Many posts have noted that the playing field will even out when SWA's fuel hedges run out--but when is that?
SWA has stopped hedging. SWA is still using hedges to control fuel costs. The hedges are not as cheap as they used to be--but there's still a sizeable difference in locking in fuel prices down the road. If oil prices became very stable then hedging would be harder with small margins.
Two things could happen to change the playing field:
1. Heating oil (hedge) prices falling rapidly--so fast SWA gets trapped with hedges more expensive than open market. In this scenario, SWA could be a loser.
2. Fuel prices fall to low levels allowing all lower prices. In this scenario, SWA would lose its advantage and more airlines could make money at current yields.
SWA will do whatever it takes to make a profit. If they lose money for 1 quarter because of fuel prices you can bet they will make the necessary adjustments to make a profit the following quarter regardless of fuel prices.
In case you haven't noticed the Middle East is becoming more UNSTABLE every day when tends to keep oil prices high.The news is reporting that we already have Special Forces in IRAN and this is USUALLY a prelude to some type of military action.
If (WN) lose(s) money for 1 quarter because of fuel prices you can bet they will make the necessary adjustments to make a profit the following quarter regardless of fuel prices.
