Southwest Airlines borrows $600M

“It's due to uncertainty about the economy and the credit market and the high price of fuel.”

Southwest Airlines Co. said Monday that it borrowed $600 million from Citibank and seven European banks to bolster its cash position because of uncertainty about the economy. via Valley Morning Star

[2 cents]

wow. This does not say much for the future of the rest of us.

[Rev Thrust]

couldnt have said it better myself...not a good sign for us all!

[jay]

I think they are going to buyout another airline.

[Tim]

It could be the daunting upfront cost of a merger, that Gary didn't want to think about. But too secure future revenue, I think southwest needs about 10 or more new cites. Or it could be too offset contract problems. Or an investment on future hedges. Just a thought. If gas keeps going up at this rate. 600 million dollars now could cost over a 1.5 billion in the future. Just brain storming, dont blow me up. LOL

[Old Jetbag]

Tim wrote:

It could be the daunting upfront cost of a merger, that Gary didn't want to think about. But too secure future revenue, I think southwest needs about 10 or more new cites. Or it could be too offset contract problems. Or an investment on future hedges. Just a thought. If gas keeps going up at this rate. 600 million dollars now could cost over a 1.5 billion in the future. Just brain storming, dont blow me up. LOL

Not at all! Trust me borrowing like that while the interest rates and credit rating is good is not a bad thing. Fuel is still going up and NO ONE knows where or when it will stop! I think maybe Southwest is doing a smart thing by keeping cash on hand for upcoming events. All of this in the event that there is NOT a terrible Hurricane season or some other unforseen disaster. Smart! I wish other carriers thought ahead. I wish EVERYONE in the industry good wishes. It is going to be one long, hot, mean, and maybe expensive summer for us all. I may need to get my zanex prescription filled.

[Chris]

Old Jetbag wrote:

<quoted text>
Not at all! Trust me borrowing like that while the interest rates and credit rating is good is not a bad thing. Fuel is still going up and NO ONE knows where or when it will stop! I think maybe Southwest is doing a smart thing by keeping cash on hand for upcoming events. All of this in the event that there is NOT a terrible Hurricane season or some other unforseen disaster. Smart! I wish other carriers thought ahead. I wish EVERYONE in the industry good wishes. It is going to be one long, hot, mean, and maybe expensive summer for us all. I may need to get my zanex prescription filled.

OldJetBag, you are very intuitive with respect to the rates. It doesn't hurt to have a strong credit rating like SWA either. The industry might see a conservative expansion of SWA in the works. Even when their fuel hedging expires, they will still be tough to beat. The legacy carriers can't come close.

[Musician]

I suspect it's just Southwest's general cautious nature. When 9/11 hit, they did the same thing ... preparing for what they saw as tough economic times.

Other airlines don't do it for the same reason don't hedge more aggressively ... weak balance sheets.

[Chris]

Musician wrote:

I suspect it's just Southwest's general cautious nature. When 9/11 hit, they did the same thing ... preparing for what they saw as tough economic times.
Other airlines don't do it for the same reason don't hedge more aggressively ... weak balance sheets.

Leaner equals meaner I always say... Funny how these mergers seem to be accomplishing the opposite affect.

[Old Jetbag]

Chris wrote:

<quoted text>
Leaner equals meaner I always say... Funny how these mergers seem to be accomplishing the opposite affect.

Also amazing how some of the carriers who had "lower balance sheets" somehow managed to find the money for outlandish bonuses and perks. I see no one else benefiting from "merger mania" but the executives. Another thing you do not see Southwest Management doing, lavishing incredible rewards on themselves.

[Chris]

Old Jetbag wrote:

<quoted text>
Also amazing how some of the carriers who had "lower balance sheets" somehow managed to find the money for outlandish bonuses and perks. I see no one else benefiting from "merger mania" but the executives. Another thing you do not see Southwest Management doing, lavishing incredible rewards on themselves.

True. Southwest's Kelly ranks 10th among the major carriers for total compensation. He also brings over 20 years experience to the position. Until this year, when he received over a $mill in compensation and bonuses, he averaged $628 thousand compared to $1.6mil for his competitor executives. Tilton from UA received over $40mill in 2006 for his termination of employee pensions while simultaneously failing to curtail operating expenses and reinvest in the business. It used to be the norm to expect results in return for rewards, but the new complacency in the market these days has changed this tradition.

[jet75]

Southwest has the best team in the industrie, if they borrowed the money you can bet it will be well spent. Maybe a buyout, maybe expansion,could be they are looking to buy some new or older planes. 737s,757s 787s note how the money is coming from Europe.

[Musician]

jet75 wrote:

Southwest has the best team in the industrie, if they borrowed the money you can bet it will be well spent. Maybe a buyout, maybe expansion,could be they are looking to buy some new or older planes. 737s,757s 787s note how the money is coming from Europe.

I would guess that they will work very hard NOT to spend it. It's just 'insurance.'