Thu, Dec 04, 2008
Airline Taking A Pounding On Fuel Hedges
Southwest Airlines CEO Gary Kelly says his airline saw a
"bang-up month, almost unexplainably strong," in October of this
year... but November volume turned down sharply after the stock
market collapse.
Southwest, which is based in Dallas, officially reported
passenger volume down 10.7 percent in November compared to a year
earlier, with an average load factor of just 63.2 percent, down 6.1
from last year.
The Associated Press reports Kelly was addressing investors at a
Credit Suisse conference in New York, and said that he doesn't
expect December to reflect another sharp decline from last
year.
Kelly added that capacity cuts next year will not be as large as
the airline had first anticipated. Southwest's new schedule will be
released in January, and reflect capacity down 4-to-5 percent, not
the 5-to-6 percent earlier estimated.
He added Southwest still plans to take delivery of 13 new Boeing
737s schedule for delivery in 2009, although he admits capacity
cuts will leave the airline with the need to "manage" 10 excess
planes as a result.
Southwest also reports it's trying to extricate itself from its
fuel hedges. The advance fuel contracts have been credited with
saving the airline $4.2 billion to date... but can be a liability
when fuel prices drop.
Southwest says it has hedged 63 percent of its 2009 fuel needs.
What the airline left unsaid was, those hedges only work if the
price of fuel once again skyrockets.
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