Contrary to what you might expect, the WSJ reports that San Francisco International has had great success in their adventures with interest rate swaps, providing a breath of fresh air amidst the media's usual "swaps ruin the economy" fare. SFO has taken on interest rate exposure in 2005 and 2008 has two more contracts that will take effect in 2010. The swaps enable them to hedge the cost of their debt, and have lowered their cost per passenger by an astounding 31%.
The key to their success is this attitude:
"If we ... can't understand it, (we) shouldn't be approving it," Mr. Kone said.
Merely understanding something has never guaranteed a profit, but the opposite approach has ruined many financial endeavors. I applaud Kevin Kone, SFO's head of capital finance, for his perception.
For the curious, SFO has published the full details and legal documentation of the swap contracts on their investor relations website.