SWA Beats the Street

[Secret Squirrel]

Your example is totally wrong because you never bought the fuel, You bought the right to take delivery at a future date for a certain price. What you fail to understand is it is only a GAAP issue until you have to actually take REAL CASH to get out from under your hedge. They have hedges at 60-70 dollar a barrel. They are selling fuel now for 40 dollars a barrel. At some point there is a guy that SWA agreed to buy fuel from at $60 a barrel. He is knocking at the door right now. You are paying $40 for the fuel, and giving $20 to the guy you gambled with. If your example was correct, there would have been no effect on your cash. SWA is burning through a ton of cash to try to get out from under these contracts.

 

[momalley81]

Your example is totally wrong because you never bought the fuel, You bought the right to take delivery at a future date for a certain price. What you fail to understand is it is only a GAAP issue until you have to actually take REAL CASH to get out from under your hedge. They have hedges at 60-70 dollar a barrel. They are selling fuel now for 40 dollars a barrel. At some point there is a guy that SWA agreed to buy fuel from at $60 a barrel. He is knocking at the door right now. You are paying $40 for the fuel, and giving $20 to the guy you gambled with. If your example was correct, there would have been no effect on your cash. SWA is burning through a ton of cash to try to get out from under these contracts.

Exactly, yet whether we pay $60 a barrel while oil is $147 OR we pay $40 a barrel and then pay $20 to the fuel hedge guy our estimated fixed costs are still the same. In both scenarios we are still paying $60 a barrel.

The FIXED cost for fuel is the same.

Yet the VALUE of the hedges is completely different.

 

[Secret Squirrel]

Yes, but now the guy is at the door, he wants his money, and you gave him cash. It was all play money created by the Mark to Market accounting practice brought to you because of the $hitbags at Enron. You keep making it sound like it is a paper loss. They lost the money it took to set up the contract, which was considerable, and they are paying at least 50% more FIXED COST for gas then everybody else. It is causing REAL CASH to leave their account. And they are spending even more money to try to buy their way out of future contracts. SWA is a great company, and their fuel hedge program has been a huge asset to the company for many years. This was a perfect storm that has hurt them, make no mistake about that.

 

[Benjamin Dover]

Have you got a source that says the operational profit expectation was a nickle?

Not to pour water on your flame dude, but wall street expectation excluded special items. Plenty of sources if you actually chose to read a full article. One such full story is attached, but here is the part you doubt is true:

Without the charges, however, Southwest would have earned $61 million, or 8 cents per share, which beat expectations of analysts surveyed by Thomson Reuters, who forecast a gain of 5 cents per share excluding special items


Seems pretty clear to me.

http://finance.yahoo.com/news/Southwest-Airlines-reports-4Q-apf-14132246.html

 

[bravodude]

Plus we didn't take the bath I expected on the hedges.

Gup

yo yo what up!

 

[Benjamin Dover]

Andy, Andy ??

 

[Andy Neill]

Andy, Andy ??

Yes. Yes. I maintain that when the dust settles LUV will record a surprise on their earnings of a negative $0.13 instead of a positive $0.03. OK?

I have great respect for SWA as an organization and regret that you took my posts as flame material. It's great that they have an operational profit. Good on 'em.

 

[bravodude]

Yes, but now the guy is at the door, he wants his money, and you gave him cash. It was all play money created by the Mark to Market accounting practice brought to you because of the $hitbags at Enron. You keep making it sound like it is a paper loss. They lost the money it took to set up the contract, which was considerable, and they are paying at least 50% more FIXED COST for gas then everybody else. It is causing REAL CASH to leave their account. And they are spending even more money to try to buy their way out of future contracts. SWA is a great company, and their fuel hedge program has been a huge asset to the company for many years. This was a perfect storm that has hurt them, make no mistake about that.

Actually if you would listen to the conference call before spreading lies you would have heard that we are paying 10-12 cents a gallon more not 50%.

 

[RedDogC130]

I still get my profit sharing so that is good.

 

[Andy Neill]

Source? How about common sense. The stock is currently up 16.23%. Does that sound like a company that just badly missed earning expectations?

If you are going to use price action as an indicator, tell me what Friday's 18.45% loss on higher volume than Thursday's meant. At $8.00 it is 4% below Wednesday's close.

 

[vikesfanIV]

If you are going to use price action as an indicator, tell me what Friday's 18.45% loss on higher volume than Thursday's meant. At $8.00 it is 4% below Wednesday's close.

Thursday the company beat earnings and went up. Friday the stock got downgraded and went down. Fairly simple actually.

 

[Kugelblitz]

Could someone please start a website for all the WN pilots to be able to congratulate themselves and endlessly kiss the posterior of their company.

I am starting to get sick......must be jealousy again I suppose.

 

[Andy Neill]

Thursday the company beat earnings and went up. Friday the stock got downgraded and went down. Fairly simple actually.

...and the stock got downgraded because they beat earnings estimates?

 

[GuppyWN]

Could someone please start a website for all the WN pilots to be able to congratulate themselves and endlessly kiss the posterior of their company.

I am starting to get sick......must be jealousy again I suppose.

Won't find me on that website. Gary Kelly is losing the goodwill of more and more pilots every day. The man has lied to us about codeshare, started selling WestJet tickets on southwest.com after saying he wouldn't and just last Tuesday told the union that we would not meet growth targets that allowed limited codesharing.

I'm sure one of my bro's will come on here and tell you I'm a rebel or out of my mind. Maybe I am but the rumble is getting too loud for Gary to not hear it.

My .02,
Gup

 

[Flyarcticcat]

Gary needs to go!!

Won't find me on that website. Gary Kelly is losing the goodwill of more and more pilots every day. The man has lied to us about codeshare, started selling WestJet tickets on southwest.com after saying he wouldn't and just last Tuesday told the union that we would not meet growth targets that allowed limited codesharing.

I'm sure one of my bro's will come on here and tell you I'm a rebel or out of my mind. Maybe I am but the rumble is getting too loud for Gary to not hear it.

My .02,
Gup

I think you are right on. I am feed up with the lies and hope we not only are heard but the BOD decides it is time to let Gary go. He has got to go because of the goodwill he is killing and not growing this company. The stock is now half of what it should be. Someone give him a kicktail sticker out the door.

 

[rajflyboy]

Excuses Excuses

SWA took another loss. End of Story!

Whats your excuse for USAIR Making a Profit in the 4th Quarter of 08??

Turns out Philly wasnt such a big deal after all.

 

[Secret Squirrel]

What do you know that the rest of us don't. The street is talking about a quarter billion dollar loss for US Airways for the 4th quarter of 08?

 

[spinup]

Taken from http://seekingalpha.com/article/116295-how-is-southwest-airlines-performing?source=yahoo

Southwest Airlines' (LUV) Q3 & Q4 (net) losses are attributed to fuel hedging/derivative "Special Items".

But, when you look further back, the profits (net) for several quarters are not attributed to the fuel savings due to the same hedging derivatives. Is this called creative accounting or creative reporting?

(Note: Without the fuel cost savings from those fuel hedging derivatives, SWA would have lost money for the past 2-3 years.)

Significant highlights from the Southwest Airlines press release:

Recent load factors are at or near the industries lowest and have declined to 2005 levels while under performing industry competitors.

Total Assets at $14.3 billion is down by $2.5 billion y/y and down by an astounding $9 billion when compared to just 6 months ago.

LT Debt increased 71% y/y to $3.5 billion. This is the highest LT Debt ever recorded by SWA as a percentage of other metrics.

Cash & equivalents dropped by 35% to $1.8 billion. Cash and equivalent was recorded as $5.8 billion ending Q2 2008. SWA's current cash/equivalent position is at the lowest ratio in many years when compared to other financial metrics.

Air Traffic Liability dropped by 24% to $963 million. This is the largest q/q reduction I can find.

 

[dooork]

Southwest Air Rises Most Since 1980 After Paring Expansion Plan
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By Mary Schlangenstein
Jan. 22 (Bloomberg) -- Southwest Airlines Co., the largest discount carrier, rose the most since at least 1980 after saying it will cut seating capacity this year as the recession slows travel demand.
The plan for a 4 percent reduction in flying snaps a 20- year expansion streak in which the Dallas-based airline relied on lower prices to win customers while full-fare carriers struggled. Southwest also delayed some 2010 jet deliveries.
“The best news is they are planning a capacity cut,” said Ray Neidl, a Calyon Securities analyst in New York. “That’s very wise in this environment. They are planning for a slow recovery, which is what they should be doing.” He rates Southwest as “underperform.”
Southwest disclosed the move as it posted a second straight net loss on fuel costs. Excluding those expenses, it had a fourth-quarter profit of 8 cents a share, beating the 5-cent average estimate of 14 analysts surveyed by Bloomberg.
The net loss was $56 million, or 8 cents a share, compared with a year-earlier profit of $111 million, or 15 cents, Southwest said. The carrier’s third-quarter net loss ended a 17- year profit streak.
“Now is not the time to be growing,” Chief Executive Officer Gary Kelly said in an interview. “Passenger traffic is declining. We’re slowing our growth at just the right time.”
Shares Advance
Southwest rose $1.30, or 16 percent, to $9.68 at 10:33 a.m. in New York Stock Exchange composite trading. The shares touched $9.83 earlier for a 17 percent advance, the biggest intraday gain in Bloomberg data dating to 1980. The stock declined 30 percent in the past 12 months through yesterday.
Southwest’s results mean that all of the nine biggest U.S. airlines probably will report net losses for last quarter as consumers pare travel plans and business passengers move from premium seats to coach.
American Airlines parent AMR Corp. and United Airlines parent UAL Corp., the second- and third-largest U.S. carriers, both announced losses yesterday and said 2009 demand was weakening.
“We have seen notable softness in post-January bookings,” Kelly said in a statement.
Southwest’s run of quarterly profits was driven in part by its ability to trim costs with fuel bought in advance. Those bets soured after jet fuel fell 65 percent in 2008’s second half, forcing the airline to put up cash collateral for the contracts and spurring the third- and fourth-quarter net losses.
In December, Southwest reduced most of its so-called hedges, slashing the amount of cash it had to pay by $600 million to $230 million.
“We’ve made dramatic adjustments to our fuel hedging to take advantage of collapsing prices,” Kelly said. “Prices are going to be soft for quite some time.”
Fourth-quarter costs related to fuel hedging were $117 million, Southwest said.
Southwest last reduced flying on a year-over-year basis in 1988, when it shrank by 0.1 percent. Airlines measure capacity in available seat miles, or the number of seats on their planes multiplied by the number of miles flown.
To contact the reporter on this story: Mary Schlangenstein in Dallas at [email protected]
Last Updated: January 22, 2009 11:01 EST

I'm talking in general.....they have been around 10-15 dollars forever.

 

[scoreboardII]

SWA beat the street by selling off jets.