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LUV Posts Loss, Says Growth 'Suspended Indefinitely'

AA767AV8TOR

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Southwest Airlines posts loss, says growth 'suspended indefinitely'

02:22 PM CST on Thursday, January 22, 2009

By TERRY MAXON / The Dallas Morning News

tmaxon@dallasnews.com

Southwest Airlines Co. will cut its capacity 4 percent in 2009, and chairman and chief executive Gary Kelly said Southwest’s growth is “suspended indefinitely.”
"I definitely want Southwest Airlines to grow," Kelly told industry analysts and reporters on a conference call. "I believe we will be able to grow, but that is certainly a secondary objective in this kind of an economic environment.

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He discussed Southwest’s new strategy as the Dallas-based carrier announced it lost $56 million in the fourth quarter including special items, giving Southwest its first back-to-back quarterly losses in nearly 18 years.

However, Southwest said it earned $178 million for the full year, continuing its unbroken string of annual profits that began in 1973.

The 2008 results were boosted by $1.3 billion in gains from fuel hedging, sparing Southwest from the huge losses that other carriers have announced or are expected to report.

AMR Corp., parent of American Airlines Inc., said Wednesday it lost $340 million in the fourth quarter and $2.07 billion for the full year. UAL Corp., parent of United Airlines Inc., posted a net loss of $1.03 billion for the fourth quarter and $5.35 billion for the year.

"We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history,” Mr. Kelly said in a prepared statement. In the conference call, he added: "I for one am very glad that 2008 is over.”

Mr. Kelly said Southwest has cut its 2010 delivery of new Boeing 737-700 jets to 10, down from 16 firm orders and six options that it had held. It ended the year with 537 airplanes, and expects to be flying 535 at the end of 2009, with lease returns and retirements to cancel out 13 new deliveries.

Through 2012, Southwest has eliminated firm orders for nine airplanes and options to buy another 32 aircraft. Through 2018, it still has firm orders, options and purchase rights for 220, but the deliveries and potential deliveries are being pushed back.

Mr. Kelly said he was pleased at Southwest’s increased revenues, up 9.7 percent to $2.73 billion in the fourth quarter. However, Southwest like other airlines was hurt by higher jet fuel prices, increasing its operating expenses 12.6 percent to $2.66 billion.

Despite an operating profit of about $70 million, special items – particularly the requirement to reflect the market price of hedging contracts – put the airline in the red for the fourth quarter.
 

N1atEcon

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Finally we are like the rest of the airlines. We loose money and our stock takes off.
 

momalley81

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SWA didn't lose a darn thing.

Why don't you educate yourself with GAAP reporting requirements?

Southwest Airlines posts loss, says growth 'suspended indefinitely'

02:22 PM CST on Thursday, January 22, 2009

By TERRY MAXON / The Dallas Morning News

tmaxon@dallasnews.com

Southwest Airlines Co. will cut its capacity 4 percent in 2009, and chairman and chief executive Gary Kelly said Southwest’s growth is “suspended indefinitely.”
"I definitely want Southwest Airlines to grow," Kelly told industry analysts and reporters on a conference call. "I believe we will be able to grow, but that is certainly a secondary objective in this kind of an economic environment.

Also Online

Airline Biz Blog: Updates from Southwest Airlines conference call

10/16/2008: Southwest Airlines posts first quarterly loss in 17 years on fuel charge
Company press release

$519M makeover planned at Dallas' Love Field
American Airlines parent loses more than $2 billion in 2008

He discussed Southwest’s new strategy as the Dallas-based carrier announced it lost $56 million in the fourth quarter including special items, giving Southwest its first back-to-back quarterly losses in nearly 18 years.

However, Southwest said it earned $178 million for the full year, continuing its unbroken string of annual profits that began in 1973.

The 2008 results were boosted by $1.3 billion in gains from fuel hedging, sparing Southwest from the huge losses that other carriers have announced or are expected to report.

AMR Corp., parent of American Airlines Inc., said Wednesday it lost $340 million in the fourth quarter and $2.07 billion for the full year. UAL Corp., parent of United Airlines Inc., posted a net loss of $1.03 billion for the fourth quarter and $5.35 billion for the year.

"We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history,” Mr. Kelly said in a prepared statement. In the conference call, he added: "I for one am very glad that 2008 is over.”

Mr. Kelly said Southwest has cut its 2010 delivery of new Boeing 737-700 jets to 10, down from 16 firm orders and six options that it had held. It ended the year with 537 airplanes, and expects to be flying 535 at the end of 2009, with lease returns and retirements to cancel out 13 new deliveries.

Through 2012, Southwest has eliminated firm orders for nine airplanes and options to buy another 32 aircraft. Through 2018, it still has firm orders, options and purchase rights for 220, but the deliveries and potential deliveries are being pushed back.

Mr. Kelly said he was pleased at Southwest’s increased revenues, up 9.7 percent to $2.73 billion in the fourth quarter. However, Southwest like other airlines was hurt by higher jet fuel prices, increasing its operating expenses 12.6 percent to $2.66 billion.

Despite an operating profit of about $70 million, special items – particularly the requirement to reflect the market price of hedging contracts – put the airline in the red for the fourth quarter.
 

satpak77

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SWA's loss is a result of its fuel hedges loosing money when oil dropped to $40 a barrell suddenly after hitting $120 just a few months later.

The loss was not due to poor company management or even the bad economy.

This was a case of many years of buying deer guards for your car because every road has deer on it, and it just so happened this year they bought a deer guard and no deer came out.

Oh well.

SWA is not going anywhere and will be a viable airline for many many years.
 

GoodTimes

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My profit sharing check will reflect a 61 million dollar profit for 4Q 2008.
 

AA767AV8TOR

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AA767 doesn't like to talk about GAAP.

RF

Redflyer65,

I’m fully aware of the fourth quarter $61 million net income. However, the big news of the day is Gary Kelly’s statement that LUV’s growth is “suspended indefinitely.” Their 2009 capacity will be down 4% from 2008.

I’m wondering now if their junior pilots are rethinking their support (or lack thereof) of Age 65?

Welcome to stagnation. It’s something the rest of the legacy carriers know all too well. About all I can say is that we tried to warn them.

AA767AV8TOR
 

ron burgundy

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This was a case of many years of buying deer guards for your car because every road has deer on it, and it just so happened this year they bought a deer guard and no deer came out.

Then it was a good investment. Deer guard installed...no deer seen on the roads. I guess it worked.
 
Last edited:

RDG

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Redflyer65,

I’m fully aware of the fourth quarter $61 million net income. However, the big news of the day is Gary Kelly’s statement that LUV’s growth is “suspended indefinitely.” Their 2009 capacity will be down 4% from 2008.

I’m wondering now if their junior pilots are rethinking their support (or lack thereof) of Age 65?

Welcome to stagnation. It’s something the rest of the legacy carriers know all too well. About all I can say is that we tried to warn them.

AA767AV8TOR

What are you even talking about? Who told you junior SWA pilots supported age 65? Did you just make that up because you're bored or something?
 

N1atEcon

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Well at least this age 65 comment has distracted everyone from my horrible spelling mistake.
 

Reebo

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What are you even talking about? Who told you junior SWA pilots supported age 65? Did you just make that up because you're bored or something?

I don't think he made it up. Look at the results when we had the union vote. Not many F/O's even bother to vote. I know many probationary F/O's were "sold" a bill of goods by quite a few senior Captains, "Welcome to Southwestern Trail ways son, don't worry you just sit over there and I'll tell you what to think":angryfire

Hell, I even had heated discussions with my classmates over age 65.

I told everyone in my class that upgrades would be at least 10 years, I was a 2006 hire, and people laughed at me. What they weren't looking at is that.......

SWA has over 200 "classic" aircraft that will need to be replaced in the next 7 to 10 years.

No airline can continue to hire 600 pilots a year and take delivery of 40 aircraft a year forever.

To have movement you need growth AND retirements.

Now we sit in a economic downturn with NO retirements. This wasn't that hard to predict. :(
 

Sedona16

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Regarding deliveries of new Boeing 737-700s, Southwest has reduced 2010 orders to 10 from 22. In 2011, the carrier will take 20 aircraft, down from 32. In 2012, it will take 23 aircraft, down from 40. Deliveries are expected to be paired with the removal of older aircraft from the fleet. In 2009, Southwest will take 13 new aircraft, while returning or retiring 15 aircraft.
Meanwhile although it has been a longtime beneficiary of an aggressive fuel hedging program, Southwest said Thursday that it has substantially reduced its net fuel hedge position to approximately 10% of estimated usage from 2009 to 2013, as energy prices have collapsed.
Currently, the value of net fuel derivative contracts for 2009 through 2013 reflects a net liability of about $1 billion. "If current prices become future prices, then (we're) going to lose a lot of money," Kelly said. "(But) when the bear market turns, and becomes a bull market for energy, we'll need to have protection in place."
On the cost side, cost per available seat mile excluding fuel rose by 6.9% to 6.86 cents. For the full year, excluding special items, net income was $294 million, which included $1.3 billion of fuel hedging cash settlement gains.
 

maxblast72

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The part of the press release that surprised me was that Southwest tapped a revolving line of credit and performed an aircraft sale/leaseback transaction and still ended up with only $1.8 Billion in cash at the end of 2008. Didn't Southwest have over $4 Billion in cash over the summer of 2008? Did they really burn through that much cash in 6 months?
 
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