They sell those "cheap seats" many times throughout the day. A SW 737 will go coast to coast with 5 or six 6 stops in a day. I won't use $29 as an example, but $79-$99 a leg adds up. Not all of their tickets are cheap. They have sales.

 

Great point. A few years ago, SWA was hedging when everyone was predicting that oil would drop from $50 to $30. Over the years since Premier Bush came into power (Sorry, I couldn't resist blurting that out), oil has steadily climbed. Historically, legacy airlines resisted the urge to hedge, because there wasn't much of a need -- prices always seemed to return to about $20, so hedges seemed more of a short term investment and were much riskier.

9/11 and middle eastern instability changed all of that. After oil passed $40 then $50 then $80 and up and up and up, conventional wisdom was that it would eventually come back down. Throw in the fact that few airlines had enough cash/credit to convince anyone that they would be around in 6 months, 1 year, 2 years, etc., and you understand why not everyone else jumped on the hedging bandwagon.

Today, I think things are different. Today's prices are being held high by the weak dollar, which no one predicts will recover any time soon. Thus, you see more oil futures trading well above $115. And getting back to IAHFlyer's point, I don't think you'll see as many takers as you did a few years ago when conventional wisdom thought that oil prices would eventually drop.

Hedges will still be around, but I would expect to see longer term and higher price hedges to be able to even out the risk.

 

Actually Southwest has not reported a loss in the past 68 Qrts. Only airline to not have a loss after 9/11. I did a case study on them, pretty good management.

 

SWAcapt,

Ease up a little. Okay, I get it. It never rains in Camelot, it is not going to rain in Camelot and anyone who says it might rain in Camelot is labeled envious etc. I was just asking... For ten years prior to 9/11 every newspaper article pointed how SWA employees were paid less than their counterparts at the legacy carriers and those high salaries were making the legacy carriers unable to compete with SWA. But now that SWA pilots are making 35-50% (pending carrier) more than their legacy counterparts one never reads about any comparison between the two. And you have to admit that Herb was kicking them back when he signed that F/A contract.

Hey, I am all for you guys getting raises. I hope you pull down 20 to 30% raise over the next five years so as to prove (as you said) you can pay your employees and still make a profit. All I was wondering is if there is any talk or concern that mgmt might ask for pay to go the other way. I guess the answer is it doesn't rain in Camelot, so no.

 

Opus, No problem. It could rain here. I just chimed in to correct some false assumptions. Our fuel hedging program has been part of our business model for over 15 years. The only way for our hedges to run out is to stop hedging. As far as labor cost, it is still relatively low because of our productivity. On the pilot side, we are manned at 11 pilots per plane and about 70 total employees per plane, ie less people to split the labor pie with. My first trip next month is a 4-day and blocks 27+55 and pays 32.8 for pay. I could do that 3 times and only work 12 days and get 98 for pay. It works great for me but I do understand that it's not for everyone. I like to block 7+ hours per day and have a 13-14 our overnight. I measure my productivity by how much I can make with least time spent away from home.
As for your last paragraph, no there has been no talk whatsoever of a concessionary contract. It would be difficult to ask for concessions on the company's part while making profits. The biggest problem we must fight is complacency. We hope it won't rain soon but I still carry an umbrella.

 

Here's a little something to ponder:
United Market Cap: 1.81B
Delta Market Cap: 2.05B
Continental: 1.69B
AMR Corporation: 1.85B
US Airways Group: 658M
Northwest: 1.79B
Which totals: 9.85B

SWA Market Cap: 9.32B

 

swaCAPT,

How do you know there has been 'no talk' of a concessionary CBA, are you behind the close door? As far as carrying you umbrella shouldn't you say "I got mine now you get yours." (stock options)

Cargo

 

Ouch! Any bitterness involved in this post? Sounds like you should replace me as the new "Oscar." Stock options are still a player for everyone here at SWA. We just need to get the price up to a level that is valuable. We can't seem to get anywhere because every time it makes a move one of our competitors gets subsidized in BK or a creditor bails them out. Many folks complain about our fuel hedges not allowing for a level playing field but it is okay to have the bankruptcy court eliminate our competitors bills and destroy their employees retirement funds. Maybe in a few years we can cash in some more stock options after the dust settles.

BTW, Straight from Gary Kelly's mouth to my ears.... "We have already budgeted for the current salary levels and do not expect to ask for give backs." Granted this conversation was a few years ago and things can change but until we start losing money it is not a factor in negotiations without some sort of equity swap.

 

[QUOTE=OscartheGrouch;374876........ We can't seem to get anywhere because every time it makes a move one of our competitors gets subsidized in BK or a creditor bails them out. Many folks complain about our fuel hedges not allowing for a level playing field but it is okay to have the bankruptcy court eliminate our competitors bills and destroy their employees retirement funds. Maybe in a few years we can cash in some more stock options after the dust settles.

............[/QUOTE]

Oscar,
Maybe if SWA would stop keeping the fare prices "artificially low", it might help EVERYONE, including SWA. Why they keep wanting to battle everyone I'll never know......

 

Just curious, many of the SWA guys say that SWA's fuel hedges aren't going to end. I just heard on TV that fuel hedging for the airlines is becoming less of an option to offest the cost of aviation fuel. Recently I saw an interview with Kelly and even he admitted "we bet the farm" when it came to their initial fuel hedging.

I just read an article that Southwest's fuel hedging power is slowly coming to an end. http://www.247wallst.com/2007/04/southwest_airli.html

Just curious what what ya'll think? I'm not a hater, not trying to pick a fight; just trying to figure this all out. It would make sense to me that if SWA was doing it, everyone would be too.

-Fatty