Southwest's hedged oil position will likely serve to benefit the air carrier in later years (2010, 2011, 2012) as inflationary pressures heat back up. But while oil prices remain depressed, Southwest will not receive the artificial boost compared with competitors that it did in 2007 and 2008.
Delta and Southwest have managed to avoid some of the larger worker contract issues facing other carriers like United Airlines. But increased cutbacks and capacity reductions could strain operations going forward.
International premium traffic crashed 21% in February, outpacing a 16.7% decline in January. That spells trouble for Delta who has major exposure to the international market. The Atlanta-based airline did offer upbeat results with their 2009 Q1 report by narrowing its loss, and more consolidation benefits will be realized from the Northwest merger.
Still, Southwest's position as the major discount carrier will serve as a vital crutch to survive the current downturn in air traffic. Capacity reductions will be key for all airlines along with instituting fees for additional checked baggage, and all other cost cutting measures. Despite Southwest's surprising Q1 loss, expect the Dallas-based carrier to show us the LUV.
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