But most of those hedges have now expired, and JetBlue has only 20 percent of its fuel costs hedged for the remainder of the year at just under $30 per barrel. If fuel prices don’t fall significantly, JetBlue’s margins will come under increasing pressure and the airline may be forced to make yet another price hike. The company has no hedges in place for 2006 and beyond.

When I ask Neeleman about sky-high fuel prices, I expect him to brush off the question, to refer me back to JetBlue’s oft-noted competitive advantages. But he does better than that. He says he really can’t make up his mind about whether he wants fuel prices to come down or go up.

If they come down, of course, JetBlue returns to profitability. If you take fuel costs out of the equation, the company has become an even more efficient operator than it’s been in the past, and business is good; revenues in the second quarter jumped 34.5 percent to $430.1 million, up from $319.7 million in the same period in 2004. Any savings on fuel prices go straight to the bottom line.

But consider the flip side: If fuel prices go up, JetBlue’s efficient business model means it loses less than pretty much everyone else, save Southwest. Most of its competitors couldn’t cadge a loan no matter what terms they’d be willing to accept, but in March, JetBlue was able to borrow $250 million. That left it with $562 million in cash and short-term investments at the end of the second quarter, enough of a cushion to weather increased costs for some time.

Then, in mid-July, the airline announced that it had purchased “caps” as a sort of catastrophic insurance if prices continued to rise. Problem is, it was too late for bargains: The best JetBlue could do was ensure that it wouldn’t pay more than the equivalent of $65 a barrel of oil for 20 percent of its fuel needs in August, and $66 a barrel for just 15 percent in September. It may be saving the airline a few bucks here and there, but the days of hedging for $30—or even $50—a barrel are long gone.

So why does JetBlue have only 20 percent of its fuel costs hedged for the remainder of the year—and none beyond that? As recently as last year, it would have been quite easy to buy hedges for oil at $35 a barrel, half today’s prices.

The simple answer is that while JetBlue executives may know how to run an airline, they’re in the same boat as the rest of us when it comes to predicting the future. When oil first broke the $50-a-barrel barrier, few observers thought it would stay that high for too long, let alone climb to almost $70. Hedging is itself a gamble. If you contract to buy all your oil at $48 a barrel, for example, and it drops to $35 on the open market, you’ll have a lot of angry shareholders to answer to for locking yourself into such expensive insurance against rising prices. “In hindsight, I wish our crystal ball would have been deeper on that one,” says JetBlue president Dave Barger. “Would I have liked to be 50 percent hedged through 2007? Sure. That said, while none of us think we’re going to see below $30 a barrel for oil, we also think prices are at an artificial high at the moment.”

Michael Linenberg, the airline analyst at Merrill Lynch, wrote in late June that if oil prices stay above $55 a barrel for the foreseeable future, there would undoubtedly be capacity cutbacks, further bankruptcies, and possibly even liquidation. And he speculated that “financially formidable low-cost carriers” like Southwest and JetBlue would be the most likely candidates to be picking up the pieces of others’ failures.

Last spring, Neeleman told me that if oil prices stayed above $50 a barrel, two of the six majors would go out of business. One’s already gone: US Airways and low-cost carrier America West announced the completion of their merger in September. The smaller airline held most of the cards in that merger, which represents the first example of a low-cost carrier literally buying its way into the big leagues. But JetBlue executives reject the possibility of a similar move on their part. They’re not nearly finished executing their own plan, they say, and have no interest in absorbing another company’s problems.

The key thing to remember is that JetBlue aims to do two things at once: undercut the competition and maintain its own profitability. Killing off the competition is not necessarily part of the strategy. “If their goal were to wipe out other airlines, they would tolerate lower profits as their costs go up,” says Jan Brueckner, a professor of economics at the University of California, Irvine. “But I don’t think that’s the game they’re playing. They’re not big enough to do that anyway. They want to expand their market share while earning reasonable profits.”