I'd have to agree with
FWAAA. The recent increase in oil prices and the fact that oil finally hit the psychological $70 per barrel yesterday just killed
ALL the airlines yesterday. B6, CO, and AA were all down ~10% yesterday. So WN's 4% drop wasn't too bad in comparison. I'm actually surprised LUV was up so much today, oil is up over $71 today, but I guess LUV's rise is probably because the overall market was up so much today.
I still don't know what to think of LUV's earnings on Thursday. The picture has been too murky the last couple quarters. What I would predict as happening hasn't been happening which is one of the reasons I got out of LUV the day before the Q4 Earnings release in January. The picture is just WAY too murky when you add in all this "unrealized income" non-sense as well as the random numbers that SWA seems to pull out of their butts lately such as the average fare numbers as well as fuel costs that I mentioned in Post #59 and part of which I will quote below:
Originally Posted by gregorygrady
They spent 30%, or $92M, more on fuel than I calculated. BTW, I calculated an average fuel price of $0.94 per gallon and SWA reported an average fuel price of $1.22. Now that $1.22 number in itself is an absolute joke.
The sad thing is that there is no way for SWA to justify that number due to the fact that they have listed the price they paid for unhedged fuel during the quarter. In their Q4 Earnings Report it lists an unhedged fuel price of $2.006 per gallon. Now their HEDGED position was widely known (and confirmed by SWA) to be 85% @ $26 a barrel, which equates to $0.78 per gallon.
I’m gonna go thru the math for the bean counters over at SWA that obviously didn’t graduate from 1st grade:
(.85 x $0.78) + (.15 x $2.006) =
$0.663 + $0.3009 =
$0.96
$0.96 per gallon is that average fuel price SWA should have paid by THEIR OWN reported numbers (and thats awfully close to the $0.94 cents per gallon that I calculated they should be paying during Q4). What hat did they pull the number $1.22 from? Like I said above, that fuel number trickery alone slashed $92M from the Q4 income, MORE THAN THE TOTAL QUARTERLY REPORTED NET INCOME COMBINED OF $86M!!!!!!
So do to the lack of clarity in LUVs recent numbers, I got out while I could. I didn't think LUV would be able to make their numbers (15% increase in Earnings) this year when in reality that would actually have to be more like a 100%+ increase in Earnings due to the $500-600M higher fuel bill this year. I haven't done my homework on SWA this quarter (heck, I haven't even listened to the last Quarterly Conference call yet!) and I won't have the time to before Thursday unfortunately. However I do agree with a couple of the posts above that SWA really should have a huge competitive advantage as the price of oil gets higher and higher. I stand by my original opinion that SWA would do great if oil went up to $100 a barrel. The market may not agree with me (at least at first), but that's my opinion. Anyways, good luck to all the longs (and "fare-increase hedgers") here on Thursday! ^