Smart Is As Smart Does

The three largest US airlines, United, American and Delta, announced today that they will raise ticket prices by $20, in the form of a fuel surcharge. The airlines claim to be feeling the pinch of increased fuel costs, and are passing that cost directly to their consumers.

Notably absent from that list is Southwest Airlines. Ticket prices for Southwest flights have risen somewhat over the course of the last eight months (who would know better than I?), but Southwest has not forced its passengers to accept a sudden fuel charge. Why might that be?

As it turns out, those crazy discount airliners might just know what they're doing. Southwest has long had a practice of aggressively buying options on fuel far into the future. With the recent dramatic rise in fuel costs, maintaining a hedge on fuel has suddenly become a noticeable asset. Increased fuel costs will eventually catch up with Southwest as well, but its smarter strategies have kept it out of the trouble that always seems to find its rivals.

Perhaps it is not a coincidence that United, American and Delta have also each been through bankruptcy a time or two.