tm602

What do you guys think? Contract issues aside (for these purposes anyway), what do you see? Slow or stop on hiring? Furloughs? Business as usual? Oil will probably hit $200 a barrel. The current "recovery" from a previously thriving economy is hitting wallets hard. So, you're predictions?

PNWFlyer

Probably not prepared at all. Announcement that they are ceasing all operations is probably being written as we speak.

Smooth at FL450

Enough cash in the bank to pay off all debt and still be $5B net cash +, about 2/3 hedged for 2022 fuel consumption at $80, and minimal international exposure. Things will hurt...but you know that saying about not needing to outrun the bear when your friend is slower?

Salukidawg

I think of all the Big 6 Airlines that Southwest is probably the best positioned to weather high oil prices the longest. However, demand destruction from runaway inflation will affect all Airlines regardless of fuel hedges. I think the entire Airline Industry is in for a world of hurt by late summer if inflation and oil prices remain as high as they are right now. I think hiring will continue at Southwest, but maybe not at the amount they had originally targeted for 2022. At this point it’s anyone’s guess as to what the rest of the year is going to hold as events continue to change by the day. I would rather at this moment in time be at Southwest than any other Airline in the US when crude oil hits $150 per barrel though.

TexasPilot80

Southwest gonna southwest. On top of hedges, SW will probably retire 700s quicker and replace them with more efficient and much needed higher takeoff weight max7s.

They’ve already said they don’t plan on adding any new cities but they will continue to chip away at AAL and UALs domestic market.

But I’m not sure if any airline business model works with $200+ Oil.

flyguy81

Sure would be nice to have a bunch of max-7’s right now. Any day now FAA…..

Smooth at FL450

Seriously.

Lewbronski

Might be able to pick up some cheap Max’s soon:

Russia: How Many Planes Will Be Undelivered Due To Sanctions?

Privateer89

I think Southwest will fly and hire for the next year at a 64% hedge while being able to undercut any competitor who is paying the going rate for Jet A. The question is, what will happen next year if there is a multi year recession and oil drops to $35-$40 a barrel? My guess is that SWA will be fine as always with a possible slow down or stoppage in hiring at that time.

Reese

Southwest Airlines Reports Fourth Quarter Profit And Full Year Results – Southwest Airlines (southwestairlinesinvestorrelations.com)
On it's most recent quarter, Southwest lists current assets at $18B, with $12.5B in cash/cash equivalents.
It also lists its current debts as $9.2B, and it's long term debt minus current maturities as $10.2B.

The interest on that long term debt of $10.2B comes with a $450M payment per quarter, up from $220M a year earlier. So the statement of paying off "all debt" isn't true.

I know the company says they have $15.5B in cash on hand, and $10.7B in liabilities, with a $4.8B net positive cash position. But pretty sure it's a spin job to a certain extent. TECHNICALLY, they can't pay off their long term debt with the cash they have on hand.

Of note, long term debt at the end of 2019 was ~$1.8B, and cash on hand was ~$4B. That cash on hand grew by $10B when they took out $10B in long term debt during the spring of 2020.

1Q 2020
"As of March 31, 2020, the Company had approximately $5.5 billion in cash and short-term investments, including proceeds of $500 million of unsecured notes due 2030, issued February 10, 2020; $1.0 billion from a 364-day secured term loan, entered into March 12, 2020; and $1.0 billion drawn from the Company's revolving credit facility on March 16, 2020, which was subsequently secured. On March 30, 2020, the Company renegotiated its $1.0 billion 364-day term loan to add additional funds of approximately $2.3 billion, which were received on April 1, 2020. On April 24, 2020, the Company received another $350 million in funds pursuant to its approximately $417 million accordion provision as part of the 364-day term loan agreement. Since the beginning of 2020, the Company has bolstered cash on hand by $6.8 billion as of April 24, 2020, including $1.6 billion of PSP proceeds, with the remaining $1.6 billion of PSP proceeds expected to be received by July 2020."
2Q 2020
"As of June 30, 2020, the Company had approximately $14.5 billion in cash and short-term investments, and a fully available revolving credit facility of $1.0 billion. Since the Company's previous update of cash and short-term investments of approximately $13.9 billion as of June 17, 2020, the Company received its third disbursement of PSP proceeds in the amount of $652 million. The remaining $326 million of PSP proceeds is expected to be received by the end of this month. Since the beginning of 2020, the Company has raised cash of approximately $17.3 billion, net of fees, including $12.2 billion in financings and sale-leaseback transactions, $2.2 billion through a common stock offering, and $2.9 billion of PSP proceeds. The Company currently has unencumbered assets worth approximately $12 billion, including approximately $10 billion in aircraft. As of June 30, 2020, the Company was in a net cash position5 of $4.9 billion, and its adjusted debt6 to average invested capital (leverage) was 49 percent."

Second, out of genuine curiosity, i've tried finding it. Can you give me a link on the fuel hedging?