q14. The company also closed all of its first-quarter 2015 hedge positions and expects to incur $190 million in losses on these contracts. Going forward, the airline can expect to enjoy 80% of future oil price declines.

Flying for less

Fuel efficiency at United improved by 1.3% in 2014 and 2.3% in 4Q14. The company plans to improve fuel efficiency by 7% by 2017.

United’s fuel consumption per 100 available seat miles, or ASMs, improved to 1.57 gallons per 100 ASMs in 4Q14, from 1.61 gallons per 100 ASMs in 4Q13. In Part 8 of this series, we’ll learn more about how United’s fleet restructuring initiatives helped the airline achieve these efficiency targets.

United and major US airlines are all part of many ETFs. Those that hold airline stocks include the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN).

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