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AMR Corporation Message Board

  • the_airline_expert the_airline_expert Mar 17, 2005 6:51 AM Flag

    LUV Fuel Hedges For YEARS TO COME.

    Southwest Airlines Hedges for years to come

    Southwest Airlines, on the other hand, is in much better shape than most other airlines and, in fact, has continued to make money. Southwest is paying $26 per barrel for 85 percent of fuel hedges it negotiated some time ago.

    Southwest, which handles more than 80 percent of the passengers who fly through Houston's Hobby Airport, tries to work on fuel hedges as much as two years out or more. In fact, the Dallas-based airline is already taking steps to protect itself for years to come.

    For 2006, Southwest is 65 percent hedged at $32 per barrel. It has 45 percent of its fuel hedged at $31 for 2007, 30 percent of its fuel hedged at $33 during 2008 and $25 percent of its fuel hedged at $35 per barrel in 2009.

    Boyd Aviation Group warned Monday that oil may stay at or above $50 per barrel "on a near-permanent basis," calling it a crisis for the industry.

    Goldman Sachs estimated oil prices would average $45 in the first quarter and $41.50 after that.

    Because prices are so much higher, it is revising its estimate of losses for the airline industry this year from $1.6 billion to $2.6 billion.

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    • Yup, AMR is not on the ropes like USAir is. AMR has many more international routes that can subsidize losses in DFW. That is the reason DFW is having a hard time getting anyone to come in...they know AMR will just kill them. DFW is not seeing what happens when they get in bed with AMR. They have an airport that no one wants to fly out of right now because their biggest MOST PROTECTED tenant won't allow competition now.

    • With hedge contract so far into the future Southwest missed what may be the best opportunity to get some gates at DFW and start gnawing away at AMR!

      • 1 Reply to shakeyjake3023
      • What are you talking about? If LUV wanted gates at DFW, they could get them...heck anyone could. Hedges aren't keeping that from happening, if anything the hedges would allow LUV to go into DFW and have a cost advantage over AMR on the domestic routes with overlap. However, AMR has international and secondary markets that could float them long enough to make it a very bloody war, where both airlines would be severly hurt. That is why LUV isn't at DFW, not because of some hedges.