Southwest Airlines Co., (Southwest) released earnings for the third quarter of the year on Thursday, revealing a drop in overall fuel costs despite fuel use remaining nearly flat to the same quarter in the prior year.
Overall, the airline paid $1.436 billion for fuel in the third quarter of the year, including about $19 million additional cost due to hedging activities.
Even with the additional hedging costs, total fuel expense was down 7.5% from the $1.553 billion paid in the same three-month period a year ago.
In the third quarter, Southwest used 562 million gallons of fuel, which is nearly flat to the 557 million gallons used in the same quarter a year ago.
That's only a 0.09% decrease in consumption.
But average fuel costs in the third quarter of 2024 were much less. In the three months ending in September, Southwest paid on average $2.55/gal for fuel, including a 5cts/gal additional cost due to hedging activities. In the third quarter last year, the company paid on average $2.78/gal, including a 11cts/gal saving on fuel cost due to hedging.
Southwest remains one of the most hedged airlines in the U.S. For 2024, the airline has 58% of their estimated fuel costs hedged, with 47% hedged for 2025 and 43% hedged for 2026. Further out, Southwest has less than 10% of their estimated fuel costs for 2027 hedged.
Airlines usually use hedging activities to help offset big changes in fuel costs and help keep overall expenses more predictable over time.
The average cost for fuel per available seat mile $(ASM)$ in the third quarter was 3.14cts/ASM, an 11.3% decline from the 3.54cts/ASM seen in the same quarter last year.
Looking ahead, Southwest expects fuel costs in the fourth quarter to average between $2.25-2.35/gal.
In their earnings report, Southwest also highlighted the breaking of ground at SAFFiRE Renewable's pilot plant at Conestoga Energy's Arkalon Energy's facility in Liberal, Kan., that will help create a low carbon feedstock for sustainable aviation fuel. SAFFiRE Renewable is part of the Southwest Airlines Renewable Venture's investment portfolio.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Cory Wilchek, cwilchek@opisnet.com; Editing by Sydnee Beach, sbeach@opisnet.com
(END) Dow Jones Newswires
October 24, 2024 11:45 ET (15:45 GMT)
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