Derivatives don't come cheap, but investors are beginning to reward savvy hedgers
By Duncan Wood|January 02, 2006 at 07:00 PM
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While most airline stocks have been taking it on the chin in the market in recent months–in large part because of the sky-high price of fuel–there is at least one that has managed to turn record oil prices into a competitive edge. The reason? Southwest Airlines Co. seems to know how to hedge–and is in a financial position to do it. “We decided some years ago that we wanted to focus on what we were good at–which is running an airline–and take out the risks that are a distraction. There are upfront costs involved, but it’s a trade-off that works for us,” says Southwest’s CFO, Laura Wright. “We believe we have the right strategy.”
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