The relative effect of operational hedging on airline operating costs
The relative effect of operational hedging on airline operating costs
- Neue Suche nach: Swidan, Hassan
- Neue Suche nach: Merkert, Rico
- Neue Suche nach: Swidan, Hassan
- Neue Suche nach: Merkert, Rico
Abstract Due to recent hedging losses, albeit prolonged volatility relatively low fuel prices and rising costs of financial hedging, many airlines decided to forego or scale-back their financial jet fuel derivatives and instead manage the risk exposure through operational hedging strategies. Based on a sample of 80 global airlines, we evaluate the cost impact of operational hedging and its relationship with financial hedging. Our results show that operational hedging based on aircraft engine commonality significantly reduces operating cost but it does not work as a standalone strategy to manage jet fuel risk exposure. Our empirical models demonstrate that deploying operational hedging in conjunction with financial derivatives is much more effective as in combination they not only reduce unit cost but also increase profitability.
Dokumentinformationen
The relative effect of operational hedging on airline operating costs
Transport Policy ; 80 ; 70-77
2019-05-01
8 pages
Aufsatz (Zeitschrift)
Elektronische Ressource
Englisch
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