SWA raises fares!

[canyonblue]

Another reason not to hire the Kolonels ffrom the luke mafia, beacause they can only be told what to do , and not think outside the box.

I thought it was kernels?

 

[Andy]

The point is they would have made money without the hedges.

Why can't you grasp this simple fact?

And for that matter, why all the negativity towards SWA??

Did you find my acknowledement that they would have made money without the hedges too obfuscated? Dude, 770 is larger than 600.

You found my post negative? I complimented Southwest's balance sheet and you consider that post to be a negative.

Way too many threads on this also. But to sum it up...they eventually go to zero. You are trying real hard to find where SWA is going to start struggling like UAL.

I understand that they eventually go to zero (around 2010) and that there are other threads on the subject. I was being lazy and figured that you or someone else had the data at their fingertips.
I made it perfectly clear in my first post in this thread that Southwest is in control of airline ticket pricing. I was merely curious so that I could get an idea of when we could expect to see another ticket price increase.
I have also previously posted that Southwest has a very strong financial position (low debt, etc) and has great management with a deep talent pool. Is that also negativity toward Southwest?

 

[Andy]

Andy,

Your a bit on the naive side. A little angry also.

Best of luck getting recalled as soon as possible.

I've read other posts by DH2WN. He may be a bit jaded after the 'going your own way' thing at FLYi. However, I'm fairly certain that he flies for Southwest.

Angry? Maybe. A bit of a pot stirrer. I don't always follow mainstream thinking. I also enjoy a good debate. And finally, I have far too much time on my hands as I recuperate from knee surgery. I really need to get back to work before I go postal.

As for the recall thingy, UAL should be calling me by fall. I'll take mil leave and work in the reserves for a couple of years (I should be able to string together orders for that long). It's gotten to the point where the military pays a lot better than United, even on third year pay and no aviation bonus.

 

[Andy]

How much does SWA need to adjust for less hedging? It depends on whether you quote current fleet size, estimated average fleet size, or fleet size at the end of the year. With 33 airplanes coming in '06 these assumptions vary quite a bit. You also have to deal with assumptions on selling fuel/oil contracts, futures, hedges or whatever they are calling them. They vary in price almost daily and the company sells a portion of them every once in awhile. You can't estimate with certainty their combined value at the end of the year.

Yeah, I know it's a jello thing. I was just trying to get a feel for future fare increases.

 

[Bavarian Chef]

Your weird. I don't even know if this guy works for us. If he does, then he's a probationary pilot with quite the attitude. Why do you find it wrong to disagree with someone from your own airline?? Sounds like a dictatorship to me.



Our CEO said we would have made a profit last year without the hedges. Believe what you want. There have been plenty of threads on this already. So many look at this problem with a straight line. There are corporate tax and profit sharing implications that make you completely wrong on this one.




No tricks needed. Why would our CEO say otherwise?? I'm sure you have another subjective incorrect theory to make yourself feel better.

Just curious -- did SWA take a charge for options last year? We did and it obviously hurt our bottom line. Anyone know more about this type of thing? Is it a yearly charge?

 

[7S3W7A]

What on earth on you talking about?? There has been ZERO talk about this.



Wrong Kernal. We would have netted a profit last year without the hedges.

Plenty of old threads to support this.

GK has said over and over and over again that we can't make money without the hedge. If we could why would we raise fares twice in the last 3 months.

DH2WN is expressing what the silent majority wants to say. Shut up and allow the company and negotiating committee hammer out a deal that will allow us to keep our jobs. .

Edited for profanity--keep it clean in the future, please, 7S3...

 

[7S3W7A]

Your weird. I don't even know if this guy works for us. If he does, then he's a probationary pilot with quite the attitude.

DH2WN said shut up and count your blessings. Sounds like he is quite happy at SWA and listens to the company information frequently. Read GKs statements in LUV lines. He has stated numerous times we won't make money without the hedge.

Sounds like you are the guy with attitude.

 

[TAZ MAN]

GK has said over and over and over again that we can't make money without the hedge. If we could why would we raise fares twice in the last 3 months.

Get your head out of your ass. DH2WN is expressing what the silent majority wants to say. Pilots don't know d!ck about finances. Nor do you. Shut up and allow the company and negotiating committee hammer out a deal that will allow us to keep our jobs. Pilots like you are going to fuc# the rest of us with your us against them BS.

Sounds like its going to take more than a concessionary contract for you to keep your job.

Wound a little tight tonight??

 

[Andy]

How much does SWA need to adjust for less hedging? It depends on whether you quote current fleet size, estimated average fleet size, or fleet size at the end of the year. With 33 airplanes coming in '06 these assumptions vary quite a bit. You also have to deal with assumptions on selling fuel/oil contracts, futures, hedges or whatever they are calling them. They vary in price almost daily and the company sells a portion of them every once in awhile. You can't estimate with certainty their combined value at the end of the year.

I looked at a past thread. http://forums.flightinfo.com/showthread.php?t=65507&highlight=southwest+hedges

A couple of posts which conflict slightly (not enough to be significant)
"This is an excerpt from Planebusiness.com:

On the hedging front, the airline said that it has increased its hedging positions. For 2006, the airline is now 70% hedged at $36/barrel; in 2007, the airline has 55% of its fuel needs hedged at $37 a barrel; for 2008, the airline now has 35% of its needs hedged at $37/barrel, and for 2009, the airline now has 30% of its needs hedged at $39 a barrel"

"
I got this from an article in the Newyorker:

In the current environment, Southwest has continued to outmaneuver everyone in the business. When crude-oil prices plowed past $60 a barrel, crushing every airline in its path, Southwest was paying $26 a barrel for 85 percent of its fuel, because of its prescient hedging strategy. And as long as oil prices remain high, this competitive advantage will extend into the next few years. Sixty-five percent of Southwest’s oil in 2006 will come at a cost of $32 a barrel. By 2008, it’ll still be getting 30 percent of its fuel at $33 a barrel."

With Southwest controlling ticket prices due to those hedges, I'd say that we can expect a few more fare increases this year (and the coming years). And they should stick, which is good for all airlines and airline employees.

 

[DH2WN]

To all,

Yes I work at SWA and yes I like it there and no I don't have attitude. Do the math from the balance sheet on yahoofinance vs. our fuel hedge which is much less yoy. At current revenue we will not make money in 2006 without a hedge. I asked GK point blank at the new hire luncheons and he said, "Without the hedge in 2006 it would be difficult to make a profit. However, that doesn't me we are sitting on our laurals and not taking a stance. The hedge is a blessing." He is also quoted on CNBC as saying if it wasn't for the hedge we would have lost money in 2005. I'm sorry I believe him over some pilot who thinks he knows more. He also went into how each and every one of us can help accomplish our goals on the score board. Much of which our senior pilots seem to think doesn't apply to them. The guy is truly brilliant and if you think he is lying then you are an ass. If you think he is just being a shrewed business man by telling me that so I can spread fear into everyone voting a quick contract then you need to quit now and go work for UAL or other ALPA carrier.

Dust off your finance books from college bust out the year end report you recieved and do the math for the future. Oh and to those annoying complaining pilots who have forgotten how bad it is elsewhere or have no idea because you were in the military and haven't seen it. Spend an hour talking to a NWA guy and come back about how PBS will be the death of our vacation or how SL31 is going to destroy elitt. Give me a break. We need to take stock in what we have and realize we aren't going to be competitive if we bleed the company dry.

One good thing I can take comfort in is it appears our unions leaders have a handle on what is necessary to keep this company profitable and the SWAPA board suspects are just hot air blowers that aren't taken very seriously.


Oh and if you are going to argue tax vs. pre-tax then you have missed the point completely.

 

[TAZ MAN]

To all,

Yes I work at SWA and yes I like it there and no I don't have attitude.

I just cracked up when I read this.:laugh:

Are you really on probation??

 

[TAZ MAN]

I looked at a past thread. http://forums.flightinfo.com/showthread.php?t=65507&highlight=southwest+hedges

A couple of posts which conflict slightly (not enough to be significant)
"This is an excerpt from Planebusiness.com:

On the hedging front, the airline said that it has increased its hedging positions. For 2006, the airline is now 70% hedged at $36/barrel; in 2007, the airline has 55% of its fuel needs hedged at $37 a barrel; for 2008, the airline now has 35% of its needs hedged at $37/barrel, and for 2009, the airline now has 30% of its needs hedged at $39 a barrel"

"
I got this from an article in the Newyorker:

In the current environment, Southwest has continued to outmaneuver everyone in the business. When crude-oil prices plowed past $60 a barrel, crushing every airline in its path, Southwest was paying $26 a barrel for 85 percent of its fuel, because of its prescient hedging strategy. And as long as oil prices remain high, this competitive advantage will extend into the next few years. Sixty-five percent of Southwest’s oil in 2006 will come at a cost of $32 a barrel. By 2008, it’ll still be getting 30 percent of its fuel at $33 a barrel."

With Southwest controlling ticket prices due to those hedges, I'd say that we can expect a few more fare increases this year (and the coming years). And they should stick, which is good for all airlines and airline employees.

Andy,

I may have misread you. This type of forum can do that you know.

My apologies.

 

[SWAdude]

GK has said over and over and over again that we can't make money without the hedge. If we could why would we raise fares twice in the last 3 months.

Get your head out of your ass. DH2WN is expressing what the silent majority wants to say. Pilots don't know d!ck about finances. Nor do you. Shut up and allow the company and negotiating committee hammer out a deal that will allow us to keep our jobs. Pilots like you are going to fuc# the rest of us with your us against them BS.

And what kind of contract would that be ol wise one?

PBS? Pay freeze? Lower rigs?

Which of the areas do you think we need to give away so we can save the company money?

 

[DH2WN]

And what kind of contract would that be ol wise one?

PBS? Pay freeze? Lower rigs?

Which of the areas do you think we need to give away so we can save the company money?

Something wrong with the status-quo or would you rather have the company take losses and furlough pilots because of our impending contract and greed?

 

[canyonblue]

Something wrong with the status-quo or would you rather have the company take losses and furlough pilots because of our impending contract and greed?

My brother, I don't think we are anywhere near being greedy or anywhere near costing the company. Pilot costs per ASM are still untouchable in this industry.

 

[SWA/FO]

Guys, I just read a union pub that has an article by a hired "Harvard of the Skies" (embry-riddle) dude..that claims "The Legacy Carriers actually set the fares, since they control 70% of the seats".

There was also some stuff about Delta in there saying "they would rather try to run someone out of business then try to get out of bankruptcy" - then he gave the example of when Delta flooded a jetblue route with 20 seats per every 1 jetblue seat.

I tried to do the old click and paste and it didn't work.

 

[DH2WN]

My brother, I don't think we are anywhere near being greedy or anywhere near costing the company. Pilot costs per ASM are still untouchable in this industry.

As a whole no but the vocal minority are being heard and when I read the swapa newsletter of how great we are compared to everyone else I worry. When I hear the ignorance of educated pilots that we made profits without the hedge I worry.

Here is another GK quote of how we wouldn't have made money with the hedge.

"We must confront 60% higher fuel costs for the first quarter of 2006. That means and increase of $155 million, for the quarter, which easily wipes out last years first quarter operating profit of $106 million." -- It doesn't get any clearer than this but the 'give me, give me, give me' greed like those who have posted above that we make money without the hedge have their heads in the sand and still think we are flying only in TX.

 

[DH2WN]

It's sad that we are going to have to take a quarterly loss before some pilots learn.

 

[Deacon]

Can somebody answer this.........doesn't SWA exercise these options to raise money and improve their cash balance? I beleive they purchase these hedges on the Chicago Merc.at these lower rates and then sell them to raise the cash.

I think they still pay the same for fuel as everybody else but yet they have the extra money to purchase these hedges and then cash them in as they expire in order to report a profit and improve their balance sheet..

If you look at their quarterl;y statement they often have a lot less operating income before they cash in their options.

I have even heard they have a department dedicated to purchasing other commodities such as gold as well.

just wondering if anyone else heard this.

 

[DH2WN]

Yes, Deacon, that is correct. We still tanker like everyone else. 'Hedging' is just money changing hands. I don't know about the special department though.

 

[Deacon]

Yes, Deacon, that is correct. We still tanker like everyone else. 'Hedging' is just money changing hands. I don't know about the special department though.

Thanks thats what I thought. as for the special department that came from a buddy that worked at the Chicago Merc. as well as another friend who is an FO for SWA (but he didn't know to much)....just wondering how true it was

 

[radarlove]

Can somebody answer this.........doesn't SWA exercise these options to raise money and improve their cash balance? I beleive they purchase these hedges on the Chicago Merc.at these lower rates and then sell them to raise the cash.

I think they still pay the same for fuel as everybody else but yet they have the extra money to purchase these hedges and then cash them in as they expire in order to report a profit and improve their balance sheet..

If you look at their quarterl;y statement they often have a lot less operating income before they cash in their options.

I have even heard they have a department dedicated to purchasing other commodities such as gold as well.

just wondering if anyone else heard this.

You're correct. Fuel hedges are just financial contracts. Every airline pays the same for fuel, but some make money from these financial contracts.

However, tax treatment is different for an airline than say, a trader at the Merc. If the trader bought a forward fuel contract, he would have to pay taxes on the gains, the airlines, if they are actually purchasing contracts as related to real usage get special tax and accounting treatment, so they get to call them "hedges", since the "hedge" phrase is found in the US Tax code.

Also, one more time for those that haven't heard the lecture before, there is nothing special about a fuel hedge. All you are doing is purchasing fuel for delivery in the future at today's price. SWA and the others with positive value hedges just bought fuel a long time ago for delivery today. Because they're financial contracts, you don't actually get delivery of the fuel itself, but the equivilant in dollars to do what with you wish.

THere is no "magical place" to go to buy fuel for lower than today's cost.

 

[Falcon Jet 1]

Yes, Deacon, that is correct. We still tanker like everyone else. 'Hedging' is just money changing hands. I don't know about the special department though.

Are you a Newbie Colonel?

 

[Andy]

Andy,

I may have misread you. This type of forum can do that you know.

My apologies.

TAZ MAN, no problems bro.

Having pride in the company that one works for is a good thing.

I don't hate Southwest, but no company is perfect. I've been critical of certain aspects of Southwest's operation, just as others are rightfully critical of certain aspects of United's operation.

Southwest's hedging strategy was flawlessly executed; it is this kind of foresight by management that puts a company out in front of the pack. On the other side of the coin, Goodwin/Dutta's desire to buy USAirways, create Avolar, and disband United's cargo operation are the kind of strategic moves that will kill an airline. One great move can put you on top of the pack for years, while a couple of bonehead moves can put an airline out of business (I have no doubt that United was very close to chap 7).

While Tilton is not a popular man at United, I'd rather have him there than Goodwin and Dutta. Tilton may be a b@$tard, but at least he's not incompetent. I can only hope that his management team can get things in shape like Crandall did at American. He won't create a happy work environment, but as long as he can make the company viable in the long term, I'll settle for that.
This is something that Southwest hasn't had to worry about; your management has been able to promote from within and preserve the corporate culture. You are fortunate in that your second and third teams are very talented. It's when they have to reach for a CEO from outside the company that the culture can change rapidly.