When do Southwest Airlines' current fuel contracts expire? Will they need significant fare increases then?

Question

When do Southwest Airlines' current fuel contracts expire? Will they need significant fare increases then?

Answer 1

Current contracts have different expirations because of when they were implemented.  Fare increases are in the future, but Southwest will try to offset the need to raise fares by raising revenue with projects such as inflight wi-fi, etc.  Also, if the Boeing forecast of oil going back to 70 to 80 per barrel in the next 2 years pans out, then fares will go back down, at least at Southwest.

Answer 2

Southwest I think has hedged about 70% of fuel costs for this year.  Some hedges expire at the end of this year, 2008 and 2009.  So their fuel will not be hedged at around $50 or $70 a barrel.

As for significant fare increases, it depends on how the price of oil is around the world.  If it remains as high as it is now, then I do see Southwest having to raise ticket prices.  However I read in Business Week that Saudi Arabia is worried about high oil prices because if they remain high, the U.S. will cut back on its use of oil and buy less from them.  Therefore they are trying to increase output so that the price of oil will drop.