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Southwest's And Legacies Fuel Hedging  
User currently offlineJacobin777 From United States of America, joined Sep 2004, 15375 posts, RR: 58
Posted (11 years 7 months 1 week 2 days 10 hours ago) and read 3186 times:

I found an article today about WN's fuel hedging strategy.....they've done a good job, where as the legacies (because of bankruptcies, bad judegement, etc) have not..

i would be curious about the other LCC's..

"Solid Southwest can afford to stay the hedging course. It already has hedged more than 80% of its fuel needs for next year with prices capped at the equivalent of $25 per barrel of crude, 60% in 2006 at $31 a barrel, and over 40% in 2007 at $30 a barrel. That's far below where the market is betting that oil prices will be. "


"Up the Irons!"
7 replies: All unread, jump to last
User currently offline7E72004 From United States of America, joined Mar 2004, 3587 posts, RR: 1
Reply 1, posted (11 years 7 months 1 week 2 days 9 hours ago) and read 3152 times:

Imagine if Southwest did not hedge...i think they would be in the same boat as the others quite possibly.

The next generation of aircraft is just around the corner!
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 11166 posts, RR: 52
Reply 2, posted (11 years 7 months 1 week 2 days 9 hours ago) and read 3127 times:

Some airlines have done a much better job blunting the impact of higher jet fuel prices by hedging those costs with futures contracts that allow them to buy fuel at below market rates.
Percent of fuel costs hedged in 2004.

--- Q2 -- Q3-- Q4
FL 25% 10% 10%
AS 40% 30% 31%
AA 16% _6% _6%
HP 35% 20% 10%
CO 80% 45% 45%
DL --0% --0% --0%
B6 44% 40% 40%
WN 80% 80% 80%
NW --0% - -0% --0%

Compared with Lufthansa (90 percent of this year's fuel bill), Air France (72 percent), British Airways (45 percent) and Virgin Atlantic (40 to 50 percent).

Soure: Lehman Brothers and MSNBC

If you have never designed an airplane part before, let the real designers do the work!
User currently offlineBurnsie28 From United States of America, joined Aug 2004, 7923 posts, RR: 8
Reply 3, posted (11 years 7 months 1 week 2 days 7 hours ago) and read 3008 times:

Wow NW at 0% and yet they are really in second place to losing less money shortly behind CO. I dont think all the reasons why airlines are in trouble was because of fuel, granted it is a large part, but NW shows that you dont need fuel hedging to do a good job.

User currently offlineGreasespot From Canada, joined Apr 2004, 3104 posts, RR: 19
Reply 4, posted (11 years 7 months 1 week 2 days 5 hours ago) and read 2922 times:

Losing Money is the busiest time of the year is "doing a good Job"???

Wow set the bar low or what.


Sometimes all you can do is look them in the eye and ask " how much did your mom drink when she was pregnant with you?"
User currently offlineJonnyboymia From United States of America, joined Sep 2004, 6 posts, RR: 0
Reply 5, posted (11 years 7 months 1 week 2 days 5 hours ago) and read 2898 times:

Hi forum,

Good topic, Hedging as we all know is like betting -and yes betting in your favour -South W have so far done a good job with this -yes it runs in there favour due to spiralling fuel costs -long term hedging again can go against you if the price of barrrels indeed falls -so yes at this point in time it does indeed look like a pretty picture. Again in their favour they are a domestic US carrier -so with good fuel experts can indeed "worst case scenario" future forecasts knowing what could or might put the price of keresene up -Now for an Intl carrier flying all over the world you will see less of a hedging habit, due to the fact foreign markets are slightly more volitile be it politcial or other influences etc etc....

User currently offlineJacobin777 From United States of America, joined Sep 2004, 15375 posts, RR: 58
Reply 6, posted (11 years 7 months 1 week 2 days 5 hours ago) and read 2879 times:

Jonnyboymia........welcome to airliners.net board......  Smile

Yes, hedging can be a bad thing......but good technical and good fundemental analysis can be used to guage future oil prices pretty accuartely, and thats why its good to hedge not a 100%, but maybe 50-75% of oil.........

as I mentioned in a previous disucssion and as 7E72004 mentioned above, if WN wasn't hedged, they would have been losing money also........

I wish I got to buy a few thousand barrels of oil at $25 right now, heck I'd be happy to sell it for $45-$50 and undercut everyone else........just call me J.R. Ewing....... Smokin cool

"Up the Irons!"
User currently offlineDutchjet From Netherlands, joined Oct 2000, 7864 posts, RR: 56
Reply 7, posted (11 years 7 months 1 week 2 days 5 hours ago) and read 2864 times:

Its very difficult to hedge fuel costs for an airline that is in poor financial condition - good credit is required and good financial resources are required, that reason alone could explain why some the US carriers have not hedged their fuel costs.

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