UAL pulling out of MDW

[ultrarunner]

SWA may get some additional hedges beyond 2009, but they are unlikely to be all that significant. The people that sell fuel hedge contracts probably will not make the same mistake all over again.

I"d have to agree...the days of SWA being able to hedge fuel at 36 bucks a barell are likely over...but it's all relative. They have real cheap fuel for the next 3 and a half years. I predict a liquidation between now and then, which will raise fares. I think it's a done deal. I just don't see how those in BK will be able to continue to pay the off the street prices they are currently paying.

 

[UALjan15]

SWA may get some additional hedges beyond 2009, but they are unlikely to be all that significant. The people that sell fuel hedge contracts probably will not make the same mistake all over again.

They will definitely get some hedges beyond 2009, and will probably increase their hedged position from 2007-09. How "significant" they are depends on the price of oil in 2009. It's not going down, that much I would bet. Even if they are getting futures at $60/bl, that will probably seem as good as their $35/bl prices now when oil is going for $125/bl in 2009. Part of the equation that you are not considering is that hedges = planning security....it is a lot easier to plan a growth strategy when you can largely eliminate the unknown of fuel prices.

I just wish my airline could hedge in the same way, but in that market, it seems that cash on hand and a good bond rating are prerequisites, and we don't shine in either area.

 

[mdf]

They will definitely get some hedges beyond 2009, and will probably increase their hedged position from 2007-09. How "significant" they are depends on the price of oil in 2009. It's not going down, that much I would bet. Even if they are getting futures at $60/bl, that will probably seem as good as their $35/bl prices now when oil is going for $125/bl in 2009. Part of the equation that you are not considering is that hedges = planning security....it is a lot easier to plan a growth strategy when you can largely eliminate the unknown of fuel prices.

I just wish my airline could hedge in the same way, but in that market, it seems that cash on hand and a good bond rating are prerequisites, and we don't shine in either area.

Well said. That's kind of what I was thinking, just couldn't express it as nicely.

 

[HalinTexas]

It will matter to the share holder.

Can other airlines without hedges continue to lose money until 2009 when SWA hedges allegedly expire?

Not alledged. It's fact. The are currently hedged through end of '09. However, the next qurarterly report will likely show additional hedges.


[/quote] For those of you who wish ill upon SWA, you better worry about your own house first, then worry about SWA's hedges.[/quote]

Since no one on here really bothers to read financial statements, here is SWA's current hedge:






[FONT='Times New Roman',Times,serif]

The Company currently has a mixture of purchased call options, collar structures, and fixed price swap agreements in place to hedge over 70 percent of its remaining 2006 total anticipated jet fuel requirements at average crude oil equivalent prices of approximately $36 per barrel, and has also hedged the refinery margins on most of those positions.​

The Company is also approximately 60 percent hedged for 2007 at approximately $39 per barrel, over 35 percent hedged for 2008 at approximately $38 per barrel, and approximately 30 percent hedged for 2009 at approximately $39 per barrel.​

[/font][/quote]
[/quote]

Pay attention to the first part of my statement. I'll restate it. By your facts the hedges run out in 2009 if they don't get new ones. My bet is they will. None of their hedges is above $40 right now. Crude is consistently trading above $70, and is not expected to ever go below $50. SWA is still making money. Call it an accounting profit if you will, but that is still looked up favorably by Wall Street and creditors.

Now to the first part of my statment. Other airlines either have no hedges or are no where near hedged as SWA is. They cannot afford to wait until SWA's hedges run out. Therefore they will continue to bleed cash if ticket prices stay constant. If that is the case, they will liquidate. SWA wins. SWA will increase market share regardless. With less competition, they will control the price, i.e. market share. My bet is that they will. SWA can win. If oil goes down or fares go up so that other airlines are profitable, SWA wins.

In conclusion, there are more things for the industry to worry about in 2009 if the only way for SWA to make money is through hedges. Three years is an eternity. Fortunes change rapidly in this industry in that time frame. Look at CAL in the 1990's between Lorenzo and Bethune.

 

[dc8b75v8r]

Mdw

On a much less sophisticated level, I think the guy that UA hired and started TED just wanted to stick it to his ex employer ATA. (I believe he also ran Midway and Vanguard off the runway as well). And thats why xtown A/L suddenly ended up yet again in another seasonal entry back in MDW.