Devoted to Managers and those that seek to improve their management skills

American Airlines (NYSE:AMR) announced today that it was going to add a $15 fee to check the first bag a passenger has on the airline, with the targeted date to begin the added cost to be on June 15. It's their response to the increasing costs of fuel. You can be sure other airlines will follow, like they did when United Airlines added a second-bag fee earlier this year of $25 each way.

Southwest Airlines (NYSE:LUV), on the other hand, doesn't have to do this. The reason why is CEO Gary Kelly understands how to manage risk and costs, and made a brilliant move to thwart the added expense of fuel for the airline, positioning themselves for a significant period of time, as the airline that isn't adding all these extra fees to consumers.

Why Southwest is able to do it, is the company has been run well for years, and they have a solid credit rating and a lot of cash on hand. So when oil was obviously going upward, they made hedges on the commodity, buying at a low price. That move counteracts the rising price of fuel for the airline.

While other airlines are living off their cash reserves at this time, they could have done something similar as Southwest as a strategic move.

The point in all of this, and something I've consulted businesses on for some time, is we need to look at business in a similar way Southwest Airlines did, looking at ways to invest the cash we generate; not only in our own businesses, but in other investment vehicles as well.

Southwest was fortunate to have Gary Kelly at the helm, who understood what needed to be done before the crisis hit. Most CEOs don't have this ability, so businesses may need to consider hiring someone in the future who knows the market and its various investment vehicles.

We may start to see many businesses succomb to economic pressures because that don't wisely use their capital in a variety of ways. The answer could definitely be hiring an expert in finance and investment who knows how to hedge and invest money over the long term.

Southwest Airlines can now market itself in a number of ways against its competitors because they had the foresight to make a move that the rest of the airlines evidently didn't even think of. Who knows how well they'll do because of it.

Even in small businesses we need to look at the best ways to use our extra capital, as most simply let it sit around doing hardly anything, losing out not only on significant revenue, but, as in the case of Southwest, using it to counteract the rising price of doing business.