The fuel hedge discussion is always interesting. Almost like it is magic or something in the eyes of those who aren't famliar with the concept. Nearly all major European, Far East major carrier have used fuel hedges for many years....not just near term but more importantly long term....remember these countries pay even higher for jet fuel many times & suffering shortages much worse than US carriers do.
Which airlines have the least amount of fuel hedges historically, year over year? The US. It hasn't been a part of their regular strategy pre-911 for who knows what reason....at SWA it has been. The '06 hedges we have now were bought '01 and staggered for years going forward, the same could be said of the '07 hedges & the '08....last quarter was the first time '10 hedges have shown up on the ledger...my poor memory recalls says they were in the low 60's....anyone want to bet at the end of the Q3 there will be more hedges purchased for '10 & probably at a lower price with the recent fall in oil? I'll bet that in '10, check back in on FI & see if there are folks saying "SWA's hedges are going to run out in '15.
Repeat after me, "it is a long term strategy, it is a long term strategy,...." buy on drops in the market, take calculated risks, highly trained & very smart folks who understand this inside & out (we have...for those who have suggestions on how to do it better, please forward your resume to SWA at
[email protected] , I'm sure they have some openings). This isn't a business for the feint of heart or weak mind. One also needs to have cash to do it...we're fortunate that we do have the cash.
Costs are important & there are many things going forward to control those costs....starting to get -300 winglets next year to cut down fuel costs, lower maintenace costs with the new maintenance program maturing, fewer mx incidents as a result of operational changes to flight ops, new vendor for cups that resulted in dollar savings (not much but we count nickles too), testing of RFID bag tags to reduce the number of lost bags by better tracking of the bags in our system will increase savings due to fewer lost bags, other uses of technology to cut training costs in the years to come (distance learning) & many more innitiatives that are constantly coming forward.
There will be efficiencies proposed by both sides in the upcoming negotiations that will be looked at....what will come out of that is uncertain but one thing that will most likely happen is that SWA will have an even more efficient operations & SWA employees will be compensated fairly for their hard work. Rewarding producitivity isn't a bad theme....fuel hedges are but one piece of that pie...fortunately we're stil buying those pieces & will continue to do so for years to come.
I know my drivel won't stop the debate from those who know more....I'll move to the side and allow the experts to chime in. Cheer, Happy Labor Day to all us Laborers!!!
