LUV Adjusts Fuel-Hedging Strategy

[Super Monkey]

Heat getting turned up on LUV. Welcome to the real world.

AA767AV8TOR

http://www.dallasnews.com/sharedcontent/dws/bus/stories/122408dnbusssouthwest.399369b.html

Southwest Airlines adjusts fuel-hedging strategy

09:45 PM CST on Tuesday, December 23, 2008

By: TERRY MAXON [email protected]

Southwest Airlines Co. – which maintained a competitive advantage by locking in prices...

It's not the article that would be offensive; it's the intro comment by the poster.

As for my attitude toward the poster...I'm all about AA pilots gettin a great contract! I wish all of you sincere luck...take the industry back!!!!:beer:

 

[Daddy]

There are now officially no good options for a young pilot in the airline industry

 

[b747dogg]

That's It, I'm going to Delta!!! imp:

 

[bravodude]

You might want to go re-read the thread starting article.....the hedging mastermind hasnt done so well lately.

The key word is lately. If you add up all the money we saved vs. what we have lost we are still way ahead. Also GK has said all along it was not meant to make money but to predict future cost. In a year when this mess is over and oil goes back up he will look like genious again.

 

[bravodude]

I try to not be an angry man. I just feel like my Koolaid drip is running low or maybe the rose colored glasses have come off. Don't know. Hope it is temporary but I most certainly don't LUV all things Southwest like I have in the past 10 years. The whole codeshare "trust me" line is my biggest problem. I just cannot condone Mr. Kelly farming out our futures.

As far as a leveraged buyout? Are you serious? Gary is the CEO. That makes him the target of my rant. The stock is trading at a TEN YEAR LOW. If you look at the other transportation stocks you'll find they have held up MUCH better than Southwest Airlines. Alaska, for example, is trading at a 52 week HIGH. Our cash on hand is down 4 billion dollars in the past year. Our market cap is down 50% from last year which makes us a much bigger target for the leveraged buyout - not smaller. Gary has screwed the pooch on that front - or maybe not. Depends on his plans.

Just the facts as I see them bro. Please tell me I'm wrong.

V/R,
Gup

You could be right! But in my humble opinion I hope you are wrong. I agree I don't like the fact that we are farming out our flying but what do you suggest. I think if we can keep out the rj flying from here we should be ok. RJ'S are the problem, if we let even one on the property that is flown by someone other then a SWA pilot then we have big problems.
As for GK you know as well as I do that if he had not come up with the hedging strategy we would be just like everyone else, laying off pilots and parking airplanes. So far even with a 5% capacity cut we are still not furloughing. All I am saying is he at least deserves a chance!

 

[Dude]

For the record, RJs aren't the only problem. Trying to conduct flying by any other means than your current seniority list pilots is the problem. There is only one reason to do that..........it's cheaper. Finding cheaper labor is the first step to our last step. RJs are no different than an Airbus or 737. They all require pilots and if they do it cheaper than WN pilots, it's a problem for us at the table.

I will be voting no, probably in vain, but NO! Any language that permits codesharing of ANY kind gets a NO! I hate to be a hardass, but my daughter's gonna need a wedding paid for in 10+ years. It ain't about worrying about upgrade anymore, it's about keeping my job and my pay. I feel like I am fighting, literally, to keep my job.

 

[Daddy]

Good, dude, you are...we all are now...there are no good flying gigs out there right now long term.

 

[Bob Dylan]

Good, dude, you are...we all are now...there are no good flying gigs out there right now long term.

UPS? FEDEX?

 

[Quimby]

He did not write the article....just posted it. Truth hurts.

I'm aware he didn't write the article, thanks for pointing it out though.

Merry Christmas to you too.

 

[ALSF 2]

Sorry for interrupting the banter back and forth, but getting back to the article....

The article points out what I was hoping SWA would be doing in low price enviroment... unloading their high priced hedges.

In a filing with the Securities and Exchange Commission, Southwest said it is now "essentially" hedged for only 10 percent of its fuel needs for 2009 through 2013.

As recently as mid-October, Southwest had hedged 75 percent of its 2009 fuel usage at the equivalent $73 a barrel of crude oil, 50 percent of 2010's needs at $90 a barrel, 40 percent of its 2011 usage at $93 a barrel and over 35 percent of 2012 fuel at about $90 a barrel.

They need to dump those high priced hedges! Unfortunately it costs a little cash to do that. Dumping them is apparently better that using them to offset the fuel bill, or they would not be doing it. But I am convinced that they would rather have a set fuel budget line item with a locked in price, than deal with the wild swings of a barrel of oil.

While I am not a big fan of selling jets to lease them back, I only hope they are using that cash to buy up hedges at the $30 dollar level to lock in the rate there. That information will not become public until its required (SEC filings).

So for those that think those SWA hedges are finally running out.

The point is, SWA is no longer operating in a fuel hedge bubble anymore.

It seems to me that they are just returning some high cost hedges, raising some cash, and hopefully buying some low cost hedges for the next few years.

Just one opinion, take it or leave it.


Cheers!

 

[Dumb Pilot]

UPS? FEDEX?

A minuscule percentage of pilots are getting on with those companies, It takes baby sitting Fred's grand kids or spending lots of money in drinks for the northern Mississippi flying club to even get an interview, that is really not a viable option for the vast majority of pilots right now

 

[Daddy]

UPS? FEDEX?

I dont know about UPS, but FDX is still talking about possible furloughs...they are both heavily tied to the economy and often act as leading economic indicators.

 

[UALjan15]

While I am not a big fan of selling jets to lease them back, I only hope they are using that cash to buy up hedges at the $30 dollar level to lock in the rate there.

Just because oil temporarily visits the $30 range does not mean you can "lock in" at that price (unless you want to store the oil at DAL). Not going to be any takers on the other side of the deal for a $30 hedge option, especially the longer term options that LUV tries to lock up. That said, I'm curious how low the contracts have gone.?.

 

[Bavarian Chef]

A minuscule percentage of pilots are getting on with those companies, It takes baby sitting Fred's grand kids or spending lots of money in drinks for the northern Mississippi flying club to even get an interview, that is really not a viable option for the vast majority of pilots right now

It is my understanding that they are not hiring and haven't for some time. My buds on the slave ship are getting mutinous.

 

[radarlove]

Just because oil temporarily visits the $30 range does not mean you can "lock in" at that price (unless you want to store the oil at DAL). Not going to be any takers on the other side of the deal for a $30 hedge option, especially the longer term options that LUV tries to lock up. That said, I'm curious how low the contracts have gone.?.

Perhaps it's time to take a finance class.

 

[RP170]

UPS? FEDEX?

NetJets is a great gig. Much different than airline flying but in a good way.

 

[hockeypilot44]

NetJets is a great gig. Much different than airline flying but in a good way.

Netjets is stable. I've heard it is much better than a regional, but I know quite a few pilots that went to Netjets while furloughed only to return to their mainline airline when recalled. Good for you if you enjoy it though. It is different. UPS and Fedex probably won't be hiring for a long time. Cargo flying is different also. Fedex might even furlough. If UPS does hire, you will be based in ANC. There are no good jobs to apply to right now. Cathay Pacific might be an option.

 

[AA767AV8TOR]

Sorry for interrupting the banter back and forth, but getting back to the article....

The article points out what I was hoping SWA would be doing in low price enviroment... unloading their high priced hedges.

It seems to me that they are just returning some high cost hedges, raising some cash, and hopefully buying some low cost hedges for the next few years.

Just one opinion, take it or leave it.

Cheers!

ALSF 2,

The problem of the returned fuel hedges for LUV is now their company is more or less on an equal footing with the rest of the industry. This has not been the case the last five years. Since 2003, LUV has not been so much of a great airline as a great fuel hedging company. The hedges have masked a lot of their internal problems.

As is well known around here, LUV’s fuel hedging strategy (whether by blind luck or by skill and cunning) created major headaches for the rest industry when Southwest was able to keep prices artificially low which continued to put the hurt on the rest of us as we tried to climb out of the 911 hole.

Now that advantage has been largely negated. With the economy in the dumps, their cash dwindling, and gas prices increasing; the next five years for Southwest will be very different from the last five.

I’m on record in this forum as being very disappointed with the direction SWAPA took when they had their “time in the sun” to do some very positives things for our profession and to set some high benchmarks for us all to aim for but choose instead to push toxic items such as Age 65. Now their window of opportunity is starting to close if not slamming shut.

I just hope SWAPA is able to tow the line on what their management wants to do with international code share. If your union losses on that one, we’re all pretty much screwed.

Because of the continuing threat to our careers, APA has taken a very hard line on the AMR/BA/IBERIA deal. Over the years, code sharing has proven to be of very little value for the American Airline pilots in regards to pay, growth, and jobs and instead has proven to be a big win for management and the consumer. It like we’re on a slow melting iceberg. Perhaps the Northwest of UAL guys could chime in here on how their codesharing has positively or negatively impacted their careers.

Over the next few years, SWAPA will be severely tested. I sincerely wish them the best of luck. Our careers depend on it.

AA767AV8TOR

 

[Frank Lorenzo]

Over the next few years, SWAPA will be severely tested. I sincerely wish them the best of luck. Our careers depend on it.

All of the pilots are depending on SW pilots for their futures? Wow. Things are more dire for the pilots than I thought.

Tell you what......I will get together my buddies from the ATA and we will set up a ceremonial table for you guys to sign on to our terms of surrender. Just let me know what base works out best for you.

We promise to make penetration as quick, painless, and well-lubed as possible.

 

[bravodude]

ALSF 2,

The problem of the returned fuel hedges for LUV is now their company is more or less on an equal footing with the rest of the industry. This has not been the case the last five years. Since 2003, LUV has not been so much of a great airline as a great fuel hedging company. The hedges have masked a lot of their internal problems.

As is well known around here, LUV’s fuel hedging strategy (whether by blind luck or by skill and cunning) created major headaches for the rest industry when Southwest was able to keep prices artificially low which continued to put the hurt on the rest of us as we tried to climb out of the 911 hole.

Now that advantage has been largely negated. With the economy in the dumps, their cash dwindling, and gas prices increasing; the next five years for Southwest will be very different from the last five.

I’m on record in this forum as being very disappointed with the direction SWAPA took when they had their “time in the sun” to do some very positives things for our profession and to set some high benchmarks for us all to aim for but choose instead to push toxic items such as Age 65. Now their window of opportunity is starting to close if not slamming shut.

I just hope SWAPA is able to tow the line on what their management wants to do with international code share. If your union losses on that one, we’re all pretty much screwed.

Because of the continuing threat to our careers, APA has taken a very hard line on the AMR/BA/IBERIA deal. Over the years, code sharing has proven to be of very little value for the American Airline pilots in regards to pay, growth, and jobs and instead has proven to be a big win for management and the consumer. It like we’re on a slow melting iceberg. Perhaps the Northwest of UAL guys could chime in here on how their codesharing has positively or negatively impacted their careers.

Over the next few years, SWAPA will be severely tested. I sincerely wish them the best of luck. Our careers depend on it.

AA767AV8TOR

Don't you guys belong to the oneworld alliance.
Did the APA cave in giving away international scope relief when AMR joined the one world alliance.
I have been verry disapointed wth the direction that the APA has taken in regards to giving away both domestc and international codeshare and scope protection.

I have some advice for you- take care of your own house first!