Southwest AirlinesSouthwest Airlines is the third largest carrier in the world and the largest in the United States for passengers carried domestically. Southwest Airlines has done something unmatched in the commercial airlines industry; that is they’ve turned an annual profit every year since 1973. Southwest Airlines has used financial techniques, like hedging fuel, to bolster its profitability and counteract many of the fiscal disadvantages of operating an airline.
Hedging fuel is a thing many drivers wish they could have done in the “hey now” 1.09 fuel days of not so long ago. Southwest Airlines has purchased fuel options for years in advance to smooth out movement in fuel costs. In reaction to projections of crude oil prices in 2001, Southwest Airline substantially increased its hedging positions. This has always helped keep costs down for the consumer and helped Southwest maintain it’s market share.
The use of these hedges helped Southwest Airlines maintain its profitability during the aftermath of the September 11, 2001 attacks and the oil shocks related to the current Iraq War and later Hurricane Katrina. As of 2005, Southwest is currently paying 50% of the market price for its fuel; however, the price Southwest Airlines pays will increase as hedges from 2001 and 2002 expire and new hedges at higher prices take effect.
With these low costs for fuel and remaining profitability, Southwest Airlines continues to be able to offer low cost airfare. Southwest Airlines requires reservations though you can often get your tickets very near the date you plan to travel. Southwest Airlines tickets also offers rewards programs and other incentives to fly Southwest like $39.00 fares on selected flights that is just unparallel in the industry and unheard of anywhere.
Southwest Airlines even has a credit card that can continue to offer rewards with specials and deals that are very rewarding. American, United, Delta, and Continental are all air carriers that are very well known in the United States, but Southwest Airlines has quietly, with its own style, and in its own manner has offered deals upon deals for the American consumer that just can’t be matched.