Flying with(out) a safety net: Financial hedging in the airline industry

This paper re-examines risk management theories in the airline context and investigates whether financial hedging (fuel, foreign exchange and interest rates) is an effective strategy for enhancing operational profitability. Based on data from 100 international airlines over six years, the authors evaluate the impact of hedging on financial airline performance. Their results suggest that fuel price hedging significantly decreases EBIT margin volatility (hence effective in mitigating financial risks) but has no significant effects on profitability (hence ineffective as a speculative tool) and operating costs. Low current ratios are shown to increase operating profits, highlighting the importance of liquidity in capital-intensive industries.

• Record URL:
  • https://doi.org/10.1016/j.tre.2019.05.012
• Record URL:
  • http://www.sciencedirect.com/science/article/pii/S1366554518307580
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/13665545
• Supplemental Notes:
  • © 2019 Elsevier Ltd. All rights reserved. Abstract reprinted with permission of Elsevier.
• Authors:
  • Merkert, Rico
  • Swidan, Hassan
• Publication Date: 2019-7

Language

• English

Media Info

• Media Type: Web
• Features: Figures; References; Tables;
• Pagination: pp 206-219
• Serial:
  • Transportation Research Part E: Logistics and Transportation Review
  • Volume: 127
  • Issue Number: 0
  • Publisher: Elsevier
  • ISSN: 1366-5545
  • Serial URL: http://www.sciencedirect.com/science/journal/13665545

Subject/Index Terms

• TRT Terms: Airlines; Foreign exchange; Hedging (Finance); Interest rates; Profitability; Risk management
• Uncontrolled Terms: Fuel prices
• Subject Areas: Aviation; Finance; Planning and Forecasting;

Filing Info

• Accession Number: 01709556
• Record Type: Publication
• Files: TRIS
• Created Date: Jun 28 2019 11:40AM