Hedging Bets

Economics | July 17th, 2008

From a reader today:

While listening to NPR on my way to school today, I heard that Southwest airlines was the only airline that has not had fuel prices effect their bottom line because they decided to use future contracts to hedge their fuel expense! It’s hard to imagine that only the CEO of Southwest airlines knew about oil futures contracts.

What Others Think

xose manolo Added:

July 18th, 2008 at 8:53 am

Re: CEO of Southwest Airlines
A couple of weeks ago I was speaking to a friend who is a Commodities sales/trader at a large IB and he mentioned that over the past year he advised several of his airline industry client’s to hedge their oil exposure. Only one listened to him. Southwest Airlines. To quote him..” they are an oil trading company that flies planes…”. I got a good chuckle out of that… thought I would share it.

Ken - Todays Breakout Stocks Added:

July 18th, 2008 at 1:49 pm

Southwest Airlines has actually been hedging their oil exposure for many years. I was surprised to see the Southwest CEO signed that crazy “StopOilSpeculation” letter to customers. Maybe it was just for PR reasons…

Merlin Dewing Added:

July 20th, 2008 at 3:33 pm

Now, if he will ask his inventory control people what the role of the speculator is He will understand. All of those long futures He bought came from a number of speculators, I am sure. Wouldn’t it be wonderful if those geniuses that we send to Washington understood this as well!