Unwinding fuel hedges timeline
 

Does anyone smart know the story/numbers behind SWAs current process of unwinding fuel hedges? They announced last March they would be unwinding them but have active positions through 2027. Curious how that affects us at the moment given the oil price spike. Don’t really understand the mechanics behind heding. Someone with a larger cranium than I please explain!

Based on the company’s latest filings:

• 2025: up to ~47% of expected fuel consumption hedged
• 2026: up to ~43% hedged
• 2027: about ~13% hedged

Hedged price isn’t disclosed but it’s gotta be cheaper than where prices are currently headed!

Sounds somewhat promising I hope.

I would be more concerned about hedge fund investors trying to force the airline to cough up cash. These investment groups are truly evil.

. Recent 10-k shows all hedges have been cancelled and the company is “ fully exposed to process fluctuations”…so I spoke to soon

Elliot didn’t do anything different than previous boards under Gary Kelly had done regarding dividends and buybacks.

They did light the much needed fire under their butts, tho!

There is a pretty detailed explanation of the unwinding of hedges in the 10k. Bottom line is it ties up cash and more importantly if you look at the average “cost” of the hedges, it just didn’t justify it anymore. The best hedge is more Max’s. If there is a silver lining, look at the futures. Many months are currently trading in the $70’s through the end of 2026. Market thinks this a short term cost at the moment. Airlines to a certain extent can pass costs onto consumers. At SWA specifically, the majority of tickets are bought within 90 days of travel. So therefore revenue management can do its thing. The risk though is always the competition. If they don’t play along then fares won’t cover the cost. That would be a problem. JP Morgan conference is coming up. Airline executives will definitely be revising earnings for the first quarter for sure. If you remember from last year, that’s when management dropped the bag fees, basic economy and dynamic pricing on rapid rewards. 44 EPS is definitely changing by the day for the first quarter.

Futures and betting markets (often hedged by insider info/cheating) are better indicators of the longer term fuel price than this week's spot price for Brent Crude. When you see US drilling rig count starting to increase in big numbers is when you know it is sticky and here to stay. This whole thing was brought on by the whim of essentially one person and can end on that same whim. That person happens to be someone who often does a 180 on big policy shifts when it suits them. While I am clearly pretty pessimistic about the whole situation as someone who has spent a lot of extended paid vacations in sunny locations, this isn’t that yet and hopefully won’t become that. Wars in that region of the world have two flavors. Hoping this is a war with a name like “Two Months War” and not the type that takes a lot of our blood and treasure to accomplish essentially nothing.

Short term oil shock is a small price to pay to rid a regime who has been undermining and killing Americans for nearly 50 years.

Absolutely phenomenal job by our troops and our national leadership! Complete pros! 🇺🇸