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Southwest Airlines' fuel hedging position benefits disappearing


Southwest Airlines stated the value of its fuel hedging contracts fell by nearly USD2 billion during the first 15 days of Oct-08. The value of the LCC’s fuel derivative contracts has fallen from USD5.1 billion on 30-Jun-08, to USD2.5 billion on 30-Sep-08, to USD550 million on 15-Oct-08, in line with the reduction in jet fuel prices. However, CEO, Gary Kelly, emphasised that falling oil prices are a “great opportunity for us and certainly not a problem". [1545 words]

Unlock the following content in this report:


  • Takes first step towards codeshare partnership with Volaris
  • Reduction in load factor gap in Oct-08
  • To shrink for first time in 23 years in 1Q09
  • Opens Spring 2009 schedule
  • Looking to increase market dominance in current challenging environment

Graphs and data:

  • Daily spot oil price and Southwest share price: Feb-08 to Nov-08
  • Southwest Fuel Hedging Programme: as at Sep-08
  • US carriers' losses/gains from 3Q08 fuel hedging
  • Southwest and Volaris key information
  • Southwest monthly passenger traffic (millions) and load factor (%): 12 months to 30-Sep-07 vs 12 months to 30-Sep-08
  • Southwest sector length (miles): Mar-04 to Oct-08
  • Southwest departures by sector length: Week commencing 10-Nov-08
  • Southwest Airlines' capacity (ASK) growth (% change year-on-year): Jan-04 to Oct-08
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