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SWA named Airline Champ of 2007 by WSJ. GL how did Delta do!

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Pricing power dies when SWA fares are routinely the same or higher than other LCC's and Legacies. The market takes some time to adjust for $100 plus/barrel. If in six months it is still there or higher and stays up or near there, the oil futures will adjust up accordingly, essentially removing SWA's ability to hedge at the lower cost per barrel. And yes I realize hedges are just investments in future oil prices to offset higher prices should they occur. It works well as long as oil bounces down below 60 or 70 from time to time and thats when SWA uses its healthy balance sheet and cash to lock in. It is nothing more than an investors game. Its not the oil/gas that goes in the planes. To be sure oil had never been as high as it has been now. If it stays or creeps higher SWA loses its advantage. Spin all you want. These are the facts. I am not thrilled about 100/barrel oil but it will even the playing field....southwest wont be offering as many $29 flights, that is for certain.
 
Sedona,
Actually, if oil stays or creeps higher our hedging advantage grows. If oil goes lower we make more with our operation. This is what it means to hedge. Look at our hedging and operational performance over the last decade. This is not spin, just facts.

The price of oil fluctuates. To paint a scenario where it doesn't is to ignore market behavior. The futures price is even more volatile. This exact conversation plays out every time SWA announces a profit. Yet somehow the next quarter, year whatever .... the hedges are still there.

http://forums.flightinfo.com/showthread.php?t=92247&page=2&highlight=swa+profit

http://forums.flightinfo.com/showthread.php?t=97179&highlight=swa+profit

http://forums.flightinfo.com/showthread.php?t=104592&highlight=swa+profit

http://forums.flightinfo.com/showthread.php?t=108175&highlight=swa+profit

In everyone of these threads someone predicts the end of SWA's fuel hedge advantage. One of these threads go back to 2004. If oil climbs the current thread will join this list.

The only way SWA losses if fuel hedge advantage is if the price of oil falls. When this happens our profit will come from something else - can you guess what that might be?
 
Hedges are plainly a way SWA predicts future cost to price their product. Of course this has been pointed out over and over again but some it doesn't register.

If SWA didn't have hedges they would price their product higher.

Yes they do have that kind of pricing power and its consolidating the industry.


Uhh, no they wouldn't and thinking you do vs actually being able to is not the same thing. Sure, anyone could, but to sustain it is not dealing in reality. See SWA's latest attempt to garner market share with $29 fares in select cities. The only reason you do this is to bring paxs back that are flying other airlines. Even with fuel hedges, this is not a profitable operation. It may have been in 1999, but the landscape has changed.

Consolidation may occur for one reason and one reason only.......money to be made by a few hundred select individuals. Has absolutely nothing to do with any airline.
 
I think SWA is a very well run airline, but I hope everyone knows that the majority of their hedges came from that idiot Don Carty selling them from AMR.
 

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