Originally Posted by sarcasticspasti
SWA fuel hedges running out in 2010? You don't think they're buying new contracts that expire in 2011? 2012? Management making too much? ALPA didn't complain in the 1990's they just said, "Gimme some too!"
OOOPS. You just gave yourself away as big-time CLUELESS...
The way fuel hedges work is that you agree to buy fuel at a fixed cost based on todays KNOWN cost and any EXPECTED changes down the road...if everything goes as planned buyer and seller break even (seller maybe gets a small commission). If prices go up or down relative to the hedge, SOMEBODY loses their ass. Whover sold SWA all those hedges lo$t their a$$ in a HUGE way...there's no such thing as a free lunch.
Fuel hedging is not a stroke of genius invented by the brilliant managers at SWA. ANY company that uses energy hedges their energy costs, airlines included. BUT becaues it is a speculative venture (that means gamble) the buyer has to be in reasonable financial helth so the seller knows the buyer can make good if it doesn't go his way. After 9/11 the only airline that had the credit rating to buy hedges was...you guessed it, SWA.
Now that we know a little bit about how it works, and given that oil is now $60/barrel...lets ask ourselves who in the HELL do you think is going to sell SWA fuel hedges at $25/barrel for 2010+ ??????? Maybe YOU would....