SWA posts small profit

[Tanker Clown]

Arrrrgggghhhh....OK...here we go again <eyes rolling>

the hedges don't run out. We have a fuel purchasing office where all they do is negotiate and re-negotiate and re-negotiate some more...on the price of fuel...both today's price and in the future.

the hedges are a part of the business plan...for today ...and the future....

Open book test tomorrow...

Yeah....but when those renegotiated hedges run out, you guys are screwed.

 

[vikesfanIV]

Arrrrgggghhhh....OK...here we go again <eyes rolling>

the hedges don't run out. We have a fuel purchasing office where all they do is negotiate and re-negotiate and re-negotiate some more...on the price of fuel...both today's price and in the future.

the hedges are a part of the business plan...for today ...and the future....

Open book test tomorrow...

True but it's not that simple. The fuel hedges don't run out (right now they go out as far as 2012 for 15% of estimated fuel consumption at around $63/barrel) and they are constantly doing their best to get future hedging contracts, but the monetery benefit from them is definatley declining. It's simply not possible to hedge as effectively with oil at $115. If it were that simple every airline would be doing it right now since most legacy carriers have billions in short term cash. SWA has a slight advantage because of their balance sheet and credit rating but they can't just magically keep hedging at $51/barrel when oil is currently sitting at $115. There is also a large downside risk to any airline hedging right now with oil this high. If oil goes back down to $85 and you hedged at $110 you are now at a big disadvantage to everyone else.

SWA knows they need to generate extra revenue to make up for their increasing fuel bill over the next few years. That's why there's a push to generate an extra $1.5 billion in revenue. I've done the math and if you look at the difference in their fuel bill from 90% hedged at $51/barrel to 30% hedged at $63/barrel (their hedge position for 2010) it no kidding comes out to around $1.4 billion. It's not a coiencedence that's the amount SWA planes to make in additional revenue annually by 2010. From the earnings webcast today it sounds like they are off to a good start on some of their revenue initiatives and slightly ahead of expectations so far.

 

[vixin]

Tejas...they will never understand so dont waste the key strokes.lol

 

[lowecur]

Arrrrgggghhhh....OK...here we go again <eyes rolling>

the hedges don't run out. We have a fuel purchasing office where all they do is negotiate and re-negotiate and re-negotiate some more...on the price of fuel...both today's price and in the future.

the hedges are a part of the business plan...for today ...and the future....

Open book test tomorrow...

You may want to check with that office. From what I've heard through the grapevine, futures contracts have all but dried up on heating oil and related. It may be next to impossible for airlines to purchase these in the coming years. I see Gary has canceled the $500M stock buy back....smart....He'll need it to keep the pilots happy.

Gee, I wonder if the pilots will do anything to help the airline with givebacks in the coming years? You are going to see all sorts of capacity cut backs in 2009 as this economy shrivels into a manhood only SWA/FO would be proud of. A high percentage of the leisure crowd will no longer be able to afford to travel, and WN better get cranking to get the high margin business traveler if they expect to maintain enough revenue to break even.

imp:​

 

[vikesfanIV]

Tejas...they will never understand so dont waste the key strokes.lol

Vixin,

Tell me what part of my post you disagree with or think is false.

I'm soon going to be working for SWA and joining your company so it's not like I'm hoping they don't succeed or something. But the numbers don't lie. I've listened to every earnings conference call and read every financial release they've had for the last year. I'm not saying they won't have future hedges but I am saying there is no way future hedges will be anywhere close to $51 barrel. They ARE going to see a signicant increase in fuel costs between now and 2010 no matter how much hedging they try to do. I don't see how you can argue that point.

 

[CF34-3B1]

Remember this name:

Canyon Blue Petroleum

You heard it here first......

 

[Jim Smyth]

Vixin,

Tell me what part of my post you disagree with or think is false.

I'm soon going to be working for SWA and joining your company so it's not like I'm hoping they don't succeed or something. But the numbers don't lie. I've listened to every earnings conference call and read every financial release they've had for the last year. I'm not saying they won't have future hedges but I am saying there is no way future hedges will be anywhere close to $51 barrel. They ARE going to see a signicant increase in fuel costs between now and 2010 no matter how much hedging they try to do. I don't see how you can argue that point.

If you go back and research a few years back on Flight Froums regarding Southwest fuel hedging the same guys were saying this same thing about our options when they were at $25 a barrel. Then it was $30 a barrel. Then it was $40 a barrel. Now its $50. Getting the idea? It keeps changing constantly. Some day they may not be available or not worth getting but for now they are.

You have to have money to pay for these futures a head of time. Most airlines didn't have money but they used the bankruptcy courts to get rid of there debt a few years back. Now they have money but the ratings are not good plus they are now showing big loss numbers again so how long will the bank account hold this time?

Southwest and also SWAPA gives us an incredible amount of information regarding how these options work, when and why they change. When your in training you will get some of this information. The longer your here the more information you will get and will fully understand how they work.

We are fortunate to have good management that makes good decisions. They have been a head of the curve for 37 years and I hope it continues allot longer.

 

[LJDRVR]

Congratulations to my kool-aid drinking friends, a profit these days is something to be very proud of.

Huzzah!

Don't count CAL out yet. The first quarter loss had more to do with 209 million dollar Heathrow slots than it did fuel.