Thursday, July 24, 2008

How to run an Airline

Amidst all the difficulties airlines face in the face of $125-$140 oil, this company continues to make a profit.

It was the airline’s 69th-consecutive profitable quarter, helped by its extensive fuel-hedging program, and it stood in sharp contrast to the losses reported by the six traditional airlines, some of them steep.

What a concept: hedge the cost of one of your company's biggest independent cost variables; I seem to remember learning that in business school.

Collectively, the other major airlines lost $6 billion in the quarter, hit hard by record prices for jet fuel. Southwest did not escape the impact of higher fuel prices, seeing those costs rise 35 percent in the quarter.

Southwest’s hedges, which cover 80 percent of the fuel that it buys, again proved its best protection against the problems faced by rivals.

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