Creative Ways to Cut Airline Fuel Costs
One of the largest costs for airline operators is fuel. Southwest Airlines (NYSE: LUV) was able to offset this large cost for years by hedging contracts for their fuel. This is partly what allowed them to maintain their status as the low-cost operator and forced competitors to lower their prices below operating costs just to compete. Back before Southwest’s fuel contracts expired, I worked for their competitor American Airlines at a regional airport. American Airlines lost money on every flight that they sent to the hub because they were forced to price competitively with Southwest. When Southwest was nearing the end of their fuel contracts they began to make cuts elsewhere, refusing to give up their competitive advantage.