Southwest success hinges on hedges

0 Comments | USA TODAY, July, 2008 | by Dan Reed

Southwest Airlines today reports what almost certainly will be its 69th-consecutive quarterly profit, a string dating back to 1991.

It won't be the first time that the USA's leading discount carrier has earned money while a financial crisis threatened other carriers' survival.

What is its secret?

There are lots of factors, but easily the most important is that Southwest is the champion oil price hedger among airlines worldwide.

Using some simple and some complex investment strategies, Southwest has for a decade locked in the prices it pays for large amounts of jet fuel months and even years ahead of time. Its success at that has protected it from run-ups in crude oil prices and dramatically cut its fuel expenses. Since 1998, it has saved...