SWA- 90% Un-hedged through 2013

[Colonel Savage]

...but is there even worse news looming?

Not if you go away.

 

[redflyer65]

One question...

How many other major airline OWN over 80 percent of their fleet?

Nwaredtail has it right, there aren't any low cost hedges available right now so Southwest will float. But when there is, they will have the cash and leverage to be very effective when it's difficult for others.

Tough times for everyone included SWA..yes,
Sky falling? I don't think so.

RF

 

[Richard Gozinya]

I know there is no newhires for a couple of years at SWA....

I'm sure everyone is surprised that you don't know what your talking about.

 

[contrail67]

What REALLY sucks is we don't have the cash to buy hedges with fuel under $40.

You're going to see an operating profit and a loss on paper of over ONE BILLION DOLLARS tomorrow.

Gary Kelly isn't living up to the hype.

Gup

Actually, Gary Kelly said he was not looking forward to January numbers. He knew this was coming, and it is not going to stop.

 

[minrest]

When I read that article I felt like an accountant trying to read a flight manual. I have no idea what it said.

 

[Sedona16]

The fact is SWA has been staving off losses for some time with its fuel hedging business. That business is gone. Losses will ensue. Will they immediately go out of business? No. Their credit would need to take a further dive and more airplanes sold before that would ever happen. Are they now playing on closer to a level playing field? Yes. If they dont upgrade their product or offerings (ie wifi, tv, movies, instant messenging, etc) will they lose business to other airlines with similar pricing? Absolutely! With most of their eggs in the domestic basket (sans Volaris) does their dissadvantage increase as other carriers increase the reach of where frequent flyer miles will take you? Yup.

 

[getonit]

This was probably written by the same jackasses on Wall Street who have gotten us into this financial mess. They can sit and analyze reams of complicated data that are dependent on thousands of variables that no one can predict. They don't understand anything about running a real business, making sure customers are satisfied, bills are paid on time, etc. The fundamentals of making and growing a successful business are completely foreign to them. They are all a bunch of lemmings following each other around until one of them decides to do something different and then we as end purchasers pay for their mistakes. Look at the recent history of Wally Street. They do it over and over again through arcane complicated financial practices that do nothing but make themselves wealthy. There was a recent article in Forbes asking what all of these money managers have done? The long term says you can't beat the market, look at the 10000 plus mutual funds out there, how many of them beat the average, technically only half of them. The ones that beat the market by 4% over average are probably in the 3 sigma range, which I think is only about 2.4%, if I remember my statistic correctly. I made all of those numbers up, but I have read it somewhere and if I get challenged I will find the actual numbers. You can sit and tell me about how they work in the capitalistic system providing liquidity, risk mitigation, etc but their overall greed ignored the fundamentals.

Soapbox ending.

 

[Cobra17]

If they dont upgrade their product or offerings (ie wifi, tv, movies, instant messenging, etc) will they lose business to other airlines with similar pricing? Absolutely!

I agree...they need to become more like Jetblue or Song...that business model is printing money!!

AMR is trading at 8 bucks. Buy.

 

[Whataburger]

Three words...

...Whose hiring, we're fU(ked.

 

[Captzaahlie]

How many more quarters can the airlines have like this? United and SWA both bleeding billions per quarter...something has to give. I know there is no newhires for a couple of years at SWA....but is there even worse news looming?

Yes, the worst news is that we will be reading more of your posts.....
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[Bookingsareup]

If you understood hedges you moron, you'd know what I was talking about with the estimation on the loss.

Gup

So, if you don't understand how to hedge fuel you are a "moron"? Congratulations to you that you do. Perhaps you can explain the exact process. I have a general understanding about the hedging process like most of us since it has been such a big part of our industry but I have to admit I'm no expert. Also, can you further explain the different criteria that Airlines use when reporting their earnings please?

 

[dalad]

Southwest isn't going anywhere. There are, however, dark clouds on the horizon. Their fuel hedging department must have been reading Golman Sachs' predictions on the price of oil going to $200 per barrel. The fact is, they basically had to cover their position with a good bit of thw $ they had saved with fuel hedging. They do own plenty of relatively new aircraft that they can sell and lease back, but, they are having to raise cash based on their assets. sitting with$1.3 billion in cash on hand is not a good thing. When DAL went into BK we had very close to $1 billion on hand and came very close to closing the doors. In fact if we had gone into BK today, we would be out of business.

 

[Green]

Three words...

...Whose hiring, we're fU(ked.

I don't mean to be overly critical but I'm pretty sure that was 4 words. Even a SWA pilot should be able to figure that out.

 

[fiel12]

I don't mean to be overly critical but I'm pretty sure that was 4 words. Even a SWA pilot should be able to figure that out.

Not sure, but it might be a joke on our new VP. When he said: three letters... J-O-B-S.

 

[B727Driver]

Don't forget the new Prez who visited 57 states during the campaign.

 

[bravodude]

Actually, Gary Kelly said he was not looking forward to January numbers. He knew this was coming, and it is not going to stop.

actually he sad Jan numbers are strong but Feb and march are weak so far!

 

[bravodude]

The fact is SWA has been staving off losses for some time with its fuel hedging business. That business is gone. Losses will ensue. Will they immediately go out of business? No. Their credit would need to take a further dive and more airplanes sold before that would ever happen. Are they now playing on closer to a level playing field? Yes. If they dont upgrade their product or offerings (ie wifi, tv, movies, instant messenging, etc) will they lose business to other airlines with similar pricing? Absolutely! With most of their eggs in the domestic basket (sans Volaris) does their dissadvantage increase as other carriers increase the reach of where frequent flyer miles will take you? Yup.

The fact is SWA still made money! The fact is SWA just sent a letter home to every employee stating AGAIN taht there will be NO LAYOFF'S OR WAGE REDUCTIONS. The fact s can you say that about your airline-NO you can't.

 

[GuppyWN]

So, if you don't understand how to hedge fuel you are a "moron"? Congratulations to you that you do. Perhaps you can explain the exact process. I have a general understanding about the hedging process like most of us since it has been such a big part of our industry but I have to admit I'm no expert. Also, can you further explain the different criteria that Airlines use when reporting their earnings please?

I was just calling Tanker a moron.

Hedging 101.(thanks BD) When you hold hedges that are WELL BELOW market you will insist on collateral so the buyer will honor the "bet." That collateral is cash. When the price of oil tanked the people we contracted our "bet" with said "Hey Gary, oil is selling for less than your hedge and we want our cash back." Our cash position tanked.

One I know for CERTAIN. Oil is cheap and we should be hoarding oil like Somalian pirates.

As far as the criteria for reporting earnings? Smoke and mirrors my friend.

Gup

 

[Scope out RJ's]

The fact is SWA still made money! The fact is SWA just sent a letter home to every employee stating AGAIN taht there will be NO LAYOFF'S OR WAGE REDUCTIONS. The fact s can you say that about your airline-NO you can't.

Keep telling yourself that junior!
Fact is, you're still a ****************************** bag!:laugh:

 

[Andy]

Second rate article.
LUV played their hedges extremely well. I listened to Gary Kelly on CNBC last week; he indicated that LUV dumped most of their hedges.

While I expect oil to temporarily rise in the near future as we experience a bond market dislocation due to Obamicide (what I call this brain dead concept of massive deficit spending). Bond yields climbed significantly last week and we haven't even started to see the enormous bond offerings that will be needed to fund that spending.
There is quite a bit of money flowing out of the bond markets and into all classes of commodities as a flight to safety; this will temporarily carry oil prices higher. However, the world's awash in oil and there is significant arbitrage play on forward contracts.
For instance, the NYMEX front month contract (Mar09) on light sweet (CL) is $46.47; the Mar10 contract is $58.18. My understanding is that storage, insurance, etc, will cost ~1/2 of that amount, leaving a pretty hefty profit for simply storing oil for a year.
That arbitrage play is taking a lot of front month oil off of the markets, but we're rapidly running out of excess storage space for arbitrators. Once the arbs are no longer able to make that play, the price on the spot market is going to collapse.

The markets are anything but stable; you have to be extremely nimble to not be crushed.