About a year ago I asked why airlines aren't hedging the price of oil. I'd still like to know. The continued potential viability of this strategy is indicated by Southwest's success, as reported in yesterday's W$J:
Southwest said it saved $155 million by capping 86% of its fuel expenses at the equivalent of just $26 a barrel of crude oil, close to half the actual cost of oil during the quarter.
In my previous post I suggested a few possible explanations for airlines' reluctance to hedge. Is it also relevant that much of the industry is operating in bankruptcy?
Like the song Hair from the eponymous show: "Its not for lack of bread, like the Greatful Dead."
You can hedge if you are profitable like Southwest. The rest of them cannot tie up that much cash.
Its also hard to take a long view when liquidation is only months away.
Posted by: Robert Schwartz | April 19, 2005 at 02:14 AM