Southwest has 3Q loss due to Fuel Hedging Strategy

[surreal1221]

Ah man. . .that 17 year streak comes to an end. . .bummer. . .

http://www.bloomberg.com/apps/news?pid=20601103&sid=acwEpH0pwySw&refer=news

Oct. 16 (Bloomberg) -- Southwest Airlines Co. posted its first quarterly net loss since 1991 on costs to adjust the value of fuel hedges, which had helped shield the largest low-fare carrier from rising prices in previous periods.

The deficit of $120 million, or 16 cents a share, compares with net income of $162 million, or 22 cents, a year earlier, the Dallas-based airline said in a statement today. Excluding the effects of the fuel hedges and other one-time items, Southwest had a profit of $69 million, or 9 cents.

The loss comes after Southwest relied on the contracts for several years to lock in fuel prices in advance to help keep it profitable. The average price of jet fuel dropped since reaching a record on July 3, forcing the carrier to reverse gains taken in earlier periods as prices rose.

But of course. . .in classic Airline finance fashion, excluding the cost of the fuel hedges and other one time items, they would have made a profit. Too bad you can't call your finances like such, ah yea - lets just get the fuel off of our books like the banks did with bad mortgages and we can turn a profit!



Anyway - I have no doubts they'll report a profit on the 4Q.

 

[SFCC/UND]

Whew, I had to sit down and rub my eyes to make sure I reading this right.

 

[toolowflaps]

Ah man. . .that 17 year streak comes to an end. . .bummer. . .

http://www.bloomberg.com/apps/news?pid=20601103&sid=acwEpH0pwySw&refer=news



But of course. . .in classic Airline finance fashion, excluding the cost of the fuel hedges and other one time items, they would have made a profit. Too bad you can't call your finances like such, ah yea - lets just get the fuel off of our books like the banks did with bad mortgages and we can turn a profit!



Anyway - I have no doubts they'll report a profit on the 4Q.

Actually, it IS only a paper loss. When you hedge (oil for instance) you but a future contract to purchase at a price certain; for instance, $100/barrel. If, at some point during the life of that contract, the spot price drops below the contract price, you have to show a loss on your books of the difference between the contract and the spot.

 

[Trip7]

By hedging a company is gambling....its almost not possible to win every time. Arpey said in that American Airlines CNBC special that fuel cost would eventually catch up with SWA.

 

[SeanD]

They should have charged for that second checked bag.

Maybe it's karma payback for taking those DEN routes from Frontier.

 

[B767Driver]

Since they were effectively paying around $50 per barrel for gas...this isn't good for them.

 

[Bigey]

Are you guys seriously happy/relieved to see this happen?

What the?

Karma? Uh-oh i answered my own question.

Sorry for southwest actually running their airline, like a business - for profit....

 

[surreal1221]

Who exactly are you talking to Bigey?

And I like your last sentence. Yeah, congrats to them. 17 years straight, no loss. Well. . .congratulations on going 17, I'm sure they wanted to go 18. . .but it doesn't look like that'll happen, not with a down 3Q.

As far as people being happy, I can only speak for myself. I'm indifferent, and hold no emotional opinion of the company.

No other threads to post in?

 

[Bigey]

Who exactly are you talking to Bigey?

And I like your last sentence. Yeah, congrats to them. 17 years straight, no loss. Well. . .congratulations on going 17, I'm sure they wanted to go 18. . .but it doesn't look like that'll happen, not with a down 3Q.

As far as people being happy, I can only speak for myself. I'm indifferent, and hold no emotional opinion of the company.

No other threads to post in?

Was mainly talking to SeanD. But theres a few on here that bash SWA because they have fuel hedges and "they wouldnt exist if they didnt have those hedges."

And whats your last sentence supposed to mean? That i cant post in whatever thread i feel like?

 

[SeanD]

Was mainly talking to SeanD. But theres a few on here that bash SWA because they have fuel hedges and "they wouldnt exist if they didnt have those hedges."

And whats your last sentence supposed to mean? That i cant post in whatever thread i feel like?

That better Bigs

 

[surreal1221]

And whats your last sentence supposed to mean? That i cant post in whatever thread i feel like?

It means simply that. No other threads to post in?

My point was, that if you're not going to actually quote someones post, just lob grenades at everyone who has posted I would have figured you would have been able to find another post to that in.

Either that, or for some odd reason your emotions attached to this here thread and just felt the need to defend Southwest Airlines for their financial decisions and cast everyone who posted in the thread as having some sort of delight in Southwest's poor 3Q financial results.

 

[Bigey]

That better Bigs

Mucho!

It means simply that. No other threads to post in?

My point was, that if you're not going to actually quote someones post, just lob grenades at everyone who has posted I would have figured you would have been able to find another post to that in.

Either that, or for some odd reason your emotions attached to this here thread and just felt the need to defend Southwest Airlines for their financial decisions and cast everyone who posted in the thread as having some sort of delight in Southwest's poor 3Q financial results.

Lob grenades? Hah!

I'm far from any defamatory statements (that's what i'd warrant as lobbing grenades) i'm just questioning ones statements. I'll continue to post in whatever threads i feel like, regardless if it doesnt fit your standards...

 

[surreal1221]

So you know what my standards are? Would you mind placing them in my mail box so I can also know?

Thanks stud.

 

[wheelsup]

Are you guys seriously happy/relieved to see this happen?

What the?

Karma? Uh-oh i answered my own question.

Sorry for southwest actually running their airline, like a business - for profit....

No kidding eh?

Sometimes I wonder how much a particular poster in this thread got beat up in grade school. It must've been a lot, judging by their angry, incredibly sarcastic, often intimidating posts.

 

[Old Pete]

By hedging a company is gambling....its almost not possible to win every time. Arpey said in that American Airlines CNBC special that fuel cost would eventually catch up with SWA.

Hedging isn't gambling or speculation. In fact it is the opposite. Hedging is used to reduce risk. But trying to explain that is...:banghead:

 

[Bigey]

No kidding eh?

Sometimes I wonder how much a particular poster in this thread got beat up in grade school. It must've been a lot, judging by their angry, incredibly sarcastic, often intimidating posts.

Is that sarcastic towards me?

 

[wheelsup]

Is that sarcastic towards me?

No I agree with your observation.

 

[meyers9163]

To answer why many might enjoy this fact. Many of your legacy carrier pilots feel that these subpart airlines like SWA/Airtran stole their jobs and flying. They are made as a discount airline and were designed strictly to steal flying away from the legacy carriers. Thus you will see a lot of people enjoying the fact of a SWA/Airtran/Jetblue/Fronter etc struggeling. It just depends on the person. A lot of us are too young to really have a thought one way or another (like myself). But I know a few guys and one I consider a mentour at DAL who has a strong dislike about SWA.

Hell just look at their commercials, checking bags, snacks, small rj, and then all the ones they placed in DEN when Fronter filed bankruptcy. Anyways what goes around comes around. Sooner or later SWA will be just like any other airline. Trying to find a way to survive. And to be honest, their prices arent even that much cheaper these days.

 

[Trip7]

Hedging isn't gambling or speculation. In fact it is the opposite. Hedging is used to reduce risk. But trying to explain that is...:banghead:

Reduce risk? So when you hedge at 147 like United....

 

[surreal1221]

To answer why many might enjoy this fact. Many of your legacy carrier pilots feel that these subpart airlines like SWA/Airtran stole their jobs and flying. They are made as a discount airline and were designed strictly to steal flying away from the legacy carriers. Thus you will see a lot of people enjoying the fact of a SWA/Airtran/Jetblue/Fronter etc struggeling. It just depends on the person. A lot of us are too young to really have a thought one way or another (like myself). But I know a few guys and one I consider a mentour at DAL who has a strong dislike about SWA.

Hell just look at their commercials, checking bags, snacks, small rj, and then all the ones they placed in DEN when Fronter filed bankruptcy. Anyways what goes around comes around. Sooner or later SWA will be just like any other airline. Trying to find a way to survive. And to be honest, their prices arent even that much cheaper these days.

Watch out. . ."Karma" might come up and get you. . .anic: