NEW YORK (Reuters) — Jet fuel prices have fallen to their lowest levels in a year and a half, providing a welcome boost to US airlines, particularly the big ones that were slow and cautious in hedging their bets.But companies like Southwest Airlines Co. and Alaska Air Group Inc. — which hedged more aggressively against rising oil prices — stand to benefit less than American Airlines, United Airlines and other major carriers, which did not.

These bigger airlines haven't locked in prices with long-term hedges, which means their fuel costs are closely tied to market shifts.

Alaska Air, for example, has hedged 50 percent of its first-quarter fuel needs at a price of $58.78 a barrel. That is slightly above the current price of $55.60 , which means it is effectively inflating its fuel bill.

"Any of the airlines that didn't hedge that much are going to be the airlines that do well," said Helane Becker, an analyst with Benchmark Co. "Most of the bigger airlines didn't hedge that much."

Still, leading US discount carrier Southwest Airlines has proven that long-term hedging can be a formidable advantage, and any benefits from falling fuel prices could be quickly reversed, if prices spike again.

But the lower fuel prices are broadly expected to stick. The welcome decline comes as the US airline industry emerges from a long slump following the airborne attacks of September 11, 2001. Cost cuts, resurgent demand and fare increases have greatly improved the industry's financial prospects.

Calyon Securities analyst Ray Neidl expects the industry to post $6 billion in profits in 2007 after posting $2.3 billion in profits last year — its first profitable year since 2000. He said the estimate doesn't assume falling fuel prices.

With the most bullish outlook for some time, many of the sector's stocks are breaking multi-year highs. The Amex airline index is up 9 percent from a year ago, while shares of American Airlines parent AMR Corp. and Continental Airlines are trading at their highest since August 2001.

Shares of United Airlines parent UAL Corp. are trading at their highest level since relisting after emerging from bankruptcy in early February 2006.

Southwest, which stands to benefit less from lower oil prices, is the industry laggard, down 32 percent from its all-time high in December 2000.

The airline industry is highly exposed to jet fuel prices, which vie with labour as its largest expense. A penny change in the price of jet fuel costs the industry about $190 million annually, according to lobby group the Air Transport Association.

Jet fuel has dipped below $1.60 a gallon, falling to its lowest level since July 2005, after topping $2.25 this summer, said Ben Brockwell, editor of Oil Price Information Service's jet fuel report.

And the price is expected to stay low. "At this point, the prices are likely to remain flat to down," said Jason Schenker, an economist at Wachovia Bank in Charlotte, North Carolina. "Technical supports remain bearish."

While unseasonably warm weather in the US northeast has weakened oil prices, airlines can also claim some responsibility for the drop in jet fuel prices.

Turning off engines more often on the ground, ascending to cruising altitude more quickly, and installing fuel-saving wing tips have led to a decline in jet fuel demand.

"There's been a lot of downward pressure from increased efficiency of usage," said Wachovia's Schenker.

Through October (the latest data available), the US airline industry consumed 3.4 percent less fuel than over the same period in the previous year, according to data from the US Energy Information Administration.