Originally Posted by ryane946
Ok, Recently I have been saying that Southwest has been able to lead the industry primarily because of fuel hedges. That does not imply that Southwest is not more efficient than others, it simply implies that they have an advantage from fuel hedges. Furthermore, when those hedges run out, Southwest will no longer be invincible, and pilot salaries will probably be number one on the expense trimming sheet.
After arguing this point with many, today I found the actual evidence that I knew existed all along:
Southwest's 4th Quarter profit = $86 million dollars
Southwest's 4th Quarter fuel hedging savings = $258 million dollarsa
86-258 = $172 million dollar operating loss (Without fuel hedges)
Now I think it was a good decision by Southwest to hedge fuel prices, and it is the primary (actually the only) reason I bought their stock in 2003. But the fact remains that those run out soon, and Southwest who has barely been turning a profit will soon be losing money, and needing to cut expenses.
See this website for the evidence.
http://news.moneycentral.msn.com/tic...&Symbol=US:AMR
Ahhhh, math in public from an en-gin-eer, gotta LUV it. Only in your world is $548 million barely turning a profit. You've been saying SWA has been losing money ex-hedges in prior quarters, which isn't true, but you are probably correct if you are saying SWA lost money ex-hedging this quarter. Your math is bad, though, because you're including corporate taxes that SWA paid on those fuel hedging gains, as well as profit sharing that SWA is paying to its employees on that gain. I haven't done the cipherin' yet, but I'm guessing an ex-hedging loss of around $50 million. You're also failing to realize that SWA's RASM was up just about 12% this quarter, which would be more than enough to cover the decreased hedging for all of 2006. Geez, next year, it'll be "If SWA was paying as much interest on their debt as other airlines, they'd be losing big time!" Anyway, please, if you have a job, stay there and be happy with your decision, just don't try to talk down a company that's doing well, or try to suggest that SWA's pay will someday inevitably come down to make yourself feel better about it.