Originally Posted by
contrail67
Someone a couple of weeks ago was boasting how SWA has all this cheap hedged fuel....what happend to all of that?
All companies (including airlines) and government entities which use a lot of energy hedge those costs to dampen normal market flucuations. The intent of this is to facilitate mid-term planning, not make a killing on futures.
Since hedging is an inherently speculative practice, the buyer needs to have reasonable credit. Post 9/11, SWA was the only airline which had the credit rating to hedge fuel, so they did (the other airlines would have if they could have). SWA did perfectly routine hedging...at $25/bbl. When oil went to $75/bbl, they had the lower price locked in and enjoyed a tremendous advantage over their rivals for about five years.
Those $25 hedges are mostly expired at this time, and of course nobody is going to sell them any more at THAT price. I assume they are hedging at the current price, as are the rest of the airlines.
SWA's hedge windfall was due to luck and normal business practice, not management genius.