SWA post 1stq PROFIT!
I work for CAL, and I'm just tired of the negativity.
04-17-2008, 10:24 AM
#34
Che Guevara
Joined APC: Aug 2005
Posts: 6,408
Originally Posted by mulcher
Maybe because we are in negotiations now. Is this the No life GL's brother from FI. The hedges ran out in 2003, 04, 05, 06, 07. They will run out in 08, 09, 10, 11 etc. You are a sad little boy. Just remeber if we have hard times what the heck will that mean for your airline? Wrap your little head around that one.
04-17-2008, 10:34 AM
#35
Gets Weekends Off
Joined APC: Feb 2006
Position: Mayor of Awesometown
Posts: 137
Hedging: 101
Ok, Hedging 101...
Southwest Airlines has a two-man fuel hedging department that is equipped with the latest market-tracking software. The concept of "hedging fuel" is not as simple as some are making it sound. First off, you can't just buy Jet-A futures, as Jet-A futures aren't available. What Southwest does is buy Heating Oil (Kerosene) futures for their hedges. Ok, now let's say they bought these futures at $70 a barrel. When the market price hits, say $114 a barrel and the company decides to sell, that's a profit of $44 a barrell...hence the savings. Same effect if the hedges are bought at $114 a barrell and sold at say $160 a barrell. Keeping this in mind, the notion that hedges "run out" is not valid.
That's my understanding of the whole thing...I'm sure there are much more complicated mechanisms in play, but I have neither the time nor the inclination to write any more than I already have.
Southwest Airlines has a two-man fuel hedging department that is equipped with the latest market-tracking software. The concept of "hedging fuel" is not as simple as some are making it sound. First off, you can't just buy Jet-A futures, as Jet-A futures aren't available. What Southwest does is buy Heating Oil (Kerosene) futures for their hedges. Ok, now let's say they bought these futures at $70 a barrel. When the market price hits, say $114 a barrel and the company decides to sell, that's a profit of $44 a barrell...hence the savings. Same effect if the hedges are bought at $114 a barrell and sold at say $160 a barrell. Keeping this in mind, the notion that hedges "run out" is not valid.
That's my understanding of the whole thing...I'm sure there are much more complicated mechanisms in play, but I have neither the time nor the inclination to write any more than I already have.
04-17-2008, 10:47 AM
#36
Gets Weekends Off
Joined APC: Aug 2006
Position: 737 Right
Posts: 1,385
TD, there are multiple contracts bought at varying times at different prices for different amounts.
For SWA in 2008 it is 70% of projected fuel needs at $51/barrel. That's the average of the contracts.
What's interesting, as Runner pointed out above, is that we don't actually buy fuel at a discounted price. We pay the same as everyone else, we just offset it by making money in Heating Oil futures since it is closely tied to Jet-A prices.
Also realize that the last time we had a global recession in the late 90's, fuel prices plummeted. If the economy gets worse towards the end of the year, it's not unreasonable that fuel prices may fall.
For SWA in 2008 it is 70% of projected fuel needs at $51/barrel. That's the average of the contracts.
What's interesting, as Runner pointed out above, is that we don't actually buy fuel at a discounted price. We pay the same as everyone else, we just offset it by making money in Heating Oil futures since it is closely tied to Jet-A prices.
Also realize that the last time we had a global recession in the late 90's, fuel prices plummeted. If the economy gets worse towards the end of the year, it's not unreasonable that fuel prices may fall.
04-17-2008, 11:03 AM
#37
Che Guevara
Joined APC: Aug 2005
Posts: 6,408
But demand for the fuels was much less. OPEC couldn't hardly give it away. I remember paying $.85 at the local Co-op when I was 17. Now with China booming, among others, while the economies might be worse the demand is higher. It's time we start drilling off Florida.
04-17-2008, 11:05 AM
#38
Che Guevara
Joined APC: Aug 2005
Posts: 6,408
Originally Posted by Runner
Ok, Hedging 101...
Southwest Airlines has a two-man fuel hedging department that is equipped with the latest market-tracking software. The concept of "hedging fuel" is not as simple as some are making it sound. First off, you can't just buy Jet-A futures, as Jet-A futures aren't available. What Southwest does is buy Heating Oil (Kerosene) futures for their hedges. Ok, now let's say they bought these futures at $70 a barrel. When the market price hits, say $114 a barrel and the company decides to sell, that's a profit of $44 a barrell...hence the savings. Same effect if the hedges are bought at $114 a barrell and sold at say $160 a barrell. Keeping this in mind, the notion that hedges "run out" is not valid.
That's my understanding of the whole thing...I'm sure there are much more complicated mechanisms in play, but I have neither the time nor the inclination to write any more than I already have.
Southwest Airlines has a two-man fuel hedging department that is equipped with the latest market-tracking software. The concept of "hedging fuel" is not as simple as some are making it sound. First off, you can't just buy Jet-A futures, as Jet-A futures aren't available. What Southwest does is buy Heating Oil (Kerosene) futures for their hedges. Ok, now let's say they bought these futures at $70 a barrel. When the market price hits, say $114 a barrel and the company decides to sell, that's a profit of $44 a barrell...hence the savings. Same effect if the hedges are bought at $114 a barrell and sold at say $160 a barrell. Keeping this in mind, the notion that hedges "run out" is not valid.
That's my understanding of the whole thing...I'm sure there are much more complicated mechanisms in play, but I have neither the time nor the inclination to write any more than I already have.
04-17-2008, 11:22 AM
#39
Livin' the Dream
Joined APC: Dec 2005
Posts: 84
Originally Posted by ewrbasedpilot
Nope, this is what I was trying to say........CAL B-777, B757, B767, and B737..... Rome, Beijing, Paris, Tokyo, SXM, STT, POS....
SWA B-737.......... Dallas, PHX, Paris (Texas)...wow!!! DUDE...
SWA B-737.......... Dallas, PHX, Paris (Texas)...wow!!! DUDE...
Yes, I agree, those are fantastic places to fly to at MINUS $80 million dollars a quarter.
Anyways, this thread is not about CAL, its about SWA and what a fantastic job they are doing at making money in a tight economy with soaring gas prices. Its nice to see a well managed company doing everything they can to stay competitive and MAKE money.
04-17-2008, 01:01 PM
#40
HOSED BY PBS AGAIN
Joined APC: Mar 2005
Posts: 1,713
Originally Posted by MILPILOT17
SWA is a great company because of the people who run it as well as the people who work there!!! There are some (ewrbasedpilot) who can't get a grip on that concept. I suspect if they had a job offer with SWA they would take it, but for obvious reasons that will probably never happen. Remember, attitude is 99% of the solution. Period!!!!!!!
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