Southwest Airlines Reports Loss

[(HCDAW)]

Let's get it on. I'll be the first to admit I've cherry picked lines and bullet points in the past. Fact is GAAP's or not, it's a loss. We can't expect to toot our own horn killing them with hedges if we don't take our lumps when we're late pulling the trigger on them.

BUT! I'm not voing for a pay freeze! $69 million profit on half empty planes is a good sign to me.

Gup

Well I for one am glad we don't have a finance department trying to "pull the trigger" on hedges at just the right time. That is a gamble, you're trying to time the market. Now, a long term hedging plan that allows you to fix your fuel costs out into the future is a planning tool. And, while you may no doubt lose money on those hedges at times (which oh by the way we didn't) it is still a wise move to try to stabilize costs for planning purposes and to even out the swings in your commodity expenses.

 

[The Prussian]

I didn't argue the operating profit. But a bottom line loss (or profit) is a loss or a profit.

The fundamentals contained therein are, of course, a different matter.

If a company loses money, they lose money. It's that simple, imho.

Which reminds me...I better get right on it and report my 401k loss this quarter according to Gaap standards.

 

[Andy]

LUV, congrats on the operating profit. As another poster mentioned, pretty damned impressive considering the loads that you've carried. I've jumped on you guys a few times this last year and the planes haven't been packed. Always class people at LUV.

On your hedges, I think that you've got some of the sharpest guys in the business. I hope that they're starting to sell forward hedges as it is likely that oil will be below $50/bbl sooner than later. The winning airlines going forward are going to be the ones who are unhedged.

All the best to you.

 

[Bavarian Chef]

Apparently you do..you have more posts on SWA than I do and I work here.

Huh? On this thread, or in general?

This just in -- Continental did not lose money.

 

[FatesPawn]

Huh? On this thread, or in general?

This just in -- Continental did not lose money.

Because they have far less hedges than SWA and didn't have to report them as GAINS in previous quarters to now have to report them as LOSSES in current quarters. Andy's comments are good enough kudos for me.

I do realize these aren't attacks on SWA or our hedges. GAAP accounting is NOT how I run my household budget, but it IS the way airlines have to report profits and losses.

 

[The Prussian]

LUV, congrats on the operating profit. As another poster mentioned, pretty damned impressive considering the loads that you've carried. I've jumped on you guys a few times this last year and the planes haven't been packed. Always class people at LUV.

On your hedges, I think that you've got some of the sharpest guys in the business. I hope that they're starting to sell forward hedges as it is likely that oil will be below $50/bbl sooner than later. The winning airlines going forward are going to be the ones who are unhedged.

All the best to you.

Thanks Andy....BTW, you pretty much called this financial debacle that we're in...over a year ago. Any thoughts on how the airline business is going to be looking a year or two out from now?? I know you don't have a crystal ball, but what's your gut telling you?? Thoughts???

 

[Quimby]

Huh? On this thread, or in general?

This just in -- Continental did not lose money.[/quote]

http://www.continental.com/web/en-US/apps/vendors/default.aspx?i=PRNEWS

really?

 

[Mr.B]

Plus it shows the pilots during negotiations that the lost money and can't afford to pay us any more $$$

Welcome to the jungle.

 

[TZtoSWA]

Plus it shows the pilots during negotiations that the lost money and can't afford to pay us any more $$$

Not just the pilots...try 5 different employee groups in negotiations right now. I am a little surprised it took them this long to report we are losing money.

 

[Andy]

Thanks Andy....BTW, you pretty much called this financial debacle that we're in...over a year ago. Any thoughts on how the airline business is going to be looking a year or two out from now?? I know you don't have a crystal ball, but what's your gut telling you?? Thoughts???

Prussian, I haven't been following the airlines for a while; I've concentrated on other financial sectors that have been profitable trades for me. I'd like to say investing, but to try to invest in this environment is suicidal.
Applying to the airlines what I expect to unfold, I would say that there will be several airlines that will not survive. Those that are heavily in debt and are in expansion mode are extremely vulnerable.
I'm not going to name particular airlines that I see likely to close doors, other than to say that United is a possibility. The only thing that I see saving United is that they have been aggressively cutting capacity and have no new aircraft orders. Those that cut - cut deeply - will probably survive.
United's cuts should put me out of work next spring; I'll likely be out on the streets for a minimum of another 5 years. That's assuming United survives. I've got other plans, so it doesn't matter to me.

The one saving grace for the airlines is oil prices. I am watching inventory numbers right now, and it has driven oil down near the 60s. I can see oil moving below $50 in the near term and even lower longer term. That will help the airlines, but it doesn't get passengers on aircraft.
Passenger travel is likely to fall through the floor which is why I think that those airlines that cut dramatically now will probably survive. I see no bounce in the economy or passenger travel. And this is likely to last for several more years than mainstream forecasters are calling for.

A lot of people called me a pessimist when I first started writing this stuff on this board. I simply looked at the data and applied my forecasts to what should have been obvious for those that dug deep enough into the numbers. Prussian, I noted that you were one of the people who were open minded on my posts. While we've had disagreements in the past on other matters, I appreciate the support.

Bottom line for the airline industry - those that cut early are going to survive. Those that are continuing to expand are going to go out of business. There will be opportunities as airlines fall, but the amount of capacity that defunct airlines leave behind will not offset the decreased passenger traffic.

 

[bravodude]

And it could get worse.

Most of the $2.2B in cash is tied up in fuel hedge contracts. Just think what will happen if oil continues to fall, and more write downs occur, + they are going to have to sell those positions at a loss to gain liquidity.

We'll see how loyal all the takers are if the company rolls over in the next year or so.

imp:​

what was that you were saying.

"Although today's challenges are unprecedented, we are well-prepared and committed to achieving our long-term financial targets and preserving our financial strength. Our unrestricted cash and short-term investment balance was $2.2 billion as of yesterday, including $1.1 billion in fuel derivative collateral deposits. Although our liquidity is healthy, we have made the prudent decision in today's unstable financial markets to access $400 million in additional cash through our bank revolving credit facility leaving $200 million still available. We remain financially conservative and well-prepared with our strong balance sheet and modest debt levels."

I am by no means justifying our loss. Like GUP said if you give s%!t you have to be able to take it.

 

[ReverseSensing]

I didn't argue the operating profit. But a bottom line loss (or profit) is a loss or a profit.

Sorta. Is a loss a loss if it's an accounting gimmick where no actual money trades places? Mark-to-market accounting required by GAAP deals with unrealized gains and losses. They're call "unrealized" for a reason.

 

[General Lee]

when you guys learn about GAap accounting, then you would understand. SWA made money.

Welcome to what the rest of us have had to deal with: Accounting rules. This is the first time you have ever had to have "excuses." Yes, you probably made a profit, but every other quarter up till now you haven't had to have any explanations. Welcome to the new reality. Welcome to Lubbock. It is freaking FANTASTIC.


Bye Bye--General Lee

 

[bravodude]

Welcome to what the rest of us have had to deal with: Accounting rules. This is the first time you have ever had to have "excuses." Yes, you probably made a profit, but every other quarter up till now you haven't had to have any explanations. Welcome to the new reality. Welcome to Lubbock. It is freaking FANTASTIC.


Bye Bye--General Lee

As far as the accounting rules you are correct I got no response on that for you. However let me know how your international expansion works out for you ar the world slides towards a global recesion. Lubbuck is awesome dude wish you were here!!!!

 

[The Prussian]

Prussian, I haven't been following the airlines for a while; I've concentrated on other financial sectors that have been profitable trades for me. I'd like to say investing, but to try to invest in this environment is suicidal.
Applying to the airlines what I expect to unfold, I would say that there will be several airlines that will not survive. Those that are heavily in debt and are in expansion mode are extremely vulnerable.
I'm not going to name particular airlines that I see likely to close doors, other than to say that United is a possibility. The only thing that I see saving United is that they have been aggressively cutting capacity and have no new aircraft orders. Those that cut - cut deeply - will probably survive.
United's cuts should put me out of work next spring; I'll likely be out on the streets for a minimum of another 5 years. That's assuming United survives. I've got other plans, so it doesn't matter to me.

The one saving grace for the airlines is oil prices. I am watching inventory numbers right now, and it has driven oil down near the 60s. I can see oil moving below $50 in the near term and even lower longer term. That will help the airlines, but it doesn't get passengers on aircraft.
Passenger travel is likely to fall through the floor which is why I think that those airlines that cut dramatically now will probably survive. I see no bounce in the economy or passenger travel. And this is likely to last for several more years than mainstream forecasters are calling for.

A lot of people called me a pessimist when I first started writing this stuff on this board. I simply looked at the data and applied my forecasts to what should have been obvious for those that dug deep enough into the numbers. Prussian, I noted that you were one of the people who were open minded on my posts. While we've had disagreements in the past on other matters, I appreciate the support.

Bottom line for the airline industry - those that cut early are going to survive. Those that are continuing to expand are going to go out of business. There will be opportunities as airlines fall, but the amount of capacity that defunct airlines leave behind will not offset the decreased passenger traffic.

Andy...Thanks for taking the time to respond...more than a few of us enjoy your posts.

 

[Bavarian Chef]

Well I for one cannot wait for JB to announce a loss, I mean profit, I mean psuedo-profiloss ... aw F it.

 

[momalley81]

Welcome to what the rest of us have had to deal with: Accounting rules. This is the first time you have ever had to have "excuses." Yes, you probably made a profit, but every other quarter up till now you haven't had to have any explanations. Welcome to the new reality. Welcome to Lubbock. It is freaking FANTASTIC.


Bye Bye--General Lee

When has SWA never had to deal with accounting rules?

General, about 6 months back you didn't even know what Market Cap was. That after I proved to you that SWA's Market Cap was more than all the other Legacy Carriers COMBINED!! Market Cap is a very basic concept of investing and a company's value. Yet you didn't know how to calculate it.

However, now you act like you know what you are talking about when it comes to accounting rules and you make the assumption that SWA is just now having to deal with this?

You are a compete and total hypocrite. However, at least you are consistant about it.

 

[General Lee]

As far as the accounting rules you are correct I got no response on that for you. However let me know how your international expansion works out for you ar the world slides towards a global recesion. Lubbuck is awesome dude wish you were here!!!!

People still need to travel around the world, and it takes too long on boats. The mega rich who used to fly on corporate jets will have to be reduced to first class travel on airliners. So will plenty of middle managers trying to rescue their businesses around the globe. So, there will be capacity cuts (we will cut more RJs), and you will have to cut 737s(?---you have no RJs--at least you aren't getting those 3 extra 737s this year).

And, LBB probably is awesome for you guys. The oil industry, which is huge out there in West Texas, is probably having trouble with this huge oil price fall, and profits aren't there like the used to be a few months ago. They are hating this economic downturn probably more than anyone else. At least they can hop one of your 737-300s and fly to LAS, to really gamble.


Bye Bye--General Lee

 

[General Lee]

When has SWA never had to deal with accounting rules?

General, about 6 months back you didn't even know what Market Cap was. That after I proved to you that SWA's Market Cap was more than all the other Legacy Carriers COMBINED!! Market Cap is a very basic concept of investing and a company's value. Yet you didn't know how to calculate it.

However, now you act like you know what you are talking about when it comes to accounting rules and you make the assumption that SWA is just now having to deal with this?

You are a compete and total hypocrite. However, at least you are consistant about it.

Hello??? Read my post McFly. I said this is the FIRST TIME I have ever seen Southwest report a loss, and it actually had accounting "tools" (one time items)come along with it. That is amazing......get it? This is a special occasion since Southwest USUALLY DOES VERY WELL WITHOUT ANY SPECIAL NOTES...Welcome to the real world. It is FRICKEN FANTASTIC.


Bye Bye--General Lee

 

[momalley81]

Hello??? Read my post McFly. I said this is the FIRST TIME I have ever seen Southwest report a loss and have accounting rules come along with it. That is amazing......get it? Welcome to the real world. It is FRICKEN FANTASTIC.


Bye Bye--General Lee

SWA has had accounting rules come along with every financial statement.

It is required by law.