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Boyd: "Okay, Panic Is Now Acceptable Behavior..."

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I heard a rumor that the company that Southwest does it's fuel hedging through is in serious financial trouble. That's not hard to believe seeing as how they're losing their shirts. Can anyone confirm this? If that company goes CH 11, does SWA lose it's hedges?
 
The article was not written by a "Legacy Driver about to loose his job" as you say. It was written by Michael Boyd, one of the most respected aviation analyst in the industry. He may be wrong on this but he is rarely wrong.
 
arthompson said:
The article was not written by a "Legacy Driver about to loose his job" as you say. It was written by Michael Boyd, one of the most respected aviation analyst in the industry. He may be wrong on this but he is rarely wrong.

Art's right, ignore Boyd at your own peril.
 
Tref said:
I heard a rumor that the company that Southwest does it's fuel hedging through is in serious financial trouble. That's not hard to believe seeing as how they're losing their shirts. Can anyone confirm this? If that company goes CH 11, does SWA lose it's hedges?

Ok, that's the most retarded thing I've yet heard on this board and that's saying something. I don't know much about SWA or the specifics of their hedges, but I know all about futures contracts.

A futures contract is simply today's spot price (let's say oil at $66) plus the cost of borrowing money for the length of the contract (let's say 1 year) plus a bid/ask premium.

If you buy a contract, you are just paying for the cost of the commodity today plus the cost to borrow the money for the length of the contract. That's it. There is no "company that does it's fuel hedging through", it's the open futures market.

Boyd, although often full of a bit of hot air really pooched this one, nobody took the other side of a bet with SWA, instead a financial firm simply bought the rights to oil at $25, sold those barrels to SWA at the cost to borrow the money and a bid/ask spread. There is ZERO RISK on the side of the market maker that sells a future.

My explanation leaves out a little bit of detail, but not much. Any basic undergrad finance course has this as a homework assignment---open the WSJ, pick a commodity, and by the spot price and today's interest rate, you can use a simple calculation to figure out the price of the futures--then you go check (in the same section) the price of the futures and voila, they're the same!
 
I thought Boyd was a flight attendant at AA?
 
Boyd is NOT a pilot. He started his career with AA, then went to Braniff, then to Bar Harbor.

His bio is listed on his website. www.aviationplanning.com

The APA has had Boyd come speak to our BOD about many issues that concern AA and its pilots. The dude knows his stuff and he does his homework. His is right many many many more times than he is wrong.
 

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