Southwest Airlines (NYSE: LUV) is famous for making a profit every year since it got started in the 1970s. Given the billions that the airline industry has lost in the last several years, that's quite a feat. And I've posted about how Southwest has been able to sustain that superior performance. But now Southwest's streak could be in danger.

How so? Southwest lost $56 million in its fourth quarter -- its second in a row, because it bet that the price of jet fuel would continue to climb. Southwest had to post cash collateral after jet fuel fell 65% in 2008's second half to less than the rates in its contracts. Southwest reduced most of these fuel hedges in December. Southwest also cut its plans to expand in 2009 -- it will pull 15 aircraft from flying this year as it adds 13 new planes, and it will delay some 2010 deliveries.

But here's the good news -- Southwest made a profit of 8 cents a share excluding $117 million in costs related to fuel hedging -- 3 cents a share above the 5 cents analysts had expected it to earn. But the question that remains for Southwest shareholders is whether it will make a profit in 2009. The answer depends on whether it can cut back on capacity to match lower demand in an economic downturn and whether its fuel hedges will make or lose money for Southwest.

That market may be betting that it can keep its streak going. Its stock is up 6.4% in pre-market.

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Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.