Southwest Airlines 3Q Losses Due to Fuel Hedges

Southwest Airlines experienced losses of $140 million for the third-quarter, its first loss in two years. Last year in the same quarter, Southwest made profits of $205 million. A portion of this loss can be chalked up to Southwest's purchase of AirTran Airways in May 2011, a $1 billion purchase. Southwest is already the most flown airline by U.S. passengers.

The major factor in the difficult quarter for Southwest is due to fuel hedges- like an insurance policy against unforgiving spikes in oil prices. High fuel costs forced Southwest to spend $1.59 billion in fuel for the quarter, a 71% increase from last year's figure. Southwest spent an average $3.23 a gallon on fuel, up from $2.47 in the previous year.

Southwest has been saving money by re-negotiating AirTran's contracts and expects to be able to save $400 million a year once completely worked out. Overall, Southwest is faring quite well- especially when compared to other North American airlines like American Airlines which reported losses of $162 million in the third-quarter, its 14th quarter out of the past 16 that incurred losses.

For a more detailed analysis: http://finance.yahoo.com/news/Southwest-posts-3Q-loss-on-apf-2592141335.html?x=0