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SWA- 90% Un-hedged through 2013

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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?
 
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.
 
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.
 
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.
 
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
 
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:
 
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.
 
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