Are Higher Oil Prices Generating The Dreaded Ripple?
New signs are emerging that suggest higher oil prices are starting to have a negative impact on Corporate America.
Case in point - the latest results from Southwest Airlines.
The numbers have led to chatter that higher oil prices could ground the carrier if not the airlines as an industry!
Not literally of course, but Fast Money Trader Simon Baker, CEO of Baker Avenue Asset Management sees that distinct possibility on Wall Street.
For example, shares of Southwest were wavering Thursday morning after the low-fare airline reported $131 million in fourth quarter profits, in line with Wall Street’s expectations.
But rising fuel costs were a cause of concern.
Southwest’s total expenses rose 14% in the quarter due in large part to oil prices. Fuel costs jumped 18% for the airline during the last three months of 2010.
“Southwest reported good earnings, but they were concerned about fuel prices,” said Baker.
During its earnings call, Southwest predicted more pain at the pump. The airline projected that fuel costs would continue rise from $2.48 per gallon to $2.80 per gallon.
A key question for Southwest will be whether higher passenger fares and traffic will offset rising fuel costs. Passenger fares rose 9.1% in the quarter and load factors improved 3.4 percentage points.
What do you think? We want to know!
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