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WN Posts 2Q Profit Of $161 Million  
User currently offlineLoneStarMike From United States of America, joined Jul 2000, 3811 posts, RR: 34
Posted (2 years 12 months 2 days 12 hours ago) and read 6687 times:

Southwest posts 2Q profit of $161 million

Quote:
Southwest Airlines Co. boosted its second-quarter profit with higher fares and more traffic from the addition of AirTran, but fuel costs soared a stunning 64 percent higher than a year ago.

After excluding special items such as gains from fuel-hedging contracts, Southwest's profit was smaller than analysts expected.

The company says that because of the pessimistic outlook for the economy and fuel prices, it won't increase capacity next year.

LoneStarMike

70 replies: All unread, showing first 25:
 
User currently offlineDFWHeavy From United States of America, joined Jul 2011, 560 posts, RR: 0
Reply 1, posted (2 years 12 months 2 days 12 hours ago) and read 6648 times:

I knew they would post a huge profit. Great for WN. Keep making that money, but buy Boeing!


Christopher W Slovacek
User currently offlineAWACSooner From United States of America, joined Jan 2008, 1883 posts, RR: 1
Reply 2, posted (2 years 12 months 2 days 11 hours ago) and read 6504 times:

But...but...how could they make a profit without charging for bags? It must be those fuel hedges!


 


User currently offlinevulindlela744 From United States of America, joined Jan 2000, 519 posts, RR: 0
Reply 3, posted (2 years 12 months 2 days 10 hours ago) and read 6372 times:

Pretty impressive considering the price of fuel and the close of the Airtran deal in Q2. Keep soaring SWA!!!!

User currently onlineMaverickM11 From United States of America, joined Apr 2000, 17361 posts, RR: 46
Reply 4, posted (2 years 12 months 2 days 10 hours ago) and read 6322 times:

Seems on the light side...5.0% operating margin, vs 5.3% @ DL, 8.2% @ UA, 7.5% @ B6, 5.1% @ US, and 5.2% @ AS


E pur si muove -Galileo
User currently offlinelightsaber From United States of America, joined Jan 2005, 12903 posts, RR: 100
Reply 5, posted (2 years 12 months 2 days 10 hours ago) and read 6196 times:
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Quoting MaverickM11 (Reply 4):
Seems on the light side...5.0% operating margin, vs 5.3% @ DL, 8.2% @ UA, 7.5% @ B6, 5.1% @ US, and 5.2% @ AS

It is. But considering the costs associated with FL, not bad. Carefull with UA's operating margins. It looks like their 'overhead' might include some of the expenses others throw into operating margins. I'm not certain (obviously), but I rather suspect their number.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineScottB From United States of America, joined Jul 2000, 6712 posts, RR: 32
Reply 6, posted (2 years 12 months 2 days 9 hours ago) and read 6130 times:

Quoting MaverickM11 (Reply 4):
Seems on the light side...5.0% operating margin, vs 5.3% @ DL, 8.2% @ UA, 7.5% @ B6, 5.1% @ US, and 5.2% @ AS

A bit over 1% of UA's operating margin in the quarter was due to an accounting change regarding deferred frequent flyer mileage revenue related to the Chase credit cards.


User currently offlinetommytoyz From Tonga, joined Jan 2007, 1353 posts, RR: 6
Reply 7, posted (2 years 12 months 2 days 1 hour ago) and read 5461 times:

I love analysts.....they often interpret the financial performances of companies to suit their own expectations.

However, the only thing that matters to shareholders and the viability of a company is after tax, net income, not any other accounting yardstick analysts and companies concoct up, excluding any "one time" items - either earnings or expenses.

An expense is an expense. The number of expenses that happen only once is unlimited anyway. So every quarter a company can have a series of new "one time" expenses - forever. On the flip side, WN's successful fuel hedge dept. is not a one time thing and a real asset to the company. Just because that dept. has nothing to do with operating the aircraft or airline, does not mean the money it steadily earns should be ignored nor that they are not a part of the company. Money earned is money in the bank and that dept. has a history of earning money via fuel hedges for WN.

Perhaps other airlines should learn that in order to successfully operate an airline, a required part of the formula for success is having a good fuel hedge dept. I remember when the legacies went BK, about a year before that, they sold most of their fuel hedges to raise money, only to see fuel prices soar afterwards, and being totally unprepared and unprotected. But is was industry practice, so apparently safe to do - only it wasn't.

Many European carriers also have good fuel hedge departments, as I recall when I was looking at this. There seems to be a correlation of profitable airlines also having good fuel hedge departments. Perhaps it's an overall canary in the coal mine in a company that indicates how capable the company's management team really is. Perhaps if they can successfully put together a good fuel hedge strategy, they may be more likely to make good business decisions in general.


User currently offlineknope2001 From United States of America, joined May 2005, 2875 posts, RR: 30
Reply 8, posted (2 years 12 months 1 day 23 hours ago) and read 4993 times:

Quoting tommytoyz (Reply 7):
I love analysts.....they often interpret the financial performances of companies to suit their own expectations.

Does that include a.net amateur analysts?


User currently offlineslcdeltarumd11 From United States of America, joined Jan 2004, 3364 posts, RR: 0
Reply 9, posted (2 years 12 months 1 day 23 hours ago) and read 4939 times:

The company set records for full planes, fares and revenue. The future looks very good for WN and I think airtran will be a very valuable addition in the long run and a good move for the airline.

User currently offlineFL787 From United States of America, joined Aug 2007, 1540 posts, RR: 12
Reply 10, posted (2 years 12 months 1 day 23 hours ago) and read 4911 times:

Personally I'm shocked by FL's contribution to WN's profits. On the conference call CFO Wright said of the $121 million dollar profit, $17 million was from FL. I really expected FL to lose money given where fuel was at for most of the quarter and the fact that FL's schedules weren't really tinkered with during the lame duck period.


717,72S,732/3/4/5/G/8/9,744,752/3,763/4,772/3,D9S/5,M8/90,D10,319/20/21,332/3,388,CR2/7/9,EM2,ER4,E70/75/90,SF3,AR8
User currently offlinebond007 From United States of America, joined Mar 2005, 5401 posts, RR: 8
Reply 11, posted (2 years 12 months 1 day 23 hours ago) and read 4904 times:

Quoting tommytoyz (Reply 7):
An expense is an expense. The number of expenses that happen only once is unlimited anyway. So every quarter a company can have a series of new "one time" expenses - forever. On the flip side, WN's successful fuel hedge dept. is not a one time thing and a real asset to the company. Just because that dept. has nothing to do with operating the aircraft or airline, does not mean the money it steadily earns should be ignored nor that they are not a part of the company. Money earned is money in the bank and that dept. has a history of earning money via fuel hedges for WN.

I agree. I'm always humored by the "...but without fuel hedging they would..." comments by analysts or a.netters. They did fuel hedge, other airlines didn't, and it was a business decision that helped make bigger profits.

What I really wonder is what would happen if WN made a loss because of fuel hedging. I really cannot imagine folks saying "Well, OK, they lost $200 million BUT if they didn't hedge fuel they would have made a profit ... so they're doing great!" ....hmmmmm


Jimbo



I'd rather be on the ground wishing I was in the air, than in the air wishing I was on the ground!
User currently offlineFL787 From United States of America, joined Aug 2007, 1540 posts, RR: 12
Reply 12, posted (2 years 12 months 1 day 22 hours ago) and read 4727 times:

Also I haven't seen anyone mention it but WN announced that they are leasing 5 additional 738s next year for a total of 25.


717,72S,732/3/4/5/G/8/9,744,752/3,763/4,772/3,D9S/5,M8/90,D10,319/20/21,332/3,388,CR2/7/9,EM2,ER4,E70/75/90,SF3,AR8
User currently offlineAtrude777 From United States of America, joined Aug 2003, 5692 posts, RR: 52
Reply 13, posted (2 years 12 months 1 day 22 hours ago) and read 4644 times:

Quoting FL787 (Reply 12):
Also I haven't seen anyone mention it but WN announced that they are leasing 5 additional 738s next year for a total of 25.

On the earnings call or something? That wasn't revealed internally, interesting.

Alex



Good things come to those who wait, better things come to those who go AFTER it!
User currently offlinepoint2point From United States of America, joined Mar 2010, 2741 posts, RR: 1
Reply 14, posted (2 years 12 months 1 day 21 hours ago) and read 4581 times:

Pretty good, WN, and congrats on another profitable quarter....

Maybe contrary to everyone's thinking here, WN is making tons and tons of money in DEN...   

...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?...?


User currently offlineFL787 From United States of America, joined Aug 2007, 1540 posts, RR: 12
Reply 15, posted (2 years 12 months 1 day 21 hours ago) and read 4575 times:

Quoting Atrude777 (Reply 13):
On the earnings call or something?

Mentioned there but it's also on the future deliveries chart towards the bottom of the press release:

http://finance.yahoo.com/news/Southw...ts-prnews-3359036764.html?x=0&.v=1



717,72S,732/3/4/5/G/8/9,744,752/3,763/4,772/3,D9S/5,M8/90,D10,319/20/21,332/3,388,CR2/7/9,EM2,ER4,E70/75/90,SF3,AR8
User currently offlineEA CO AS From United States of America, joined Nov 2001, 13518 posts, RR: 62
Reply 16, posted (2 years 12 months 1 day 21 hours ago) and read 4552 times:
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Quoting AWACSooner (Reply 2):
But...but...how could they make a profit without charging for bags?

It's never been about not making a profit without charging for bags, but rather that they're leaving a SHITLOAD of money on the table by not charging for bags. They'd have likely doubled that profit (or more) if they charged just twenty bucks a bag.



"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
User currently offlinelaxboeingman From United States of America, joined Mar 2008, 538 posts, RR: 0
Reply 17, posted (2 years 12 months 1 day 21 hours ago) and read 4505 times:

Good job WN. This is great for them. They certainly know what they are doing...get the pax from point A to B via short hauls. They are very good.

Thank you for all questions/comments,

laxboeingman



The real American classics: LAX and Boeing.
User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5454 posts, RR: 29
Reply 18, posted (2 years 12 months 1 day 21 hours ago) and read 4434 times:

Quoting EA CO AS (Reply 16):
It's never been about not making a profit without charging for bags, but rather that they're leaving a SHITLOAD of money on the table by not charging for bags. They'd have likely doubled that profit (or more) if they charged just twenty bucks a bag.

I won't disagree with what you say, but I absolutely make a decision to fly WN vs AS based on the fare + bag fees. WN fares tend to be a pinch higher, but after a famly of four and bags the AS itinerary tends (for us) to be an extra $100-$200 more. For a 2-3 hour flight, it just isn't that important which carrier we fly.

-Dave



Next Trip: SEA-ABQ-SEA on Alaska
User currently offlineexFATboy From United States of America, joined Jul 2003, 2974 posts, RR: 9
Reply 19, posted (2 years 12 months 1 day 21 hours ago) and read 4396 times:

Quoting EA CO AS (Reply 16):
They'd have likely doubled that profit (or more) if they charged just twenty bucks a bag.

But as passengers have become used to the bag fees, they look more at total expense - it's quite common for Southwest to have advance-purchase fares that are the same or higher than most other airlines, and "bags fly free" makes them more competitive, especially with baggage-intensive passengers such as cruisers, golfers, skiers, etc. If Southwest introduced bag fees, they'd likely have to reduce at least some fares or give up market share, so while a bag fee could contribute to the bottom line, I think it unlikely that the impact would be as large as you might think.


User currently offlinemacsog6 From Singapore, joined Jan 2010, 525 posts, RR: 0
Reply 20, posted (2 years 12 months 1 day 20 hours ago) and read 4331 times:
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Quoting EA CO AS (Reply 16):
They'd have likely doubled that profit (or more) if they charged just twenty bucks a bag.




Not with the amount they would have to spend to upgrade their antiquated IT systems. Their IT staff readily admits the primary reason they do not charge a bag fee is that their systems can not handle it. WN has put the bucks into airframes so they could expand, a good idea in my mind, but their systems, including their website, lag the industry.

But I still fly them and enjoy doing so.



Sixty Plus Years of Flying! "I fly because it releases my mind from the tyranny of petty things." - Saint Ex
User currently offlineSANFan From United States of America, joined Aug 2006, 5363 posts, RR: 12
Reply 21, posted (2 years 12 months 1 day 20 hours ago) and read 4269 times:

Quoting macsog6 (Reply 20):
but their systems, including their website, lag the industry.

Maybe another reason they have good, healthy profits -- not putting tons and tons of money into the latest, newest, most cutting edge IT stuff!?! (Or into IFE for that matter...)

Their res system seems to get people booked, transported, and off at their destination -- to claim their "free" bags. And the pax on WN seem to survive the flights okay without carrier-provided TV, movies, games, music, or ordering drinks and peanuts from their (unassigned) seats.

Hmmmmm, kind of old-fashioned. Kind of highly successful and rather profitable... Apparently a lot of people are quite satisfied with WN...

bb


User currently offlineLoneStarMike From United States of America, joined Jul 2000, 3811 posts, RR: 34
Reply 22, posted (2 years 12 months 1 day 20 hours ago) and read 4222 times:

Quoting macsog6 (Reply 20):
Their IT staff readily admits the primary reason they do not charge a bag fee is that their systems can not handle it.

If that's truly the case, how do you explain this from southwest.com's checked baggage page


Baggage Allowance:

Southwest allows two (2) checked pieces of baggage per ticketed Customer. Size and weight limitations apply.
Excess Baggage:

Your 3rd through 9th bag or item will incur a charge of $50 per piece, and any bag or item thereafter will be $110 per piece.

Weight and Size Allowance:

Maximum weight is 50 pounds and maximum size is 62 inches (length + width + height) per checked piece of luggage. Overweight items from 50 to 100 pounds and oversized items in excess of 62 inches but not more than 80 inches (e.g.; surfboards, bicycles, vaulting poles) will be accepted for a charge of $50 per item.

LoneStarMike


User currently offlinetyler81190 From United States of America, joined Feb 2009, 676 posts, RR: 0
Reply 23, posted (2 years 12 months 1 day 18 hours ago) and read 4053 times:

Quoting bond007 (Reply 11):
They did fuel hedge, other airlines didn't, and it was a business decision that helped make bigger profits.

They did not do the Hedging, they bought it from NW. One of the stupidest things NW ever did.

WN was only smart for buying the hedges, they did NOT create them...


User currently offlineEA CO AS From United States of America, joined Nov 2001, 13518 posts, RR: 62
Reply 24, posted (2 years 12 months 1 day 15 hours ago) and read 3858 times:
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Quoting SANFan (Reply 21):
Apparently a lot of people are quite satisfied with WN...

...except their shareholders.  



"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
25 WWTRAVELER99 : Really? Then I suppose their system is so antiquated that it only allows them to charge for the 3rd or 4th bags! WW
26 FlyPNS1 : And what about the shareholders at all the airlines that do charge for bags, but whose stocks perform terribly?
27 Post contains links MaverickM11 : Even adjusting UA's margin it still leaves WN near the bottom. Also troubling, "For July 2011, passenger revenue per ASM (PRASM) is estimated to have
28 LoneStarMike : Aren't unaccompanied minor fees, pet fees and Early-Bird check-in fees considered ancillary fees? LoneStarMike
29 PlanesNTrains : If things are as antiquated as they are implied, I will be watching with interest when they finally do migrate to a new system. That could turn into
30 lucky777 : Actually i'm pretty certain they purchased Delta's fuel hedges.
31 Post contains links LoneStarMike : OK, I'm a little confused here. Southwest first began hedging fuel in 1994. source Are you guys saying that those original fuel hedges from 1994 were
32 tommytoyz : I think you are wrong on that. They would have had fewer passengers and those that did fly would have checked in fewer bags. Also consider little but
33 tommytoyz : Actually broker/dealers trading on the Chicago exchange in commodities and futures and Wall Street broker/dealers trading in securities and derivative
34 Post contains images PlanesNTrains : Interesting question, but at the end of the day, WN was managed well enough that they were able to take the hedges - and apparently profit from them
35 MaverickM11 : If WN is averaging a 5% margin, roughly speaking they can either charge one person $25 for a bag or they have to find about 4 incremental passengers
36 tommytoyz : 1. What do you make of possible longer turn times when the cabin is always stuffed to the gills with more carry on baggage due to charging for checke
37 ScottB : It isn't just about market shift, it is also about the ability to maintain and increase fare levels and revenue mix. Southwest's RASM fell by 1.0% be
38 EA CO AS : ALK shareholders are quite pleased, actually. LUV shareholders, on the other hand, have been quite restless for the last decade or so, and most notab
39 ScottB :
40 tommytoyz : I think stealing market share has something to do with that: Southwest's share of the domestic market (by passengers boarded) increased from 15.00% i
41 MaverickM11 : You're missing two very critical pieces of the equation, that I think far outweigh any talk of bag fees. 1) You are comparing peak or near peak years
42 Johnberg : Disagree. Southwest had fast turn times before anyone started charging bag fees. I would say checked baggage has no impact on turn times. Instead car
43 PlanesNTrains : Higher Fares & No Bag Fees Lower Fares & Checked Bag Fees Yin Yang One thing is that the higher base fare is, for lack of a better term, non-
44 tommytoyz : And your point is what? That WN continues to make good business decisions in changing markets, as they always are changing?
45 tommytoyz : Check and see who has faster turn times. And then I suggest, you think of the reasons for that.
46 Post contains images norcal : Absolutely, I jump seat a lot and have been on a whole bunch of different legacy carriers and low cost carriers. In my experience Southwest has the f
47 delta2ual : WN should just charge 10 bucks for bags. They would still be lower than competitors, but it could bring in a nice extra chunk of change. This would h
48 Post contains images EricR : You are criticizing WN for leaving revenue on the table by not charging baggage fees, yet you also criticize them for increasing revenue by raising a
49 bobnwa : Isn't the majority of WN profit from the fuel hedging business they are in? I'm not talking about the hedging of their own fuel usage, but the hedgin
50 Post contains links EricR : According to WN's 10-Q filed on August 5th, the Q2 figures "include Airtran's financial results since May 2nd, 2011". In Q1, 2011, FL had an operatin
51 justloveplanes : Exactly. Bottom line is profits, but value is also found in the strength of the company, I.E. low debt to asset ratio. This last figure is where WN i
52 Post contains images MaverickM11 : I think it was pretty clear what my point was. It was even enumerated. Of course WN has shorter turn times, but that's not related to bag fees, not e
53 ScottB : I suppose that "annhiliat[ion of] premium demand, particularly long haul" explains the drastic cuts in domestic capacity undertaken by "longhaul Amer
54 EA CO AS : Hardly. They don't equal one another - bag fees, for the most part, have not resulted in people booking away from their preferred carriers. They have
55 PlanesNTrains : The past two trips that my family has booked have gone WN rather than Alaska (our preferred carrier, if you will) because the bag fees pushed Alaska
56 EA CO AS : And I'm not saying you're the only one that makes that sort of comparison. I am, however, saying that the vast majority of people don't, and once aga
57 Delta2ual : Also, many frequent flyers have ways around the bag fees anyway. I personally think it was a great marketing strategy for WN. They have also done a p
58 wwtraveler99 : I think that travelers with bags fall into one of the follow catagories: 1. Business traveler, with a preferred carrier, isnt charged for bags. 2. Bu
59 tommytoyz : I asked what your point was, because you argue against yourself. In criticizing WN, you actually argue in favor of WN, because you describe how the p
60 Post contains images MaverickM11 : That disappearance in the front cabin extended down to domestic, when corporate travel generally banned front cabin travel across the board. For peop
61 cubsrule : I wonder whether some of the added "business" revenue in the 2007 to 2009 time period was due to business travelers "checking out" WN as belts tighte
62 Post contains links tommytoyz : I would like to know if you can link to any hard numbers. It is counter intuitive for me and others here and in looking at this topic I found several
63 tommytoyz : This does not necessarily mean legacy turn times have slowed - though I suspect they have, but it might have slowed WN turn times, which might have co
64 EA CO AS : Most frequent fliers actually APPRECIATE the bag fees. Want to know the main reason they cite? "I was getting tired of my last-minute, high-value tic
65 wwtraveler99 : I am glad to see that you are one of the many who actually believe this statement. If this was actually a subsidized cost then you would have seen ai
66 FlyPNS1 : I've heard many business travelers grumbling though as flights get delayed because people are trying carry-on everything but the kitchen sink. Or if
67 Post contains images cubsrule : This has given me pause about automatically booking away from 50 seaters and larger Dash-8s/CRJs, as the valet check option can be a significant time
68 exFATboy : I wouldn't describe the bag fees as "gravy", but more as an indirect fare increase directed more toward lower-fare passengers. Consumer psychology is
69 bond007 : This is nothing but the fault of the airlines. The airlines have carry-on policies that they continue to fail to enforce. If they enforced the one ca
70 tommytoyz : Yes, but then you would annoy the business traveler who has maybe a roller and his laptop and a briefcase. I think WN's policy is just much better. T
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