Southwest increases it's hedges

[wheelsup]

I'm not an accountant nor do I understand much about economics, but why are these huge oil companies able to get away with the price of their oil set so outrageously high.

Because when people like you and I go to the pump, we say %$(G $2.60/gal? That's %$(% rediculous, and then swipe our Visa and pump it into our suburban, hummer, or even hybrid.

The prices are high because we have no choice but to buy gas. Atleast right now. Purely electric cars won't come about until some infrastructure gets in place like plugs at the workplace to charge them for the drive home, etc. Until you can make a choice as to what you use, you have to use gas. And they can charge whatever people are willing to pay.

At what point will people simply say I'm not going to pay $xx/gal for gas, I'd rather walk to work or buy a golf cart? Who knows. We'll find out soon, I think.

~wheelsup

 

[SWA/FO]

thanks dude.... its sinking in

 

[Flopgut]

?

How did SWA manage to enhance the fuel hedges? They swapped some short term for some longer term/duration hedges at a slightly higher amount? Is that right? Are there any hedges available for outright purchase below $50? If there is any sort of hedges available, airline management needs to zero in on them! My airline wants to instead make expensive investments in the regional carrier and the foriegn carrier and save some money for the day they can outright purchase some South American airline! They need to be "inspired" to fixate on fuel just like SWA!

On a side note: How is what is going on with fuel not translateable to the airline business? I mean, NWA had a bad day in DTW that was wx induced and almost immediately we had a passenger bill of rights! Why is Congress not pressing for a energy users bill of rights? Big oil would have you believe the wx is a determining factor in much of today's environment. Of course, I do know that the prevailing mentality in Washington is to keep these energy prices high, but why are we (this industry) not being more vocal on this issue?

 

[canyonblue]

If the market were to move in the right or wrong way, it is possible that SW could pay more for its fuel than an airline that has not hedged any of its fuel costs.

If Oil were to move in the opposite direction we would then just cash out the hedges and even make a profit at that.

 

[apdsm]

For those of you interested, here is a document that describes fuel hedging strategies. Boring stuff to most, but some might be interested.

http://www.kellogg.northwestern.edu/research/fimrc/papers/jet_fuel.pdf