What's up at SWA?
 

A friend of mine told me that an ex-coworker of ours (who is at SWA) freaking out about his job with this age 65 thing and supposedly the hedges running out, etc. He's been there like 2-3 years. What's he freaking out about? What's going on at SWA? I thought things were going along ok over there. Just wondering though.....

Nothing big going on - if the guy is freaking out, it's because his upgrade has been pushed back for a good while because of the age 65 change coupled with reduced growth this year, that's all. Fuel hedges have been gradually trailing off for years, SWA just announced another 500 million in stock buybacks (1.5 billion now over the last two years), and SWA is rock solid financially. We could potentially just barely break even this quarter or next since we just blew our entire annual advertising budget over the last three weeks with this be more productive thing.

His expectation of a 5 year upgrade just jumped to about 9 or 10, that's probably what he's freaking out about. All that goes out the window if growth ramps up again, which would mean 6 or 7 year upgrades.

If there is industry consolidation then it would seem SWA would be prime for further growth. Where the majors reduce capacity SWA can pick up the slack. Most majors claim they can't make money on the domestic routes yet SWA was able to turn a profit on a purely domestic route structure (even with hedges taken out...I believe removing hedges cuts the profits about in half...but a profit none the less on a domestic only route structure).

Hope for consolidation and I believe you will see SWA take a greater share of the domestic route system and increase growth.

Just thoughts.

Rosie

Forgot to mention...with increased growth stagnation (9-10 year upgrades) would be reduced due to increased growth.

I see. Thanks!