Southwest CEO talks mergers

[Whataburger]

Had it not been for fuel hedges, SWA would have reported a loss this past quarter.


Sounds a lot like:
Had it not been for making all that money, SWA would have reported a loss this past quarter.

Exactly what I was saying. If we didnt have money, we wouldn't have any money.

 

[SteelerMan]

The fuel hedges won't run out. They are ongoing. Even though today's prices are sky-high, it's still almost certainly cheaper than it will be 5 years from now.

Remember, they don't have to find cheap fuel. They only need to find it cheaper than what everybody else is paying.

What exactly does SWA have hedged? Have they been hedging oil at 90?

 

[1031Guy]

Buuuuyyyyy Sun Country

 

[Tanker Clown]

Looks like SWA is biding their time watching this consolidation stuff to work itself out. I'm sure they are licking their chops as the legacies abandon the domestic market. This whole thing could work out quite well for SWA and they could be a growth airline again by the end of the year.

p.s. Someone better tell SWA that their fuel hedges are running out. I don't think they have a concept of time. If it weren't for the fine folks of FI, they wouldn't have remembered to continue hedging when their $29/bbl hedges ran out. We can only hope that the people at SW headquarters have an active Flight Info account so they realize that they won't be hedged at $51 forever.

 

[GuppyWN]

Had it not been for fuel hedges, SWA would have reported a loss this past quarter.


Sounds a lot like:
Had it not been for making all that money, SWA would have reported a loss this past quarter.

That's hilarious.

General. West coast markets are down for USAir/Cactus. Their LAS operation is way down to the point they've completely pulled out of DEN.

Gup

 

[50Pesos]

What exactly does SWA have hedged? Have they been hedging oil at 90?

The resaon hedges are bought, is not the intention of making money off of them. The fact that the do make money is a bonus. They are bought to make a fixed number to predict opersting costs.

Lets say SWA hedges at $100 til 2014. Then Some form of hybrid vehicle come out and they are cheap and reliable and everything else and oil drops to $70 a barrel. SWA is not required to use the $100/brl fuel they can just buy off the current market at $70.

Now if oil goes to $120 they still have the right to purchase fuel at $100 and thus giving them fixed numbers to plan on. Operating at $70 just gave them and everyone else more profit.

Hedging will never go away. There is always someone out there willing to sell you insurance again anything. It is called the futures market in the WSJ.

 

[Tanker Clown]

The problem with hedges is that you have to have cash to do it. Or credit. It's too bad that the legacies that hid in BK have not exactly made themselves the best credit risk. So, I'm sure the legacies would love to hedge, but as we can see by their last quarter, the cash is a little hard to come by. As for credit...If I loaned you a dollar and you paid me back a quarter, I wouldn't be exactly jumping for joy to loan you another dollar.

 

[jke406]

If I loaned you a dollar and you paid me back a quarter, I wouldn't be exactly jumping for joy to loan you another dollar.

That's what General Lee would call a "good business model."

 

[radarlove]

Lets say SWA hedges at $100 til 2014. Then Some form of hybrid vehicle come out and they are cheap and reliable and everything else and oil drops to $70 a barrel. SWA is not required to use the $100/brl fuel they can just buy off the current market at $70.

Now if oil goes to $120 they still have the right to purchase fuel at $100 and thus giving them fixed numbers to plan on.

Let me summarize: you have no idea how futures contracts work.

 

[Secret Squirrel]

Let me summarize: you have no idea how futures contracts work.

That is true. SW fuel hedges are heating oil contracts. Jet fuel is not a commodity which is exchanged on the futures market. There are some contracts with private hedge funds but SW seems to be exclusively Heating oil contracts which they exchange for jet fuel. They are basically making money in the futures market. If the price of oil started going down they could potentially still make money by betting on heating or crude oil futures to decline.