Skip to content
Subscriber Only
Business
Economics

At Southwest, No Fear of Fueling

The discount carrier is flying high, thanks to savvy jet-fuel hedges that are helping keep its costs earthbound

By Wendy Zellner

With its highly productive workers, efficient use of aircraft, and easy-to-use Web site, Southwest Airlines (LUV ) is as famous for its low costs as for its low fares. Recently, though, the discount king has been winning kudos for another kind of cost-cutting tactic: savvy fuel-hedging that has saved the airline millions of dollars as oil prices have hit records. Indeed, without its hedges, Southwest would have lost money in the first quarters of 2003 and 2004. Instead, with its recent third-quarter proft, including $73 million in net hedging gains, it's bragging about 54 consecutive quarters of earnings -- while many rivals are drowning in red ink.