Upgrade time at SWA?

[dashocho]

Jblu

Good to see you in OAK last month. Glad things worked out. Thanks for being just 10 numbers senior to me as well. Otherwise you leaving would have done nothing to help me!!!! LOL

PS: We all got off probation today!!!!!!!!!

 

[Jim Smyth]

PS: We all got off probation today!!!!!!!!!

As they said in Animal House..................

"Now you go on double secret probation!"

 

[ivauir]

Um, no, I guess you don't understand hedges. You can't "rework" them. Most of the hedges the airlines do are simply futures contracts. A futures contract is today's spot price, which is around $59/bbl, plus the cost of interest on the money for the lengh of the futures contract.

So, there isn't some special place that only LUV knows about to go buy oil for less than $59/bbl. They might be hedging some at $59+, but probably not too much.

Actually, your understanding of the hedges is incomplete, they do NOT reflect todays price, but instead what someone thinks the price will be in the future. As a result we are constantly "reworking" our fuel hedges; our finance department watches the market and takes advantage of fluctuations as they occur. The "special place" that only LUV knows is the place that takes only cash. The hedges are not "runnig out", they just aren't at $26 a barrel anymore.

As a matter of fact, we have just added some hedges through 08, and we didn't pay 59 (I can't remember the price). Basically there are still enough traders willing to bet that the price will fall that we can still hedge below the current market price. At some point the price WILL fall and we'll have paid a premium, but the corresponding economic boom that will result should drive up yeilds and offset that premium price on fuel. Furthermore, we are able to base our business model on a flatter and more predicatable fuel cost. This way we can set ticket prices, buy airplanes, and hire pilots based on real world expense numbers (we already bought most of our gas for 06). This beats the heck out of guessing and then finding out you've been selling tickets too cheap and are losing money, because fuel went up 5 minutes ago.

 

[dashocho]

As they said in Animal House..................

"Now you go on double secret probation!"

Capt. Wormer? Is that you?

 

[radarlove]

Actually, your understanding of the hedges is incomplete, they do NOT reflect todays price

Please don't argue finance if you don't even understand a futures contract.

Here's some homework: go find a futures contract that trades for less than today's price. Yeah, your company couldn't find one either.

but instead what someone thinks the price will be in the future.

No, the futures price is based on today's spot price plus the cost to borrow money for the length of the contract. If it were off, there would be an arbitrage opportunity.

As a result we are constantly "reworking" our fuel hedges; our finance department watches the market and takes advantage of fluctuations as they occur. The "special place" that only LUV knows is the place that takes only cash.

This doesn't make any sense. What do you mean, "only takes cash"? Was that an attempt at a joke?

The hedges are not "runnig out", they just aren't at $26 a barrel anymore.

Sure they are, if I remember the financial press, your company stopped hedging as the price rose significantly. The hedges, in fact, "run out". Because next, you say:

As a matter of fact, we have just added some hedges through 08, and we didn't pay 59 (I can't remember the price)

Why don't you read your own company's financial information? They have a whole paragraph describing the length of the hedges. Hint: they run out.

The reason you don't know the price is because they didn't tell you the price, unless you work in the finance department, which you apparently don't, since you don't understand futures pricing.

. Basically there are still enough traders willing to bet that the price will fall that we can still hedge below the current market price.

Ok, easy enough there big guy. Find me one quoted futures price that is below today's price. If those "traders" exist, then surely you can find the price?

 

[7S3W7A]

ivauir just got bitch slapped.

 

[TAZ MAN]

ivauir just got bitch slapped.

I'm just curious 7S3W7A,

Why couldn't you answer SWAdudes question?

A little false representation?

Your here right now...so answer.

 

[TAZ MAN]

Gone again with no answer.

I guess SWAdude outed ya!!!

Good job SWAdude!!!

 

[ivauir]

I never claimed to be a financial guru, but you are just wrong here. We are constantly adding hedges. We have hedges going past 2008 and some of that is at 33$ a barrel. I am not going to do any "homework" for you - we have a fuel department that takes care of that for me. But I read in some mail box stuffer that we just added some hedges - I don't remember the price because I didn't try to. If you want to post some useful links feel free. But the hedges are not "running out" they just aren't as sweet a deal as they used to be.

So, you are just as wrong as you were with your first post.

 

[ivauir]

ivauir just got bitch slapped.

Again, not a single useful thing to say. Try a new screen name.