The Right Coast

June 08, 2004
The Greatness of Southwest
By Mike Rappaport

It is not just good labor relations that makes Southwest a profitable airline: (Hat tip: Mises blog)

As oil prices try to head over $40 a barrel, squeezing transportation company profits, one petroleum user is sitting pretty: Southwest Airlines Co.The Dallas-based airline has hedged more than 80 percent of its fuel needs for the next two years at a price of $24 a barrel. And Southwest is the only U.S. carrier to have hedged most of its fuel. How important are those fuel hedges for Southwest? "It's huge," said Chief Executive Jim Parker in an interview with Dow Jones Newswires earlier this week. That foresight was the reason Southwest turned a profit in the first quarter, while other airlines bled due to high fuel costs and depressed air fares. Without the hedges, Southwest's profit of $26 million would have been a loss of $8 million.