Dec. 24 (Bloomberg) -- Southwest Airlines Co., the world’s largest low-fare carrier, rose the most in a week in New York trading after unwinding most of its fuel hedges and agreeing to sell and lease back 10 jets to raise cash.

Southwest will trim the share of jet-fuel needs covered by hedges to 10 percent from 2009 through 2013, according to a regulatory filing yesterday. That’s a cut from the 63 percent hedged previously for 2009, a UBS AG analyst said today.

“Southwest’s fuel hedges had quickly become a major drag” on the airline’s financial performance, UBS’s Kevin Crissey in New York wrote in a note. “The reversal of these hedges should remove these overhangs.” He rates the shares as “neutral.”

The move showed how Southwest is responding after the hedges used to protect against price increases contributed to a third-quarter loss, its first since 1991, as fuel demand fell. Jet fuel for immediate delivery in New York Harbor has plunged 68 percent since peaking July 3 at $4.36 a gallon.

Southwest gained 31 cents, or 4 percent, to $8.10 at 1 p.m. in composite trading on the New York Stock Exchange, which closed early for the Christmas holiday. The stock has fallen 34 percent this year.

Southwest said yesterday it sold the first five Boeing Co. 737 jets, netting $175 million, and that it expects to sell the remaining planes on similar terms in the next quarter.

To contact the reporter on this story: Hugo Miller in Toronto on hugomiller@bloomberg.net

Last Updated: December 24, 2008 13:28 EST