IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v49y2014i1p149-172.html
   My bibliography  Save this article

Does Operational and Financial Hedging Reduce Exposure? Evidence from the U.S. Airline Industry

Author

Listed:
  • Stephen D. Treanor
  • Betty J. Simkins
  • Daniel A. Rogers
  • David A. Carter

Abstract

We examine the effects of both financial and operational hedging on jet fuel exposure in the U.S. airline industry. Specifically, we investigate two operational hedging strategies: the extent to which airlines operate different aircraft types and the degree to which airlines operate fuel-efficient fleets. We find that both financial and operational hedging are important tools in reducing airline exposure to jet fuel price risk. However, operational hedging strategies appear to be more economically important, which suggests that hedging with derivatives is more likely to be used to “fine-tune” risk exposure, whereas operational choices have a higher order effect on risk exposure.

Suggested Citation

  • Stephen D. Treanor & Betty J. Simkins & Daniel A. Rogers & David A. Carter, 2014. "Does Operational and Financial Hedging Reduce Exposure? Evidence from the U.S. Airline Industry," The Financial Review, Eastern Finance Association, vol. 49(1), pages 149-172, February.
  • Handle: RePEc:bla:finrev:v:49:y:2014:i:1:p:149-172
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/fire.12029
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roncoroni, Andrea & Id Brik, Rachid, 2017. "Hedging size risk: Theory and application to the US gas market," Energy Economics, Elsevier, vol. 64(C), pages 415-437.
    2. Merkert, Rico & Swidan, Hassan, 2019. "Flying with(out) a safety net: Financial hedging in the airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 206-219.
    3. Gavin Cassar & Joseph Gerakos, 2017. "Do risk management practices work? Evidence from hedge funds," Review of Accounting Studies, Springer, vol. 22(3), pages 1084-1121, September.
    4. Swidan, Hassan & Merkert, Rico, 2019. "The relative effect of operational hedging on airline operating costs," Transport Policy, Elsevier, vol. 80(C), pages 70-77.
    5. Michael T. Chng & Victor Fang & Vincent Xiang & Hong Feng Zhang, 2017. "Corporate Hedging and the High Idiosyncratic Volatility Low Return Puzzle," International Review of Finance, International Review of Finance Ltd., vol. 17(3), pages 395-425, September.
    6. Shao, Lili & Shao, Jun & Sun, Zheng & Xu, Huaxin, 2019. "Hedging, speculation, and risk management effect of commodity futures: Evidence from firm voluntary disclosures," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    7. Turner, Peter A. & Lim, Siew Hoon, 2015. "Hedging jet fuel price risk: The case of U.S. passenger airlines," Journal of Air Transport Management, Elsevier, vol. 44, pages 54-64.
    8. Carter, David A. & Rogers, Daniel A. & Simkins, Betty J. & Treanor, Stephen D., 2017. "A review of the literature on commodity risk management," Journal of Commodity Markets, Elsevier, vol. 8(C), pages 1-17.
    9. Gayle, Philip & Lin, Ying, 2020. "Cost Pass-through in Commercial Aviation: Theory and Evidence," MPRA Paper 102018, University Library of Munich, Germany.
    10. Hu, Rong & Xiao, Yi-bin & Jiang, Changmin, 2018. "Jet fuel hedging, operational fuel efficiency improvement and carbon tax," Transportation Research Part B: Methodological, Elsevier, vol. 116(C), pages 103-123.
    11. Wang, Huabing & Gao, Xiang, 2020. "Oil price dynamics and airline earnings predictability," Journal of Air Transport Management, Elsevier, vol. 87(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:49:y:2014:i:1:p:149-172. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/efaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.