SWA "dings" up 321M profit!

[lowecur]

vikesfanIV:

Thanks for correcting my numbers. Couldn't edit my previous post to make the corrections myself.

You clarified my earlier point: fuel costs will increase dramatically as hedges get more expensive to be offset by other cost cutting and revenue initiatives. The question is whether the aformentioned initiatives will offset the increased costs to generate adequate profit.

Newf

It's my understanding oil futures contracts are going for around $100bbl in Dec 08. It's hard to predict the future but I think Gary Kelly is rightfully concerned. This article in USA Today says SWA needs to raise revenue by 8% to break even in the 4th Q. Now that's figuring oil at todays prices. Jaime Baker doesn't think they can do it, and Kelly admits SWA may not continue it's long streak of profitable Quarters.

It's my guess if we make it through Hurricane season without a blip and the mideast stays calm, 2009 will bring us $70 bbl. Just plug in the numbers folks, and you'll see how artificial profits can turn and bite you.

imp:​

http://www.usatoday.com/money/industries/travel/2008-07-24-airline-outlook-losses_N.htm?csp=N008

 

[AA767AV8TOR]

Indeed, LUV has won the lotto with its fuel hedges. And now for the rest of the story:

Southwest Airlines reports $321M profit, helped by fuel hedging

09:55 PM CDT on Thursday, July 24, 2008
By TERRY MAXON / The Dallas Morning News

[email protected]

As an airline, Southwest Airlines Co. is losing money. As an energy trader, it's doing just fine.


Buoyed by more than $500 million in gains from fuel hedging contracts, Southwest reported net income Thursday of $321 million in the second quarter. Without the fuel hedges, the Dallas-based carrier would have lost $134 million.


Speaking to analysts and reporters, Southwest chairman and chief executive Gary Kelly acknowledged that the airline is under pressure, with unit costs up 10.5 percent in the second quarter because of higher fuel prices.

We're going to need strong revenue growth from now on with those kind of unit cost increases to avoid having an unprofitable quarter," he said.

I can certainly tell you that nobody at Southwest Airlines intends to lose money in any quarter," Mr. Kelly said. "But I can't guarantee you that won't be the case."

Excluding special items but including the fuel costs, Southwest earned $121 million, or 16 cents a share, on $2.87 billion in revenue in the second quarter, compared with $278 million, or 36 cents a share, on revenue of $2.58 billion in the second quarter of 2007.


The consensus estimate from analysts was for a profit of 12 cents a share.


Although Southwest exceeded estimates, its shares declined 98 cents, or 6.2 percent, to close at $14.90 Thursday. However, its decline was the smallest among the nation's 10 largest airlines; the other nine saw their share prices drop an average of nearly 15 percent.


Southwest has benefited by hedging its fuel costs through financial contracts that lock in the price for a percentage of its fuel years in advance.

The airline will continue to be protected by fuel hedges in coming quarters, but the benefit will decline as the hedged prices increase and the amount of fuel hedged declines.


In fourth quarter 2008, Southwest has hedged about 80 percent of its fuel usage at the crude-oil equivalent price of $58 per barrel. That declines to 70 percent at $66 in 2009 and 40 percent at $81 in 2010.


In the short term, Southwest may be helped as other carriers reduce capacity in the fall and winter.

Southwest chief financial officer Laura Wright said other carriers have reduced their capacity 15 percent in markets where they compete with Southwest.


That should be a benefit, Ms. Wright and Mr. Kelly said. "All things being equal, our prospects are very good, based on history, that we'll pick up a significant amount of revenue with that kind of a competitive cutback. But things are never equal," Mr. Kelly said.


One industry analyst, Jamie Baker of J.P. Morgan, raised prospects for a fourth-quarter loss for Southwest, calling it "still likely."


Assuming Southwest averages paying $2.55 a gallon for jet fuel even with its fuel hedges, the airline will need to increase its unit revenue by 8 percent or more to avoid a loss, Mr. Baker said.


"Not impossible, in our view, but this likely represents the best-case outcome for Q4," he wrote in a report Thursday.


Analyst Ray Neidl of Calyon Securities said that Southwest faces a "very delicate balancing act" as it tries to raise fares without chasing away too many customers.

 

[rajflyboy]

You might be making dough.....

But at the end of the day....

You are still a "Pay for Training" company

 

[Mach 80]

>>>But at the end of the day....

You are still a "Pay for Training" company<<<

At the end of the day, deduct the cost of the type rating in a first year pilot's pay, and he STILL makes more than other first year pilots at other airlines....and the chart really goes up in the following years. And SWA pays during their 4 or 5 weeks of training AND pays for the hotel rooms. Considering all that, a 737 type is a small blip. It's like some airlines airlines requiring an ATP....SWA just goes one step further. Certainly not pay for training since SWA is paying the new guy during his 4 or 5 weeks of initial training.

 

[rajflyboy]

>>>But at the end of the day....

You are still a "Pay for Training" company<<<

At the end of the day, deduct the cost of the type rating in a first year pilot's pay, and he STILL makes more than other first year pilots at other airlines....and the chart really goes up in the following years. And SWA pays during their 4 or 5 weeks of training AND pays for the hotel rooms. Considering all that, a 737 type is a small blip. It's like some airlines airlines requiring an ATP....SWA just goes one step further. Certainly not pay for training since SWA is paying the new guy during his 4 or 5 weeks of initial training.

To be honest. I was just kidding with this post. I will also be honest and say that I will NEVER believe in paying for your job as a pilot (expecially BEFORE you know you have the job).

 

[MILPILOT17]

You might be making dough.....

But at the end of the day....

You are still a "Pay for Training" company

What's the point? I'm really trying to figure out this whole pay for training deal! Are you really that unhappy with your life or is there some point you're trying to make, but don't know the English language well enough to put it into words? If someone wishes to pay for training in order to land a job with the best damn company in the industry why would you have a problem with that? Unless you grew up with a silver spoon in your mouth then I would guess you've paid for training at some point in your life? Just trying to understand this shallow point of view?

 

[rajflyboy]

What's the point? I'm really trying to figure out this whole pay for training deal! Are you really that unhappy with your life or is there some point you're trying to make, but don't know the English language well enough to put it into words? If someone wishes to pay for training in order to land a job with the best damn company in the industry why would you have a problem with that? Unless you grew up with a silver spoon in your mouth then I would guess you've paid for training at some point in your life? Just trying to understand this shallow point of view?

Thanks for proving my point!

Just what I thought with you "Pay for Training" guys!

 

[rajflyboy]

What's the point? I'm really trying to figure out this whole pay for training deal! Are you really that unhappy with your life or is there some point you're trying to make, but don't know the English language well enough to put it into words? If someone wishes to pay for training in order to land a job with the best damn company in the industry why would you have a problem with that? Unless you grew up with a silver spoon in your mouth then I would guess you've paid for training at some point in your life? Just trying to understand this shallow point of view?

I see your background. Looks like the american taxpayer paid for your tickets. You have probably never seen the inside of a C-152 or a C-172. You have paid the due's I see.

 

[rajflyboy]

Nothing Like Stopping a Southwest Love Fest Thread in its Tracks!

 

[Bake]

Yep, you stopped it alright. All us SWA folks are going to hang our heads low and cry in our beer. You did it, single handed. You stopped us, be proud. What a stud you are. Gotta go now, your wife's calling.