Originally Posted by
Free Bird
In the next couple of years SWA cost for dead dinos will be more closely aligned to what others are paying. Any bets on what happens then? SWA will raise their fares significantly and they will ask for pay cuts from employees.
SWA mngt. did a brilliant move with the hedges. Take those away and they will not be any different than many of the legacies. They too would be losing $$$ right now if it wasn't for the hedges. Time will tell.
As a cargo dog that follows the business management of airlines closely, your argument is patently thin. You would make Gordon Bethune happy though <g>. He is a smart guy who did alot of brilliant things at CO, however, he simply hates SWA. SWA management strength is a stable team that is truly invested in the company. The challenge many of the legacies face is management teams that are invested in milking the corporation for their gain only. Golden parachutes, etc. are the priority. We employees pay dearly for this mismanagement.
1. SWA is able to pay well because the management team largely invested wisely the profits of the company. Fuel hedging is not uncommon in the airlines, but it does take capital. SWA management wisely uses this capital to lower their direct operating cost (DOC) via fuel hedging. It makes sense to lower DOC and sure beats the alternative of asking employees to pay for managements inability to lower DOC's any other way. AS another post demonstrates, sometimes you lose money, but overall, they win the hedge.
2. SWA business model is smart, one aspect, single aircraft type and get Boeing to modify this common type to match the market needs they desired. All airlines used to do this, SWA nearly perfected this normal business move to their profitable bottom line.
Could go on and on and have a PHd thesis <g>, but fuel hedging is only a little part in the reason they are profitable consistently over the long term. Take hedging away, they will still be a dominate player in the airline business.