Fuel Hedging

[lostplanetairman]

Actually, Doug, a hedge just gives you the RIGHT to purchase a certain commodity at a certain price. If you buy hedges for oil at $40 a barrel for June deliveries and the price of oil declines to $35 a barrel, you are not obligated to actually purchase the oil at $40 a barrel.

See post #6! Been dere, done dat.

 

[Stone Cold]

I'm not saying that the brown trout forced other airlines to make mistakes, just that in order to compete with southwest's lucky break, some other airlines way of competing was to do things that ended up not working out so great.

To me that says alot about southwest's business plan... it was very good. Question is, when they are on equal ground again, will they still be the darlings of the wal-mart crowd?

Wonder what kind of other goodies management can come up with? Maybe it is time to go after the pilot's pay since they are actually compensated fairly well compared to other airlines?

Don't hate the playa just because they can run circles around you on the court!!!

Look back at the data. SWA has always done the same thing...used the same type of airplanes, and kept their business the same. I will generalize and say ALL (not true, but valid for the point being made) other airlines played games with each other, bought each other out of bankruptcy, merged, went under, and right before 9/11, almost all had big orders in for airplanes, incurring the debt to go with it.

Now, look at SWA and their prices. You have to go to their web site...why? Why don't they list on Orbitz, Expedia, name your web site??? Because their secret would be out. Compare them on average and they are usually higher in price than most other airlines. Granted, they do cherry pick some routes and compete very aggressively in certain markets. However, overall they have done what they have been doing for their entire existence.

Don't hate the playa...hate the game.

 

[CFIse]

Actually SWA could take their cash and speculate in currency if they wanted to. In that case they would be engaging in risky speculation.

They could take their cash and speculate in anything - corn markets, the 2:30 at Pimlico Park. But they don't, and neither does American speculate in the currency market. They sell tickets in foreign currencies, and they generally wish to re-patriate that money at some point, timing that point is a form of currency speculation and thats where American makes money (or doesn't) but they don't routinely speculate in the currency market.

 

[flyover]

I'm not saying that the brown trout forced other airlines to make mistakes, just that in order to compete with southwest's lucky break, some other airlines way of competing was to do things that ended up not working out so great.

To me that says alot about southwest's business plan... it was very good. Question is, when they are on equal ground again, will they still be the darlings of the wal-mart crowd?

The point is that the other airlines will likely never be on equal ground with SWA. SWA got no lucky breaks. They ran their airline the way it should have been run. As huge comsumers of jet fuel all the airlines should have been hedging. They weren't because they weren't disciplined enough and didn't protect their balance sheets and credit.

 

[flyover]

They could take their cash and speculate in anything - corn markets, the 2:30 at Pimlico Park. But they don't, and neither does American speculate in the currency market. They sell tickets in foreign currencies, and they generally wish to re-patriate that money at some point, timing that point is a form of currency speculation and thats where American makes money (or doesn't) but they don't routinely speculate in the currency market.

That's my point. Any company that gets paid in foreign currency tries to time when they convert that currency and make some extra dollars on that conversion. Likewise anyone who has to buy huge quantities of a commodity like jet fuel should be buying futures contracts. That's why the futures market was implemented, to dampen out the ups and downs of the market and make it less risky for both consumers and suppliers.

SWA is doing it right, everyone else is doing it wrong. The argument should be about when the others are going to get their heads out of their a** and do what SWA is doing, not when SWA will start behaving like them.

 

[mtsu_av8er]

The argument should be about when the others are going to get their heads out of their a** and do what SWA is doing, not when SWA will start behaving like them.

I knew that you were my hero!