Why did Southwest Airlines publish a blog post this weekend explaining their recent earnings report? The post appears to be directed at employees, confused that the company touted its 70th straight quarter of profitability, while also reporting a loss.
It’s not that complex, really. The company “made a profit running our airline”, but had to book a big loss when it had to mark its fuel hedges to market. It seems that, for once, it got caught on the wrong side of an oil trade, when prices took a dive. The post describes it as a “paper loss”.
But we don’t recall similar statements when their fuel hedges proved crucial in allowing the company to stay profitable in recent years. They never said: Well we made money this quarter, but if we hadn’t bought those hedges back in the day, then “running our airline” wouldn’t have been profitable, just like all those other money-losing carriers. And unless Southwest plans unwind all of its hedges, and let itself be exposed to the vagaries of the oil market, then it’s silly to think of this as simply a one-time deal.
And now we must wonder whether the media’s attitude towards Southwest will change. The business press has lauded the company as brilliant for years (see representative example here, back from 2003), but could it be that the company just, you know, made a lucky bet?
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.