However, even if we assume SWA wouldn't have made a profit without hedging, the fact remains that through astute business planning, they did remain profitable as an organization and are able to survive and thrive without implementing tactical nuclear strategies such as seeking employee givebacks or worse, resorting to extended stays in bankruptcy.
No, What is TRUE is that SWA lost money on the AIRLINE business, and made money in the INVESTMENT business. Were the hedges smart? Sure. Maybe the rationale was that if fuel prices went down, the majors would not have force paycuts and SWA could have then been able to afford a loss on the hedges. It worked for them...this time. But would you feel comfortable living off of just an investment income in your personal life? Funny you forget history, SWA HAS had to go to the employees for givebacks. SWA reported losses just like everyone else before that time. I guess it's the legacy carriers turn to undercut your payrates for 10 years.
Unlike most businesses, SWA management has openly stated that it believes "the greatest act of disrespect a company can show its employees is to fail to make a profit."
WADR, that's just a bunch of cumbaya BS they are spewing at you so they can get your cooperation when it's your turn to bend over (within 2 years, but don't believe me, I was wrong when I said NWA's day was comming two years ago)
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I believe that without the hedges, SWA would be a vastly different airline than it is right now, but still profitable.
See, that is one of the falacies of the "econ 101" crowd. Your investment decisions should NOT be based on how your hedges went. If a route is profitable WITHOUT hedges, you add it. You get the income from the hedges WETHER YOU BUY GAS OR NOT. You should therefore mangage the airline INDEPENDENT of the hedges.
Now what MAY be more true is that the hedges masked an underlying flawed business plan going forwrd, and the cash inflow from the hedges helped SWA maintain a higher credit rating, thus making expansion cheaper. In any case, if in Mr. Kelly's words he would quit taking deliveries of jets if SWA was not profitable, then he should be giving Boeing a call, because at best the AIRLINE was breakeven for one of the busiest Q's of the year.:unsure:
Based on the 2005 global cost of living rankings, UAL's hubs all fall in the top 100 most expensive metro areas in the WORLD!
Los Angeles - 44
San Francisco - 50
Chicago - 52
Washington DC - 78
Denver - 94
No wonder I carry so many UAL pilots on my jumpseat going to/from work ... few of them want to live there!
This may come as a surprise to you (but probably not since you've had "econ 101") places have higher costs of living in most cases because PEOPLE WANT TO LIVE THERE. Having a good paying job is a big driver in that. If not for high paying jobs, no one would move in, people would move out, and the housing/land markets would COLLAPSE (thereby LOWERING the cost of living, examples? see SWA dominated cities....). Many airline pilots, because they CAN, commute to these cities and live where things are cheaper due to the lack of a strong economy. Maybe that's why you see so many jumpseating on SWA jets. Kind of goes with my hypothesis. You ran the global carriers out (or induced cutbacks) and caused economic ruin for the cities. Pilots, with the ability to commute play an arbitrage game with housing and therefore end up commuting to the places with good economic condictions (ie the global carrier hub).