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Shehadi, Charles A. III (Charles Anthony), and Michael R. Witalec. "How to utilize hedging and a fuel surcharge program to stabilize the cost of fuel." Thesis, Massachusetts Institute of Technology, 2010. http://hdl.handle.net/1721.1/61186.
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Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2010.Cataloged from PDF version of thesis.
Includes bibliographical references (p. 101-103).
This paper looks at some of these travails as well as the common tools used to approach a volatile priced commodity, diesel fuel. It focuses on the impacts of hedging for companies that are directly impacted through the consumption of diesel fuel in addition to companies that are indirectly impacted because they outsource their transportation. It examines the impact of a fuel surcharge and how it distributes risk throughout the supply chain. To complement the research, analysis was conducted in the form of a survey to benchmark the industry with respect to current practices of hedging and fuel surcharges, a sensitivity test of a fuel surcharge matrix to find its appropriate usage, and a simulation to provide guidance as to the appropriate strategy for hedging. Lessons learned from the survey flowed into the sensitivity testing and simulation. These three segments of analysis highlighted the problem of volatility, increasing cost, and inability to pass on the cost, proving the true pain of fuel in the market. Ultimately, the paper answers: How to utilize hedging and a fuel surcharge program to stabilize the cost of fuel? The survey showed the wide adoption of fuel surcharges, confirming the academic research. The sensitivity test proved the need to keep the escalator variable in line with a carrier's actual fuel efficiency and standardize for all carriers. The simulation recommended longer term derivatives. Putting this together, the fuel surcharge establishes stability for the carrier, at the risk of the shipper. The shipper must maintain that stability through its maintenance of the escalator in the fuel surcharge matrix. Additionally, the shipper should hedge fuel via long term derivatives to establish personal fuel cost stability, creating a competitive advantage and enabling the shipper to compete more effectively.
by Charles A. Shehadi, III and Michael R. Witalec.
M.Eng.in Logistics
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Schweitzer, Brandon Lee. "Jet Fuel Hedging and Modern Financial Theory in the U.S. Airline Industry." ScholarWorks, 2017. https://scholarworks.waldenu.edu/dissertations/3323.
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To counter the problem of the volatility of jet fuel prices within the United States, many financial managers of U.S. airlines use hedging as a financial tool to mitigate the risk of exposure to market price volatility. However, their efforts often lead to financial distress for their airlines. The purpose of this qualitative grounded theory study was to explore U.S. airline managers' use of financial hedging to reduce the risk of exposure from the volatility of jet fuel prices. The conceptual framework was Simkowitz's theory of modern finance, which concerns debt policy, dividend policy, and investment policy as they relate to financial decision making by upper management. The research questions addressed when, why, and how U.S. airline financial managers would consider the use of hedging as a financial tool to mitigate the risk in the purchase of jet fuel at times of lower jet fuel prices. Interviews with a purposive sample of 20 U.S. airline financial managers provided data for analysis and theory development of jet fuel hedging utilization in the U.S. airline industry. Data analysis using the constant comparative method enabled the development of a theory of jet fuel hedging utilization. Participants reported using over-the-counter derivatives purchasing strategies as a form of hedging to protect their airlines against spikes in jet fuel prices on the open market. Using study findings, managers may be able to reduce jet fuel operating costs in the U.S. airline industry. Implications for positive social change include potentially higher profits and more jobs as well as lower consumer prices.
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Turner, Peter Alistair. "Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel." Thesis, North Dakota State University, 2014. https://hdl.handle.net/10365/27250.
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Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishing the best cross-hedging asset. Airlines hedging with futures would create the most effective hedge by using 3-month maturity contracts of heating oil. 3- Month maturity contracts are slightly more effective as hedging tools than the next month, but beyond the 3-Month veil, increased maturity makes heating oil less effective as a cross hedging tool.Upper Great Plains Transportation Institute (UGPTI)
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Haliplii, Rostislav. "Hedging in alternative aarkets." Thesis, Paris 1, 2020. http://www.theses.fr/2020PA01E059.
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La recherche faisant l'objet de cette thèse se concentre sur deux marchés alternatifs: les cryptomonnaies et les produits pétroliers. La plupart des marchés alternatifs sont loin d'être efficaces, et cela génère beaucoup de défis en termes de modélisation. Les modèles basés sur des distributions gaussiennes sont toujours le choix le plus populaire pour les analystes financiers quantitatifs et sont mis en œuvre même sur des marchés qui sont loin d'être efficients. Un cadre de modélisation solide pour l'alternative des actifs doit partir d'une distribution non gaussienne. Par conséquent, tout au long de cette thèse, le thème général de toutes les simulations et estimations est l'utilisation de l'hyperbolique généralisée distributions. Cette approche a une double justification. D'une part, il est essentiel pour développer un cadre quantitatif tranchant au-delà de l'univers gaussien, tester les performances du nouveau modèle dans des situations réelles. D'autre part, les marchés faisant l'objet de cette recherche (produits pétroliers et crypte-monnaies) n'ont ni les fondamentaux ni le comportement empirique qui pourraient justifier la modélisation traditionnelleThe research making the object of this thesis focuses on two alternative markets: cryptocurrencies and oil-distillates. Most alternative markets are far from being efficient, and this generates a lot of challenges in terms of modelling. Models based on Gaussian distributions are still the most popular choice for quantitative analysts and are implemented even in markets which are far from being efficient. A sound modelling framework for alternative assets should start from non-Gaussian distribution. Therefore, throughout this thesis, the overarching theme for ail simulations and estimations is the use of generalized hyperbolic distributions. This approach has a two-edged justification. On the one hand, it is critical to developing a fully-edged quantitative framework beyond the Gaussian universe, thereby testing the performance of the new mode! in real-life situations. On the other hand, the markets making the object of this research (oil distillates and crypto-currencies) have neither the fundamentals nor the empirical behaviour that could justify traditional modelling
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Falahee, Mara. "As the Price of Oil Decreases, Does Airline Profitability Increase?" Scholarship @ Claremont, 2016. http://scholarship.claremont.edu/scripps_theses/799.
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With a dramatic decrease in oil prices over the past few years, the opportunity for increased profitability within transportation companies has become a relevant topic of discussion. Oil is a commodity that influences the price of gas and jet fuel. As commodity prices, and oil prices in particular, have collapsed, one would expect transportation companies to benefit from a decrease in operating expenses and experience an increase in profitability. Through this thesis, I seek to prove that despite a dramatic decline in the price of oil, airline companies have not benefited due to their engagement in hedging activities, and therefore have not experienced an increase in profitability. My dataset includes a collection of operating expenses and operating profit for the four major domestic airline companies over the past seven years. These companies include Southwest, Delta, United, and American Airlines. I tested my hypothesis through regression analysis, and used fuel derivative gains or losses as the independent variable and operating profit as the dependent variable. Although my results are not significant, my analysis indicates that operating profit has, in fact, decreased through this recent period of declining oil prices, due to an increase in operating expenses through airline companies’ hedging activities.
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Felder, Frank Andrew. "Hedging natural gas price risk by electric utilities : a comparison of fuel switching to financial contracts." Thesis, Massachusetts Institute of Technology, 1994. http://hdl.handle.net/1721.1/28123.
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Bigdeli, Sam, and Petra Marcusson. "Oil exposure, hedging and firm value : A quantitative study on the U.S. airline industry." Thesis, Linnéuniversitetet, Institutionen för ekonomistyrning och logistik (ELO), 2018. http://urn.kb.se/resolve?urn=urn:nbn:se:lnu:diva-75438.
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This thesis examines the impact of oil price fluctuations and jet fuel hedging on firm value before, during and after the subprime crisis. Four regressions are estimated with two different variables representing firm value; market return and market valuation. The result of this study shows that the airlines’ oil price exposure has substantially decreased over time and that jet fuel hedging does not add value for investors.
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Caetano, Bruno Manuel Matos. "Aplicação de estratégias de hedging com futuros no custo de combustível da Força Aérea Portuguesa." Master's thesis, Instituto Superior de Economia e Gestão, 2013. http://hdl.handle.net/10400.5/6308.
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Mestrado em Contabilidade, Fiscalidade e Finanças EmpresariaisNo quadro da atual conjuntura económica de elevada vulnerabilidade, a gestão do risco assume um papel relevante do ponto de vista organizacional. Neste sentido, o presente trabalho tem como objetivo apresentar e discutir a análise dos efeitos da aplicação de estratégias de hedging no custo com jet fuel da Força Aérea Portuguesa (FAP), através da utilização de futuros sobre o heating oil. A aplicação desta estratégia pretende minimizar a volatilidade do preço da matéria-prima bem como reduzir o custo total decorrente do aumento de valor do combustível nos mercados, aumentado desta forma a estabilidade orçamental. Assim, foi utilizada uma metodologia ex post facto baseada no preço pago em jet fuel pela FAP (JP8 e Jet A1), no período entre Abril de 2006 e Dezembro de 2011, considerando três cenários de hedging: aquisição de futuros anual, semestral, e trimestral. Para cada cenário foi estudada a percentagem de hedging ideal. Os resultados demonstram que, genericamente, uma cobertura total das necessidades de ambos os combustíveis através da compra de contratos de futuros do heating oil permitiria uma poupança e uma menor volatilidade no preço de combustível. A aquisição anual de futuros revelou-se a opção mais consistente no quadro da gestão de risco aqui analisada, dado que permitiria uma poupança total de 7,356 milhões ao longo dos seis anos do estudo, demonstrando que a aplicação de estratégias de hedging poderia ter-se afigurado uma alternativa viável no contexto da FAP. Estes resultados revelam-se congruentes com dados de estudos internacionais desenvolvidos quer no sector público quer no privado.
Under the current economic situation of high vulnerability, risk management plays an important role in organizations. In this sense, the objective of this research is to present and discuss the analysis of the implementation of jet fuel hedging strategies in Portuguese Air Force (PoAF), through the use of heating oil futures. The application of such strategies aims to reduce the volatility of monthly purchase price and reduce the total cost resulting from sudden upturn in jet prices, thereby increasing budgetary stability. Thus, was used an ex post facto methodology based in price paid for jet fuel (JP8 and Jet A1) in the period from April 2006 to December 2011, considering three hedging scenarios: cover twelve, six and three months ahead. For each scenario was studied the optimal hedging position. The results show that, generally, full coverage of jet fuel needs by purchasing heating oil futures contracts allow savings and less volatility in the price of fuel. The annual cover proved to be the more consistent strategy in the risk management analysis as it would have provided savings of 7,356 million over the six years of the study, showing that PoAF would have benefited from undertaking a hedging position. These results are consistent with data from international studies developed either in the private or public sector.
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Havik, Jonathan, Emil Stendahl, and Andreas Soteriou. "Commodity Risk Management in The Airline Industry : A study from Europe." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Företagsekonomi, 2016. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-30346.
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The airline industry is a major user of jet fuel and this constitutes a large component of the operating costs and is a risk coefficient for airlines. Several studies have been conducted on how oil price volatility affect stock prices and cash flows as well as how, in general, firms that uses derivatives experience lower stock returns volatility and stock s .The impact of oil price volatility on airline stock s and the impact of hedging on airline stock s have not been adequately examined, this paper fills this gap. By gathering daily frequency of oil spot prices to access the quarterly oil price volatility and stock s from 16 European airlines, we correlate quarterly oil price volatility to quarterly airline stock s as well as stock s and hedging percentages between 2010-2015, we reject the hypothesis that oil price volatility has an impact on airline stock s and that hedging reduces stock s. These findings therefore suggest that oil price volatility do not have a large impact on systematic risks or that hedging offset systematic risks. The findings are of interest to investors who want to make well informed investment decisions based on non-diversifiable equity risk since it has become popular for management recently to implement hedging policies to signal competency in risk management in order to attract investments.
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Rocha, Raquel Mafra. "Fuel hedging e o impacto cambial : uma análise sobre os custos operacionais das companhias aéreas IAG e Finnair." Master's thesis, Instituto Superior de Economia e Gestão, 2019. http://hdl.handle.net/10400.5/20107.
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Mestrado em Contabilidade, Fiscalidade e Finanças EmpresariaisA indústria aérea tem se deparado com a crescente volatilidade que tem existido no mercado do petróleo, uma vez que afeta os seus custos, tendo o combustível um peso de cerca de 30% dos custos operacionais da indústria. Esta situação leva ao uso de várias estratégias de gestão do risco do combustível por parte das companhias aéreas, com o objetivo de redução dos custos do combustível e eliminação da volatilidade dos preços de mercado. Face a situação atual nos mercados, este trabalho visa analisar os custos operacionais de duas companhias aéreas, a IAG e a Finnair. Tem o objetivo de estudar a evolução das receitas e dos custos que as organizações incorreram com as atuais estratégias de hedging do combustível e da taxa de câmbio para assim poder comparar os resultados obtidos pelas diferentes estratégias utilizadas e identificar qual das duas foi a mais eficiente. Iniciamos o estudo através de uma análise da estatística descritiva dos custos e receitas operacionais de cada empresa, recorrendo a medidas standard da aviação. Posteriormente, recorremos a regressões lineares para estudar o impacto do preço do petróleo e como o câmbio interfere no custo unitário do combustível, utilizando variáveis de controlo nas regressões.
The Aviation industry as struggled against the increased volatility that exists in the oil market, affecting its costs, with the fuel weighing 30% in the industries operational costs. This situation leads to the adoption of several risk management strategies for fuel by aviation companies with the goal of fuel cost reduction and thus mitigating the volatility in market prices. In light of current market situation, this work aims to study the operational costs of two airlines, IAG and Finnair, the goal is to check the evolution of their costs an revenues against their hedging strategies for both fuel and currency exchange and thus comparing results achieved by both airlines and find the most efficient one. The study began with a statistical analysis of operational costs and revenue for both entities using standard aviation metrics and later integrating linear regressions to study the impact of oil (price) and currency exchange rate in the cost of fuel, control variables were also used.
info:eu-repo/semantics/publishedVersion
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Kosobucki, Edwin A. "Hedging risk : hedge funds and the politics of financial regulatory harmonization." Thesis, McGill University, 2006. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=99728.
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Hedge funds introduce considerable volatility into global financial markets. Given the volume of capital they mobilize, hedge funds are capable of precipitating 'herding'---the underlying dynamic behind the transmission of financial distress and the precursor to systemic crises. Greater regulatory oversight of hedge-fund activities could reduce these excesses without necessarily impinging on the self-correcting mechanism of the free market. Presently, there is no regime or monetary authority in place that would compel states to undertake efforts to enhance existing regulatory structures so as to mitigate the exigency of systemic risk. That coordination has not been achieved exposes both the obstacles facing monetary cooperation for establishing a more robust international financial order and the limitations of liberal theories of international cooperation. It also makes evident the importance of hegemonic participation in the construction of economic regimes in an era of accelerating financial globalization.
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Ferreira, Bruno Emanuel Azevedo. "Fuel and operational hedging : evidence from the airline industry." Master's thesis, 2019. http://hdl.handle.net/10400.14/28784.
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A indústria da aviação é, hoje em dia, caraterizada por uma intensa competição global entre companhias aéreas. Os custos com combustível representam uma parte substancial das despesas operacionais e estão sempre sujeitos à volatilidade do mercado. Tanto a cobertura de risco financeiro como operacional estão ao dispor das companhias aéreas para contrariar a volatilidade e reduzir os custos em combustível. Sendo um dos poucos estudos a incluir companhias aéreas da Europa e da Ásia, esta investigação foca-se em 43 companhias ao longo do período 2007-2017 e conclui que as transportadoras aéreas Europeias têm menor exposição ao risco do preço do combustível, do que as companhias Asiáticas ou Norte-Americanas. Também é realizada uma comparação entre tipos de companhias e é possível concluir que a exposição média ao preço do querosene é maior em companhias-bandeira do que nas de baixo custo. Pensamos que este será o primeiro estudo global a incluir três medidas de cobertura de risco operacional, sendo estes a diversidade da frota, a eficiência de combustível, e a utilização de aviões em leasing operacional. Treanor, Carter, Rogers, & Simkins (2013) estudaram estas medidas mas apenas em companhias Norte-Americanas. Usando modelos de efeitos-fixos, os nossos resultados sugerem que a cobertura do risco financeiro acaba por aumentar a exposição. Adicionalmente, as nossas evidências apontam para uma rejeição da hipótese de que a cobertura de risco operacional leva a uma diminuição da exposição ao risco do preço do querosene, em todas as nossas três proxies.The airline industry is nowadays characterized by an intense competition among carriers around the globe. Jet fuel costs represent a substantial part of airlines’ operating expenses and are always subject to the market volatility. Both financial and operational hedging are at the disposal of airlines to offset the volatility and smooth these expenses across the years. Being one of the few studies to include airlines from Europe and Asia, this research focuses in 43 airlines over the period 2007-2017 and finds that European carriers are less exposed to fuel price than Asian or North American airlines. We also test for types of carriers and find evidence that the average fuel exposure is higher on premium airlines, when comparing to low-cost carriers. To our knowledge, this is the first study to include three measures of operational hedging on a global sample of airlines, namely fleet diversity, fuel-efficiency and operating leased aircrafts. Treanor, Carter, Rogers, & Simkins (2013) studied these but only on a sample of North American airlines. Using fixed-effects’ models, our results suggest that financial hedging increases fuel risk exposure. Furthermore, our results lead to a rejection of the hypothesis that operational hedging decreases airlines’ exposure, on all three proxies we consider.
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Subhaschandra, Dhiren. "A gestão do risco na indústria da aviação: o caso da Jet Fuel." Master's thesis, 2007. http://hdl.handle.net/10071/630.
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J.E.L. classification: G32, G39In the current context of great uncertainty, risk management has assumed an important role in the organizations. The actual environment of fierce competition and the volatility associated with financial markets and commodities prices have led to an increasing search of the derivatives. This thesis intends to approach the risk that the airlines face due to the instability of the oil market. Jet fuel is one of the most important costs that airlines support, being in some cases the biggest cost. To achieve a discount in the unit cost of jet fuel relative to the market price can mean an excellent competitive advantage against the other competitors in the aviation business. Lufthansa is known as one of the best airline carrier in terms of managing the risk of jet fuel price. Using the German company as an example, this study describes how to develop a strategy to manage efficiently the risk of jet fuel and to assess the impact in the accounts of the company.
No actual contexto de grande incerteza, a gestão de risco tem assumido um papel cada vez mais importante nas organizações. O clima de concorrência feroz e a volatilidade associada aos mercados financeiros e aos preços das commodities têm levado a uma procura crescente dos derivados. Este trabalho pretende abordar o risco que as companhias de aviação correm face à instabilidade do mercado petrolífero. O jet fuel é um dos custos mais relevantes que uma empresa de transporte aéreo suporta, sendo em alguns casos o maior. Conseguir que, numa empresa, o custo com o jet fuel seja ligeiramente menor que o preço de mercado pode significar uma vantagem competitiva relevante face às demais congéneres. A Lufthansa é reconhecida como uma das empresas que melhor gere o risco de preço do jet fuel. Recorrendo ao exemplo da empresa de transporte aéreo germânica, abordam-se os factores a ter em conta na implementação de uma estratégia de cobertura de risco eficaz e aprecia-se qual o seu impacto nas contas da empresa.
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Santos, Laura Carvalho. "JETFUEL: modelo de gestão de risco." Master's thesis, 2009. http://hdl.handle.net/10071/1771.
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Relatório de ProjectoO presente trabalho tem como objectivo a proposta de criação de um modelo que permita gerir o risco e controlar as ameaças a que estão sujeitas as transportadoras aéreas, face à variação do preço de mercado do jet fuel. Tal modelo assenta essencialmente nos procedimentos e controlos a implementar no âmbito de um Modelo de Gestão de Risco, com vista a adequada execução da estratégia definida (ou a definir) pela gestão. A cobertura do risco (hedging) pode ser assegurada principalmente através de instrumentos financeiros derivados, cujo enquadramento é efectuado neste trabalho, os quais, uma vez integrados na estratégia de gestão de risco permitem estipular intervalos de custos a suportar pela empresa com a aquisição de combustível. É essencial considerar que uma empresa que opere como transportadora aérea já se encontra sujeita a riscos operacionais inerentes à própria actividade, como seja a competitividade de companhias de low cost, devendo transferir o risco de mercado para as entidades cuja actividade incide na gestão do risco de alterações nos preços/taxas de mercado.
This work aims to create a model that allows the airliners to manage the risk and control the threats, resulting from the jet fuel spot price fluctuation. It is based on procedures and controls that should be implemented in a Risk Management Model, to define and execute a strategy. The hedging is achieved through derivative financial instruments (explanation sustained throughout this paper), which included in a risk management strategy locks the jet fuel costs interval. It is essential to consider that a company that operates as an airliner is already subjected to operational risks, inherent from its activity, such as low cost company’s competitiveness. This way, the market risk should be transferred to a third party, such as organizations whose core business is managing the price and markets rates changes risk.
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Henriques, Ana Maria Alves Joaquim. "Does risk management increases the firm value? : evidence from the jet fuel hedging in the airline industry." Master's thesis, 2015. http://hdl.handle.net/10400.14/19981.
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This thesis examines the use of financial instruments to hedge jet fuel risk in the airline industry during 2000-2014. The main goals are to understand if changes in the hedging policy increases the airline firm's value, measure by the Tobin's Q and if the use of different financial tools also has an impact in the airline company's value. The results show that all the values are statistically insignificant. This leads to the conclusion that the model used may not be the right one. Further research is needed in the area and maybe the best approach is the one followed by Viessmann (2010).Ce mémoire de recherche analyse l'utilisation des instruments financiers pour couvrir le risque de carburéacteur dans l'industrie des transports aérien entre 2000 et 2014. Les principaux objectifs sont comprendre si les changements dans la politique de couverture augmentent la valeur des entreprises de transport aérien mais aussi, tester, à l’aide du Q de Tobin, si l'utilisation de différents outils financiers a un impact sur la valeur de la compagnie aérienne. Les résultats montrent que toutes les valeurs sont statistiquement insignifiantes. Par conséquent, cela veut dire que le modèle utilisé peut ne pas être le bon. On peut donc penser que peut-être la meilleure approche est celle suivie par Viessmann (2010), et que de la recherche supplémentaire est nécessaire.
Esta tese examina a utilização de instrumentos financeiros para cobrir o risco do jet fuel na indústria da aviação comercial durante o período de 2000 a 2014. Os principais objetivos são entender se as mudanças na política de gestão de risco aumenta o valor da empresa de aviação, medida pelo Tobin's Q, e se o uso de diferentes instrumentos financeiras também tem um impacto no valor da companhia aérea. Os resultados mostram que todos os valores são estatisticamente insignificantes. Isto leva à conclusão de que o modelo usado pode não ser o mais adequado para este estudo. É necessária mais investigação na área e, talvez, a melhor abordagem seria a seguida pela Viessmann (2010).
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Wu, Wanting, and 吳婉婷. "An Econometric Analysis Of The Effect Of Fuel Hedging On The Financial Performance Of Asian And American Airlines." Thesis, 2012. http://ndltd.ncl.edu.tw/handle/51531144740914870699.
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碩士開南大學
空運管理學系
100
There is considerable interest in determining the extent to which fuel hedging affects the financial performance of airlines. This is due in large measure to the enormous fluctuations in the cost of fuel that airlines have experienced over the past decade. This thesis first introduces a very simple stochastic theoretical model to highlight the essential aspects of fuel hedging. It is shown that fuel hedging can only affect expected profitability when the firm perceives that it can out guess the market with respect to the future spot price of fuel. In addition, it is shown that risk aversion can also motivate fuel hedging with the optimal hedge ratio depending positively on the extent of this risk aversion. Numerous other reasons can be offered to rationalize the use of fuel hedging such as reductions in the variability of costs and profits and thus equity risk premiums, enhanced planning and operations, and demonstration effects regarding managerial competency, all of which should have a bearing on the financial performance of airlines. The second part of the paper uses paneled data on a selected group of US and Asian airlines to quantitatively determine if fuel hedging does in fact have a measurable effect on the financial performance of airlines. It is seen that under various performance measures and model specifications, fuel hedging can increase financial performance, at least with respect to the experience of US airlines. It is also shown that Asian firms have not benefited as much from their fuel hedging activities during the past ten years. Finally, it is found that macroeconomic influences have significant and unexpected effects on the financial performance of airlines due to the complicated dynamics involved.
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Carlo, Pietro Scotto Di. "How can airlines optimally hedge fuel price risk? [EDP Energias de Portugal, S.A. – hedging in multinationals: focus on FX and IR risks]." Master's thesis, 2020. http://hdl.handle.net/10362/115199.
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This paper is divided in two main parts. The first describes the main aspects of the business project carried on with EDP throughout the semester, namely the benefit of managing interest rate and foreign exchange risks simultaneously. The second explores the complexity of insulating fuel price risk from the airlines point of view, showing that rising fuel costs do not necessarily imply lower cash flows and, thus, hedging by locking in the cost of future fuel purchases is not optimal. In fact, moves in oil prices depends on supply and demand shocks which differently impact airlines’ operations.
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Conceição, Francisco Duarte Faria Garcia da. "Fuel and foreign currency derivatives use in the Us airline industry - the impact on Tobin’s Q." Master's thesis, 2018. http://hdl.handle.net/10362/35450.
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This thesis examines the use of foreign currency and fuel derivatives by a sample of 26
passenger airlines, between 2000 and 2016. The main goal is to study the impact on Tobin’s
Q. Based on previous literature, I investigate if there is a premium associated with using these
derivatives, controlling for other variables that might affect Q. The results are not statistically
significant but point to a positive premium associated with the use of currency derivatives and
a discount for the use of fuel derivatives. These results are consistent with an alternative
approach, using ROA, stock returns and revenue growth sensitivity to fuel and currency prices.
I also study the likeliness of a firm hedging these risks based on its fundamentals. A negative
correlation between jet fuel prices and the price of the US dollar relative to a representative
basket of currencies indicates the possible presence of a natural hedge, meaning that losses
from high prices in one of the factors may be offset by gains in the other.