Southwest becoming busiest airline at southern California airports

By carefully hedging its fuel purchases, Southwest Airlines has managed to continue to show profit while its rivals are grounding flights.

The budget carrier is on track this fall to become the busiest airline at LAX and also at three other airports in southern California – in the midst of soaring fuel prices and competitors cutting capacity.

Southwest is enjoying the benefits of its successful strategy of buying oil at lower prices, and has been able to contain its expenses while others are struggling to limit losses.

By the use of long-term fuel contracts, the carrier locked in its fuel prices last year based on crude oil prices at $51 a barrel, well below the most recent price of $126 this past week.

During the second quarter of 2008, Southwest paid $2.19 per gallon for jet fuel, on average, compared the $3.51 price that most of the rest of the airlines were paying.

Largely due to this fuel-price hedging, the airline reported a 15% increase in its profits for the second quarter, and was the only US carrier reporting a profit during the period.

As a result of this practice, while others are drastically cutting service, Southwest is holding steady and gaining a bigger share of flights in the region.

www.southwest.com