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Earnings: Southwest Down(!), Google Up

We can all agree that it qualifies as news: For the first quarter in 17 years -- 17 years -- Southwest Airlines reported a quarterly loss today.

The reason: Southwest gambled and lost on its jet fuel hedge. (Brilliant Forbes headline: "Southwest Flies Into a Hedge.")

Southwest, the on-time sector darling and model of efficiency, hedged its fuel bets, meaning it assumed fuel prices were going to continue rising like they did this summer. But when rapidly falling oil prices dipped below the futures amount Southwest paid, the company suddenly found itself overpaying for jet fuel.

Such is the nature of futures.

If you back out the $247 million charge Southwest had to record for its bad bet on hedges, the airline actually recorded a slight profit for the quarter.

Speaking of profits, they were up at Google during the third quarter, compared with the same period last year.

The search ad giant released its earnings just after the markets closed today, and they beat analyst expectations.

This is good news for Google, which has watched its value drop by half over the past year. Shares of Google closed at $353.02 today; in early November last year, Google peaked at $732.94.

Further, the unrivaled online ad titan could face a tough 2009. Ad revenue forecasts for next year were already looking dim before the current financial crisis. What do businesses in contraction cut first? Advertising and marketing budgets.

-- Frank Ahrens

By Frank Ahrens  |  October 16, 2008; 4:44 PM ET
Categories:  The Ticker  
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Next: October 16, 2008


I believe that the same thing happened with United. It's a big problem, these oil prices going down so fast. I guess there are bigger problems when you think about it. It's good news for the military, because they burn tons of fuel every minute of every hour of every day. After the election, advertising and marketing is going to be a blood bath. They live and die by the elections. There will still be ships on the water, so what can you do? The good guys always win and that's why they are the good guys. The terrorists wanted to destroy capitalism and capitalism is destroying the price of oil. Capitalism makes things move fast. Think NASCAR. The NASCAR voter is all but being ignored, like we are second class citizens. We were trying to get a NASCAR track built around here and it still might happen. The airport has gone down the drain and they we're betting the future on Southwest. The other plan was to drill gas wells around the airport. Nobody bid.

Posted by: Night Mayor | October 17, 2008 4:40 AM | Report abuse

Hey Post. You should launch a NASCAR Browser. That brings in big site traffic and the potential for ad revenues is high. You have nothing to lose or everything to lose depending on how you look at it. We can go Post Bootleg and speed up growth. Life in the fast lane beats slowing things down until you are crawling. Good luck Post!

Posted by: Night Mayor | October 17, 2008 4:56 AM | Report abuse

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