United Airlines 2012 Annual Report Download - page 65

Table of Contents
The fuel hedge portfolio is comprised of many individual hedge contracts (primarily option contracts) on multiple underlying commodities and entered into at
various points in time, resulting in a wide range of strike prices with several hedge counterparties. The table below provides a view of the economic impact of
the hedge portfolio on the Company’s 2013 fuel costs given significant moves (up to +/-20%) in market fuel prices from December 31, 2012 (in millions).
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

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 
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20% (0.60) 0.08 (0.52)
10% (0.30) 0.06 (0.24)
(10)% 0.30 (0.01) 0.29
(20)% 0.60 (0.06) 0.54
(a) Projected using equal shifts in spot and forward prices for aircraft fuel and all commodities (heating oil, diesel, crude oil) underlying hedge contracts from December 31, 2012
levels.
(b) Projections based on estimated consumption of four billion gallons and a price of $2.98 per gallon, excluding taxes and other delivery costs.
(c) Cash gain/(loss), including premiums, on existing hedges as of December 31, 2012. Includes all hedges whether or not the hedges are designated for hedge accounting.
Foreign Currency. The Company generates revenues and incurs expenses in numerous foreign currencies. Changes in foreign currency exchange rates
impact the Company’s results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Some of the
Company’s more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro and Japanese yen. At times, the
Company uses derivative financial instruments to hedge its exposure to foreign currency. The Company does not enter into derivative instruments for non-risk
management purposes.
The result of a uniform 10 percent strengthening in the value of the U.S. dollar from December 31, 2012 levels relative to each of the currencies in which the
Company has foreign currency exposure would result in a decrease in pre-tax income of approximately $291 million for the year ending December 31, 2013.
This sensitivity analysis was prepared based upon projected 2013 foreign currency-denominated revenues and expenses as of December 31, 2012.
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