Southwest - Profit!!!

[DH2WN]

Blah blah blah... we are kicking a$$ and taking names. Sorry that upsets some of you older, wiser guys. I do my part everyday I VJA for a trip, helping out. You must fly 60 trips a month!

So is Continental and American without a hedge. Actually they made more money than we did without the hedge.

 

[YourPilotFriend]

It's a statement such as this that shows me why so many people don't understand the Southwest Airlines Business strategy.

You couldn't be further from the truth.

What is their business strategy then? People will fly SWA if it costs more than a legacy carrier, I think not.

 

[Falcon Jet 1]

So is Continental and American without a hedge. Actually they made more money than we did without the hedge.

Yeah but what are the percentages Gross Vs. net profit. Kinda like saying that we made more than jet blue who has about 20% of our revenue. Stick with flying airplanes. And for all of you who say the pilots of swa will have to take paycuts you need to look at casm for swa pilots compared to everyone else. Even after managment stuck it to all of you our costs per mile are still lower even though our hourly rate is significantly higher due to productivity.

 

[SWA/FO]

So is Continental and American without a hedge. Actually they made more money than we did without the hedge.

So, I don't care about CAL or AA... I care about Southwest Airlines. Those two airlines have more planes then us. Maybe they should have a hedge, then they would make more! Maybe if they paid their employees what they use to they might have lost money.

 

[Dangerkitty]

What is their business strategy then? People will fly SWA if it costs more than a legacy carrier, I think not.

A couple of points:

1. SWA is a point to point carrier. The Legacies are Hub and Spoke. Comparing the two is like comparing apples and oranges in many cases.

2. On the routes that SWA competes directly with Legacies the Legacies are chomping at the bit for SWA to raise fares (so that the Legacies can too). However, the goal of the SWA business model is to keep fares as low as possible (even if that means making less of a profit). If you ever read Nuts you will see that.

3. Ever heard of the "Southwest Effect"?

 

[AA767AV8TOR]

Directly From the Dallas Morning News 07/21/06:

Southwest said it earned $333 million, or 40 cents a share, in the three months ended June 30.

That compares with earnings of $144 million, or 18 cents, in the same quarter of 2005.

The earnings bested Southwest's previous record of $246 million, set in the second quarter of 2003.

Excluding gains from accounting changes, Southwest earned $273 million last quarter, or 33 cents a share, above the 26-cent consensus estimate from analysts surveyed by Thomson Financial.

Southwest's aggressive fuel hedging program earned the carrier $198 million during the quarter.
Even so, its adjusted fuel costs increased from $330 million to $518 million.

Southwest senior vice president and chief financial officer Laura Wright said the carrier was 77 percent hedged in the second quarter at $36 a barrel – about half the current market price.

In the third quarter, Southwest has 74 percent of its needs hedged at the same price.


How it is reads, at least from the Dallas Morning News, is that Southwest would have netted $75 million for the second quarter ($273 - $198) without their fuel hedging program. Unless Southwest is using fuzzy math, the $273 net includes the $198 earned from the fuel hedging program. You do not add both numbers together.

Though hedged in 2008, I believe the bulk of Southwest’s hedges run out in 2007. The latest numbers I have for 2007 is 60% hedged at $38.

Still a solid quarter given the current environment. It’s great to see the industry taking a turn for the better.

AA767AV8TOR

 

[YourPilotFriend]

A couple of points:

1. SWA is a point to point carrier. The Legacies are Hub and Spoke. Comparing the two is like comparing apples and oranges in many cases.

2. On the routes that SWA competes directly with Legacies the Legacies are chomping at the bit for SWA to raise fares (so that the Legacies can too). However, the goal of the SWA business model is to keep fares as low as possible (even if that means making less of a profit). If you ever read Nuts you will see that.

3. Ever heard of the "Southwest Effect"?

1. SWA will probably become hub and spoke with international routes.

2. Even at SWA break even point legacies can now operate at a profit on those routes. If there is a way to make more profit that option will be explored i.e. regional jets.

3. At the current cost of gas the southwest effect is dead.

 

[Dangerkitty]

1. SWA will probably become hub and spoke with international routes.

You are so wrong it is laughable. Do a little research and you will see that SWA will never become a Hub and Spoke model. Have you ever even read much about SWA? Or is this just you guessing?

2. Even at SWA break even point legacies can now operate at a profit on those routes. If there is a way to make more profit that option will be explored i.e. regional jets.

Wrong, wrong, wrong again. SWA still has some of the lowest operating costs in the industry. Still lower than the Legacies. Furthermore, Regional Jets are way too expensive to operate. SWA wont buy them.

3. At the current cost of gas the southwest effect is dead.

Show me the proof. I bet you can't.

 

[Bake]

1. SWA will probably become hub and spoke with international routes.

2. Even at SWA break even point legacies can now operate at a profit on those routes. If there is a way to make more profit that option will be explored i.e. regional jets.

3. At the current cost of gas the southwest effect is dead.

Hello Friend, Here's what I'm thinking. SWA has 3B in cash or equivalents. 2.9B in debt which leaves approx 1.1 B in cash. (by the way, these are tx words and figures im using here. Might not make much sense to a savvy investor like yourself).

Lets just assume that everything remains the same or worse at SWA. We quit paying cash for airplanes, sims, real estate, fuel hedging, and we quit making money. Let's say for starters that we lose money 2 out of every 4 quarters... Given everything, SWA should last approx 6 years. Now we start getting into too much debt (probably like yourself). Now we borrow, sell, beg whatever for another year. OH Crap@@@@ now it is bankruptcy. Well this is where we get another life. We get to pass go, collect 200 dollars and get a "Get outta jail free Card" .Well Shiat!!!! 10 years have passed. Where will you be??? Moaning and groaning about SWA getting a free ride in BK court??? Probably. See, you are not a thinker but a person that likes to make excuses against the successful. You like to complain to everyone else why you are not successful. It's because you are a loser, personally and professionally. I think in your lifetime you will not see SWA falter however your children (if you are capable of having any) might.http://forums.flightinfo.com/images/icons/icon27.gif

 

[AA767AV8TOR]

I think in your lifetime you will not see SWA falter however your children (if you are capable of having any) might.http://forums.flightinfo.com/images/icons/icon27.gif

Bake,

I wish nothing but success to Southwest. Heck, it gives the rest of us something to aspire too. But I caution against too much optimism in this industry and thinking you are bullet proof. At American, we were riding the same high horse in 1999 and 2000. All it takes is a terrorist hit, an aircraft accident; throw in some bad management decisions, all of which could turn your world upside down.

AA767AV8TOR