Southwest Airlines Reports Loss

[lowecur]

Lowecur,
We are still paying the fuel guy market prices. If oil drops to $30 (below hedge) were still better off operationally. GAAP might further skew the true picture, however. Keep in mind that our hedges caused us to show a "loss" but were still well above oil prices. If oil were to drop to 50 for Q1 you might see another "loss". If Q2 it rose to 60 (still below hedge) GAAP would show a gain because its relative to the last quarter, not the original purchase price. The new reporting rules in GAAP really dont make sense if you ask me.

If your house gains or loses 50k in a quarter you dont factor that into your personal net income do you? That is essentially what is going on here.

My figuring was dependent on Gary holding on to his positions. Since it sounds like they are unwinding them ahead of the curve, then the exposure to write offs will go with it. He just needs to be far enough ahead of the curve not to take any big losses. We'll just have to see how that all plays out in the coming 12 months.

It will be interesting if some of the other carriers try and set the market in some of your key cities, as their biz model and expenses may give them an advantage with oil below $80. That could limit WN from increasing the revenue it will need to stay firmly in the black.

That being said, has anyone noticed the divergence in stock price between AAI and JBLU? I think JBLU faces some interesting decisions to refinance debt as it comes due in 2009 and beyond. DL may get their wish to buy them.

imp: ​

 

[Whine Lover]

"An up and coming airline can't have industry leading wages."

Maybe not...but they can have Industry Standard wages.

Funny, but start-ups manage to pay Industry Standard rates for airframes, insurance, parts, spares, gates, infrastructure, taxes, fees etc.

Yes, they negotiate breaks here and there and receive some incentives now and again...But Pilots are the ONLY ones who will fall for the ridiculous argument that 50% or less is what is necessary to accept as a wage to "help" the airline get started or, in the case of harsh economic times, to survive.

YKMKR

 

[vixin]

Whine,

I agree the blame goes to the pilots that will work for sunstandard wages, not the company offering them.

 

[Lowpayisgreat]

Not ROTC or ZOO, Started out working on jets as an enlisted guy. Add to that I went to school in Missouri so thats why I suck at writing. Also, my brain works faster then my fingers. I got furloughed in 2002 and did a civilian job for 3 years and did very well and moved up quick. Pilots always undersell themselves. We are mostly type A, take charge guys, who want to get the job done. The non-flying world loves that, and believe me, there's not alot of people like that out there. Its not hard, you just have to apply yourself like you did when we were all learning to fly. Sorry for the spelling corrections, but very limited time to be on here with two jobs (UPS and Guard) and two kids. Take care

 

[jmreii]

Remember that the "Jerry Springer" crowd will not be flying when air fare's cost more than Greyhound.

Nobody else will be flying either since they are too busy trying to hold on to the rest of their life along with the tiddy bowl man and the crap that in the toilet.

 

[Whataburger]

Whine,

I agree the blame goes to the pilots that will work for sunstandard wages, not the company offering them.

What and Who decides standard is the million dollar question.
Who decides standard for teacher, doctors, lawyers, plumbers, fire fighters, engineers, etc. Isn't it basically economically driven? UPS and FedEx drivers can make tons of cash for not flying much because those companies SEEM damn near recission proof.

 

[328dude]

I sure as heck thought this was an anonymous web board. If you want to throw your name out there, go ahead, nobody is stopping you. As far as what I will do, I will enjoy this board and not get so frustrated, like you do. Have a great day with those 25 minute turns. I won't be doing that. And, I look FANTASTIC in the mirror. Going to Rio a lot gives me a great tan.

Bye Bye--General Lee

Whats more interesting is the fact you have played this game for so long, that it has grown so far out of proportion for you to acknowlegde your real position at Delta. It's not my job to call you out or point out your real position within Delta, but some of us know the real truth and what you do, and as you like to protray, flying is not one of them.

Have fun with your fantasy world. Looking forward to the snappy comment.

 

[Lowpayisgreat]

Well don't be so fast. Lets just see what happens in the first qt from both Fed Ex and UPS. I'm a UPS guys and I bet they will try to furlough around 100 guys and several hundred from Fred Ex. No- one is recession proof if it get as bad as some say it will. Hopefully I'm wrong, but we are not bullet proof just alittle more so then the pax side

 

[maxblast72]

Well, you forgot the not-so-small fact that we pretty much set the fares where we fly. I don't recall any fare increase that WE initiated that didn't stick, do you?

Are you sure that Southwest has as much pricing power as you say? Monthly year over year load factor comparisons are down 5-6% at Southwest. Those numbers seem to indicate that Southwest has raised prices alot already or the economy is really starting to slow, neither of which lead to alot of pricing power.

Did Gary Kelly set ticket prices low intentionally to reduce Southwest's 3rd quarter's operating profit when compared to 2007?

 

[The Victors]

Southwest's average fare was up to $125 (about 18%) for the quarter but their load factor dropped over 5% while most other airlines load factors were down less than 2%. RASM was up about 10% overall.

Southwest is probably reaching that price point were they are going to reduce demand. Should be interesting going forward. With 75% of 2009 fuel hedged at $73/barrel, should be a pretty even playing field across the industry if fuel remain between $60-$80/barrel.

How exactly is it a "level playing field" again when swa must compete with companies like airtran who's pilots accept work at half price?

 

[maxblast72]

How exactly is it a "level playing field" again when swa must compete with companies like airtran who's pilots accept work at half price?

How was Southwest's pay compared to the rest of the industry in 1986 (Southwest 15 years of existence point)?

We have been working on a new contract for over 4 years now. Airtran Captain pay isn't half of Southwest's Captain pay. Airtran FO pay is crappy but when Contract 2001 was signed, everyone had a shot of upgrading under 2 years so FO pay wasn't big on anyones priority list. I think FO pay will be alot higher up the list during the these negotiations, and is one of the big reason our TA was shot down last summer.

 

[MINIME]

How exactly is it a "level playing field" again when swa must compete with companies like airtran who's pilots accept work at half price?

Common on now! I'm one of the biggest admirers of LUV. But lets not start comparisons about what is fair or unfair when dealing with LUV strategies. The hedges while a proactive measure on the part of LUV management, did not make for a fair playing field for the rest of the industry. Especially the financially weak like Frontier. Roll with the punches, just like everybody else has during not so optimum times.

 

[momalley81]

"An up and coming airline can't have industry leading wages."

Maybe not...but they can have Industry Standard wages.

Funny, but start-ups manage to pay Industry Standard rates for airframes, insurance, parts, spares, gates, infrastructure, taxes, fees etc.

Yes, they negotiate breaks here and there and receive some incentives now and again...But Pilots are the ONLY ones who will fall for the ridiculous argument that 50% or less is what is necessary to accept as a wage to "help" the airline get started or, in the case of harsh economic times, to survive.

YKMKR

There is one flaw with your argument.

Except for the late 90's SWA pilots have always been paid very close to industry standard pay.

Maybe some SWA pilots here smarter than me can post the SWA pilots wage rate ajusted for CPI from 1972 to present that SWAPA put out.

I was startled to see that SWA pilots have been very close to Industry Standard pay since WN's inception.

 

[ASADFW7]

The field is what it is, unless we go to socialism it is a free market.

 

[BrokenWing]

You didn't tell us anything.

SWA made an operating profit of $69 million.

Because the hedges are worth less now (about half)than they were about 3-4 months ago a charge was incurred.

This has nothing to do with SW not being able to make money in this environment without their hedges. How you came up with that is beyond me.

So just how much would SWA have made if they didn't have hedges? I read that they made 480 million off the hedges so I don't see how you can eliminate that and still show an operating profit.

 

[4 Fan Trashcan]

http://blogsouthwest.com/blog/mind-gaap-understanding-our-financial-results

Maybe this'll help.

 

[momalley81]

So just how much would SWA have made if they didn't have hedges? I read that they made 480 million off the hedges so I don't see how you can eliminate that and still show an operating profit.

I take it that you are not very bright.

 

[YourPilotFriend]

The hedges are meaningless, it's the right sizing of the company to compensate for the decrease in demand. SW was growing when it should have been shrinking. This is exactly what led the other airlines into bankruptcy. If the status quo remains, my 2009ish SW bankruptcy prediction made in 2006 still stands.

 

[FlyinGuy]

Friend....you show your ignorance because you do not realize how much cash and assets that SWA has. Many will fold before SWA goes down the Ch 11 or 7 road. That said, SWA must remain smart and proactive or we will have problems because no one is immune to it!

 

[YourPilotFriend]

Friend....you show your ignorance because you do not realize how much cash and assets that SWA has. Many will fold before SWA goes down the Ch 11 or 7 road. That said, SWA must remain smart and proactive or we will have problems because no one is immune to it!

Don't get me wrong, the other airlines are in way worse shape. However, I don't see how SW will be able to cut costs without selling off a major portion of the airline, or going into bankruptcy. This is reality, demand for air travel is going down. Ticket sales into next year are already down 50% in some sectors.