SWA posts profit

[B727Driver]

Southwest Air nearly doubles 4th-quarter profit









NEW YORK (MarketWatch) - Southwest Airlines reported Tuesday that fourth-quarter profit almost doubled despite higher jet fuel prices.


The Dallas carrier said earnings were $111 million, or 15 cents a share, up from $57 million, or 7 cents, in the year-earlier period. Revenue rose 9.5% to $2.49 billion
On an adjusted basis, earnings per share totaled 12 cents. Analysts had been expecting 10 cents, according to Thomson Financial.
Southwest also said it would buy back as much as $500 million of its stock under a new plan. For 2007, the airline said it purchased 66 million shares for a total of $1 billion, an average of about $15.15 each.
Just after the open on Wednesday, Southwest shares (LUV:
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"Although we are taking a cautious approach to our overall fleet growth in 2008, we currently plan to grow our [available seat miles] 4% to 5% on a year-over-year basis and remain well-positioned to respond quickly to favorable market opportunities," Chief Executive Gary Kelly said in a statement


I know...hedges, blah blah blah. Wonder if those who live in the northeast don't hedge their own heating oil while their neighbor freezes their a$$ off because they didn't have the cash to do so.
Also, SWA bought back $1.8 billion worth of shares in the last two years. WOW! Nice job guys.

 

[Tanker Clown]

Looks like business as usual. You guys make money and the stock slides like it's a money losing legacy. Maybe SWA should pull a delta and lose some money. Then the next time around just lose less, claim victory, and get the stock up.

 

[737lj]

What is the Street thinking?

Looks like business as usual. You guys make money and the stock slides like it's a money losing legacy. Maybe SWA should pull a delta and lose some money. Then the next time around just lose less, claim victory, and get the stock up.

True. I just don't understand why Wall Street responds in such a weird way to earnings. A few years ago I began trading UPS stock. I bought it, and two or three quarters later they reported a quarterly profit of 1.3 or 1.4 billion dollars. They very narrowly missed earnings estimates though (fraction of a penny per share), and the stock slides $4 or $5 a share. At the same time, UAUA (reorganized United) gains $3 or $4 a share on news that they generated a quarterly profit of 20 some million dollars. The kicker was that their money people had warned of a wide loss. I guess as an invester I would rather have the company I am investing in know within a fraction of a cent what the earnings will be rather than them not know whether they will make or lose money for the quarter. I am obviously no financial genius, and I'm not saying, I'm just saying.

 

[800Dog]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

 

[Tanker Clown]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

Everyone said "Wait until their $27/barell hedges run out" a couple of years ago. SWA get's thrown under the bus because they are hedged and then you got GL on the DAL threads talking about how awsome their $70 mil quarterly loss was.

I have a sneaking feeling that the folks at SWA are aware that their $51/barell hedges don't last forever and they are planning accordingly .

 

[Whataburger]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

I believe you are approx a 8yr FO at DAL. Are you sure you wanna post ignorant flame bait as your company posts yet ANOTHER loss?? Our hedging team does an outstanding job preparing our company for rapidly rising energy costs. If we paid market rates our profits would surley suffer. Thank goodness we are in a financial position to take care of the future company and not have to declare bankruptcy etc. We are mostly and partially hedged thru 2012. Our hedges wont run-out. They might get more expensive, but as long as we pay less than the other airlines, our prices will be cheaper, our tickets will be cheaper, more folks will fly on us, and we will post profits again. We are not immune to anything, but I am certain our company has our best interests in mind. Does Delta have you and your family's future as a priority?

Thank you for caring about our raises. We at the airlines have firm brotherhood, and your care for our financial future proves it. Likewise I am happy for your 1.5% pay raise since DAL did less-sh!ttier than last year.

 

[mach zero]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

For the millionth+ time...

Hedging is an ongoing continuous process @ SWA. There are three people in the finance department at HQ whose sole job is to hedge.

 

[Tanker Clown]

For the millionth+ time...

Hedging is an ongoing continuous process @ SWA. There are three people in the finance department at HQ whose sole job is to hedge.

Yeah, but when those hedges run out you guys are screwed. Or, what if one of those three calls in sick? You guys are doomed. Sarcasm implied.

 

[SWAdude]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

I thought this to be a good explanation of SWA's hedges and how it affects their bottom line.

http://forums.flightinfo.com/showthread.php?p=1436129#post1436129

 

[Big Beer Belly]

True. I just don't understand why Wall Street responds in such a weird way to earnings.

You've got to re-cage your investing gyro 737. Wall St is all about what you're "going to do" for me, NOT what you "did" for me.

My guess is a number of negatives going forward will continue to pressure the stock: the economy teetering on recession, higher fuel costs (per/bbl hedge price increasing + spot market purchases), higher labor costs spread over a less aggressively expanding asset base, GK's own cautionary statements of cost control concerns, increasing competition from LCC's & merged legacies, etc...

Finally, similar to UPS (a 100 yr old company), SWA is a mature airline w/ modest growth going forward. Given the aforementioned, LUV would have to trade at a significant discount to tempt me (and others apparently) to put cash at risk for "modest growth" (many parallels to UPS stock performance).

BBB

 

[B727Driver]

Modest growth in the domestic market. SWA has yet to serve MSP, LGA, ATL and such as well as building DEN. Still untapped is Mexico, Canada and the Carib. This is why GK is open and poised to acquire. Opportunities are out there and when the timing is right, they have the cash to do it.

 

[800Dog]

I believe you are approx a 8yr FO at DAL. Are you sure you wanna post ignorant flame bait as your company posts yet ANOTHER loss?? Our hedging team does an outstanding job preparing our company for rapidly rising energy costs. If we paid market rates our profits would surley suffer. Thank goodness we are in a financial position to take care of the future company and not have to declare bankruptcy etc. We are mostly and partially hedged thru 2012. Our hedges wont run-out. They might get more expensive, but as long as we pay less than the other airlines, our prices will be cheaper, our tickets will be cheaper, more folks will fly on us, and we will post profits again. We are not immune to anything, but I am certain our company has our best interests in mind. Does Delta have you and your family's future as a priority?

Thank you for caring about our raises. We at the airlines have firm brotherhood, and your care for our financial future proves it. Likewise I am happy for your 1.5% pay raise since DAL did less-sh!ttier than last year.

Take a deep breath and reread my post. Nothing but best wishes for LUV and all pilots. I am aware that raises for them could have a positive affect for my group. Just an honest question about LUV's hedges and what their plan is for the future. You sir, have some issues! Good luck.

 

[Whataburger]

Take a deep breath and reread my post. Nothing but best wishes for LUV and all pilots. I am aware that raises for them could have a positive affect for my group. Just an honest question about LUV's hedges and what their plan is for the future. You sir, have some issues! Good luck.

Nope, not buying your BS. You have been on this sight for years, you have seen the hedge threads, certainly you've flown with someone who knows what they are and how they affect your/our airlines. You attempted to spin this thread out of control because because once again we posted a profit. It is a very small attempt at being "cool" as you hide behind your computer. Nice try at playing innocent. Poor you, just an honest question, I luv you guys. Yea ok.

 

[800Dog]

Nope, not buying your BS. You have been on this sight for years, you have seen the hedge threads, certainly you've flown with someone who knows what they are and how they affect your/our airlines. You attempted to spin this thread out of control because because once again we posted a profit. It is a very small attempt at being "cool" as you hide behind your computer. Nice try at playing innocent. Poor you, just an honest question, I luv you guys. Yea ok.

Just reaffirms there is one in every group. Looks like we have found LUVs. Do not forget, Delta made a profit for the year. True, I have been on this site for years. I have no idea what LUVs future hedges look like and what their plan is if and when they run out. Why are you so defensive? Worried what the future may hold? Hope all the other LUV folks have a good year.

 

[Whataburger]

Just reaffirms there is one in every group. Looks like we have found LUVs. Do not forget, Delta made a profit for the year. True, I have been on this site for years. I have no idea what LUVs future hedges look like and what their plan is if and when they run out. Why are you so defensive? Worried what the future may hold? Hope all the other LUV folks have a good year.

If you really wanna know, did you do a search of this website, swa's website, or even the link provided? If so. Thank you for caring.

PS all airline pilots should be worried about their futures at all times. Even the best companies go down in a pile of flames and rubble. All we can do is arm ourselves with knowledge and preparation.

 

[Falconjet]

800Dog: 34 years of profits allows you to gather CASH, which is almost as good as money, giving you the ability to buy fuel hedges at MARKET rates. When you continue to make money, buy airplanes with cash, and have a stellar credit rating, you can use these hedges as a way to fix your future costs for fuel.

YOUR airline would do it too if it had the money or decent enough credit to purchase the hedges. Every airline should be doing it, but most of them are too busy going into and out of bankruptcy, killing employee retirement funds, and basically running the company into the ground to take the time to figure it out.

Makes you wonder how in the world they get paid the big bucks. Also makes you wonder how you don't understand all of this.

FJ

 

[800Dog]

800Dog: 34 years of profits allows you to gather CASH, which is almost as good as money, giving you the ability to buy fuel hedges at MARKET rates. When you continue to make money, buy airplanes with cash, and have a stellar credit rating, you can use these hedges as a way to fix your future costs for fuel.

YOUR airline would do it too if it had the money or decent enough credit to purchase the hedges. Every airline should be doing it, but most of them are too busy going into and out of bankruptcy, killing employee retirement funds, and basically running the company into the ground to take the time to figure it out.

Makes you wonder how in the world they get paid the big bucks. Also makes you wonder how you don't understand all of this.

FJ

I understand fuel hedges sport. Read my posts. My question has yet to be answered. What is LUVs plan going forward? Hedges? New sources of revenue? Acquisitions? Status quo? What an uninformative message board. Its no wonder why so many think pilots are a#######!

 

[Big Beer Belly]

What is LUVs plan going forward? Hedges?

Googled this (info about 8 mos old):

<<
Its forward fuel hedges are dwindling, which means this gets to visit the same barrel session as the other airlines on fuel costs. In 2005 they were sitting pretty with an average cost per gallon of only $1.03, but we are almost in the middle of 2007 and those hedges could only be purchased for so long into the future. Its 2006 total fuel costs rose 48.5% to $1.53 because so many hedges ratcheted higher. According to its last annual report here is the company's fuel hedge for forward years ("approximate" per barrel basis, as of mid-January):


2007 is 95% hedged at $50/barrel;
2008 is 65% hedged at $49/barrel;
2009 is over 50% hedged at $51/barrel;
2010 is over 25% hedged at $63/barrel;
2010 is over is 15% hedged at $64/barrel;
2012 is 15% hedged at $63/barrel.
>>

 

[GuppyWN]

Dog,

WN has always and will always buy hedges. By buying fuel hedges you not only insulate yourself to increasing fuel costs but you also can plan with more certainty what your expenses will be YEARS in the future.

The news not mentioned here is that our 2007 earnings were over $650 MILLION - an all time high. We are in a very good financial position going forward.

Thanks Gary for another great year!

Gup

 

[Falconjet]

Hopefully LUV will keep making money and the pilots will get raises etc. If LUV paid market rates for fuel, would they have made a profit? When do their hedges run out and are they trying to hedge for the future? Thanks.

Sure doesn't sound like it, "sport".

FJ

 

[Whataburger]

Laura Wright. 4Q transcript.

Looking forward to the first quarter of 2008, we have derivative contracts on approximately 75% of our estimated consumption at an average crude equivalent price of $51 a barrel and we have converted the majority of our crude oil positions to refined products.
Based on this hedge position and current market prices, we do not expect the same amount of hedging gains in the first quarter that we had in the fourth quarter of ‘07. As a result we currently expect our first quarter ‘08 economic fuel price to approximate $2 per gallon.
Our premiums associated with the cost of our hedging program were in the same range as last year’s $16 million and this is recorded in other gains and losses. We expect similar premium costs in the first quarter of 2008.
The estimated fair value of our hedge contracts related to future periods was $2.4 billion at December 31 and looking forward, our hedging position is as follows: in 2008 we are over 70% hedged at approximately $51 a barrel; in 2009 we’re over 55% hedged at approximately $51.00 a barrel; 2010 is nearly 30% hedged at $63.00 a barrel and 2011 and 2012 are over 15% hedged at approximately $64 and $63 respectively.