I didn't word my original post very well.

What I meant to state is that AS and WN reported serious losses during Q3because the present value of fuel hedge contracts settling in future periods decreased. In the case of WN, it was their first quarterly loss in something like 30 years. The point is that future fuel hedge contracts the airline already holds have decreased in value, therefore, they have to record a write down on the balance sheet, since if they were to try to sell that contract to purchase at $1XX/barrel, it would be worth much less now. We all know how much trouble write downs can cause after the financial maelstrom of the past year. The airline must report the loss on its balance sheet according to GAAP accounting principles. Put another way, it is a paper loss. In reality, WN and AS still paid less for fuel during Q3 than they would have otherwise due to the fuel hedging program.

So, yes, if the fuel price goes down, AS is only out "the insurance premium" as you stated. However, the write down they may have to take due to the serious decline in value of fuel hedge contracts could well make the year-end financials seem rather ugly, because all those paper gains they reported during Q1 and Q2 that made the P&L look better will now be canceled out by paper losses. Also, keep in mind that fuel hedging premiums have been going up in recent months, so that "fuel insurance" they are paying is not a trivial amount by any stretch of the imagination.

I'm not an accountant, but I do have background in economics and I think I have the general gist of it right here. AS is doing better than a lot of airlines, but they are still saddled with some high labor costs and high landing fees and airport gate/facility leases (especially at SEA). So, $40 barrel oil does not mean profitability. And, with the huge OPEC cuts yesterday, who knows how long prices will stay that low (also depends on how much the member countries cheat).