Oldfreightdawg

I'm sure no one will ever accuse me of being a genius. However, I once listen to our CEO boast that our balance sheet was so strong that "we could operate the company for several months without a nickel of revenue" or something to that effect. If I could be describe as stupid, it's because I believed him. In the three years following that pronouncement, a management change, a stock buyback plan, 2 acquisition/mergers, and the disaster of 9-11, the company was on the verge of BK. Of these five issues, three of them have been reported in the media as possibility occurring at SWA right now.

I'm second generation airline. I've seen a lot of good airlines perished, and because hindsight is 20/20, you'll always be able to analyze why. In spite of that, few if any (management) seem to see trouble coming until it's too late. Such is not the case at SWA, at least right now.

All this is just a personal observation on my part. But if it makes me stupid, then I guess I'm stupid.

Oldfreightdawg

Thanks. You guys will be fine. In fact, I wish some of SWA's clairvoyance would rub off on us!

JMT21

That is not fact. This is:
Remaining in 2007: 90% hedged at $51/barrel;
2008: 65% hedged at $49/barrel;
2009: 55% hedged at $51/barrel;
2010: 25% hedged at $63/barrel;
2011: and 2012 are "modest positions"

Quarterly profit=$278M
Quarterly fuel hedge gains=$173M

$278M-$173M= (positive) $105M

If you add SWA fuel hedging gains to fuel and oil operating expenses you will find salary, wage, and benefit expenses are still quite a bit more than fuel and oil expenses.

Sr. Barco

Has everyone forgotten about this little tid bit?

"...for second quarter 2006....repurchased 32 million shares of common stock for $464 million."

So had we not spent $464 million on buying our own stock what do you suppose the net profit would have been? Did this $464 million come out of cash flow? I think so because cash on hand did not decline quarter to quarter. Does anyone have any insight on this. Is it more accounting magic?

S.B.

1Seat 1Engine

I think that those kind of transfers only show on the income statement AFTER net income from operations.

JMT21

Here's the quick and dirty:

Cash is an asset and listed as an asset on the balance sheet. Repurchased stock (called treasury stock) is listed (as a negative amount) under stockholders equity on the balance sheet.

When a company like SWA repurchases stock it uses cash. Thus, its cash balance will decrease and Treasury stock will increase (remember it’s a negative balance so the negative amount gets bigger). The result is that total assets and total liabilities+stockholders equity will both decrease in the same amount. Take a look at SWA balance sheet, I think it might be easier to follow of you see it visually.

Basically, the repurchase of stock doesn’t hit the income statement and does not directly affect profitability. Obviously there are financial ratios (like EPS) that will be affected as the amount of outstanding stock is less. Generally the repurchase of stock is seen as a good thing.

The statement of cash flow is affected as cash is used to buy back the stock.

No accounting magic; hope this helps.

LuvJockey

And you have been personally wrong consistently since 2005. You are not able to read a quarterly statement. You are a moron. How's that United interview shaping up?

All right, the rest of you think I'm being a little hard on him, but Ryan has been predicting that SWA will cease being profitable since 2005. Here's one of my favorite posts from early in 06 that I think you'll all enjoy:

"I have some comments.

1. Obviously, the two people above have not had any experience either investing in airlines. They obviously have no idea where that figure comes from. Where does that $17 billion come from? It really is meaningless. When United exits from bankruptcy, there will be a several billion dollar profit. Where did that all come from??? Again, that is meaningless.

2. There is only one thing that matters. Operating profit/loss. That was $183 million for the 4th quarter. Hummm... That is exactly how much Southwest would have lost if they didn't have fuel hedges. INTERESTING!!!

3. Exec bonuses. The exec bonuses are fair. The number 400 manager at United makes about $85,000 a year. That is less than almost EVERY pilot at the airline. Executives are underpaid for their field of work, and a bonus is certainly within reason, especially sticking with the airline during bankruptcy. Executives are in high demand. Their compensation is not on par for their line of work. They deserve the bonuses.

4. Why do many people on this forum attack executives. If you are so envious of their job, why don't you try to become an executive??? Oh wait, you might have to work more than 20 hours a week. They are more important, they are in demand, they did their job. They deserve a stock bonus.

5. I predict a slight loss in 06, and a profit in 07 for UAL."


Let's see: He says SWA is actually losing money (wrong), United's executive compensation has been fair (wow, don't know how to describe that), and that United would make a several billion dollar profit after bankruptcy. Oh yeah, and the numbers are meaningless (perhaps they are when you don't understand them.) I rest my case. My apologies to the United bubbas out there, I know he's not one of yours, and I'm not trying to grind in your problems. If you want him in your pilot group, you're welcome to him.

Rocco

A business makes money. If it does not, they will not be around very long with out some help......you can hedge fuel...carry mail....boxes....passengers....whatever. Make money and it doesn't really matter....

Like you said its the game, not the player.