Rising oil prices are usually bad news for airlines, so with crude trading at an all-time high many carriers are likely hurting given the fact that fuel is one of the industry's largest expenses -- but not Southwest. According to Reuters, the carrier, which is the lone big-time price hedger among the U.S. airlines, has hedged 90% of its anticipated fuel needs at an average cost of just $51/bbl., well below the record $93.20 crude traded at on Monday. Southwest's hedging success, Reuters said, is evident in its Q4 fuel-price forecast as it expects to pay $1.80/gallon of jet fuel, which is some $0.50/gallon less than most carriers and $0.70 below UAL Corp.'s forecast. AMR Corp., Reuters noted, has hedged about 40% of its expected Q4 needs, capping prices at $69/bbl. Nevertheless, even as other carriers are forced to raise prices because of rising fuel costs, Reuters said Southwest likely will be unable to step in and cut fares because it has the fastest-rising non-fuel costs among the carriers.
Commentary: Earnings Improvement In The Airline Business Continues • Is $100 a Barrel Conservative? • Southwest Airlines Should Put LUV in Its Logo
Stocks to watch: LUV. Competitors: AMR, JBLU, CAL, UAUA, DAL, LCC
Earnings call transcript: Southwest Airlines Q2 2007