SWA Hedging
04-24-2008 | 06:59 AM
#11
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From: B737, Capt.
We actually do buy our fuel at spot prices on the open just like all airlines. Our hedges are commodity futures in heating oil. At the end of the quarter, the profits from the heating oil futures trades are deducted from our actual spot fuel purchases. This yields a total fuel cost that can be divided by actual gallons used to show a reduced price per gallon over what was 'paid at the pump'.
04-24-2008 | 07:00 AM
#12
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From: FO
SW "bets" that fuel (heating oil) will be at or more a price on a certain date, someone else bets that it will be less. It's less, SW pays the difference, more the other person pays the difference.
Southwest still buys fuel at the spot price at every airport they fly to.
If they didn't, why would they tanker fuel from one part of the country to another?
04-24-2008 | 07:26 AM
#13
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I don't get what benefit the fuel hedges even have. Mainly because, ever since they started hedging it, it seems profits have been going down. Southwest is still offering $29 fares....that's just crazy. I know commitment to your customer is one thing. However, as a company, shouldn't southwest be maximizing profits to ensure even greater safety going into the future?
$29 to where?
04-24-2008 | 09:33 AM
#15
:-)
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04-24-2008 | 09:42 AM
#16
:-)
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04-24-2008 | 09:43 AM
#17
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From: A320
You're also forgetting that SWA has less debt than cash. This excess cash allows them the freedom to hedge.
A hedge is a bet nonetheless. Hedging oil at $100/barrel now may seem like a good move, but what if you're paying $100/barrel in 2012 and everyone else is paying market rates of $80/barrel?
The above scenario is unlikely, but still possible. Nothing in life is guaranteed.
A hedge is a bet nonetheless. Hedging oil at $100/barrel now may seem like a good move, but what if you're paying $100/barrel in 2012 and everyone else is paying market rates of $80/barrel?
The above scenario is unlikely, but still possible. Nothing in life is guaranteed.
04-24-2008 | 10:51 AM
#18
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From: CFI, MEI
I'd say Southwest should keep doing what it is doing. Any southwest guys...I wouldn't listen to the rest of the arrogant guys because they are jealous of you. Everybody else is always jealous of the best...keep it up southwest.
04-24-2008 | 03:37 PM
#19
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A promotion to sell a few seats on a flt to grab attention.....
04-24-2008 | 03:52 PM
#20
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Could we please end the "SWA's hedges will run out" conversation? How many years have we heard the same stupid conversation? The company has made money every year since they opened the doors. Obviously they know what they're doing and no their hedges will never run out because they know how to make money unlike most airlines. Nobody can touch SWA, its not even worth a debate, just read their financial reports.
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