Fuel Hedging, Operational Hedging and Risk Exposure – Evidence from the Global Airline Industry

Berghöfer, Britta

doi:10.2139/ssrn.2309510

Cited by 2 publications

(2 citation statements)

References 61 publications

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“…Operational hedging Empirical research documents that many firms actively manage exposure to market risks through the use of operational hedging (Choi & Jiang, 2009;Pantzalis et al, 2001;Berghöfer & Lucey, 2014) -as in Pantzalis et al (2001) -so it is necessary to control for operational hedging to understand firm exposure. We use the dummy variable GEOMARKT, which has a value of one for firms that have sales This table shows the number of firms and the percentage of firms that use derivatives by country, by derivatives use information, and by year for all firms.…”

Section: Firm Specificsmentioning

confidence: 99%

Policy uncertainty, derivatives use, and firm-level FDI

2017

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We explore the link between uncertainty in economic policy, firm-level FDI, and firm hedging behavior -building upon a newspaper-based index of economic policy uncertainty (EPU). We find that the relative difference in EPU between home and host country has a significant relationship with FDI. Firms increase their FDI level in countries, which have a low level of EPU relative to their home country. In addition, firms use derivatives more intensively in response to an increase in EPU. Interestingly, the link between EPU and corporate derivatives use varies according to the type of firm. Domestic MNCs make the most effective use of derivatives to hedge against EPU exposure. Journal of International Business Studies (2018) 49, 96-126.

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Section: Firm Specificsmentioning

confidence: 99%

Policy uncertainty, derivatives use, and firm-level FDI

2017

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“…Treanor, Simkins, Rogers, and Carter () found that airlines primarily manage risk exposure through operational hedging, but fine‐tune it with derivatives. Berghofer and Lucey (), however, concluded that neither financial nor operational hedging actually reduces airline fuel costs or risk. Thus, although theorists argue derivative hedging can generate value, gains appear elusive for airlines.…”

Section: Background and Motivationmentioning

confidence: 99%

Vertical integration as an input price hedge: The case of Delta Air Lines and trainer refinery

Almansur

Megginson

Pugachev

2019

Financial Management

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In April 2012, Delta Air Lines (Delta) purchased a mothballed oil refinery. We use this case to illustrate when, how, and why vertical integration (VI) can hedge input price risk. First, we show that stockholders and creditors expected the move to create wealth. Consistent with their predictions, Delta's exposure to refining margins, cash flow volatility, cost of debt, and default probability all decreased, relative to peers, postacquisition. Our evidence is consistent with the refinery influencing Delta's operating strategies, especially in its most affected markets. The case demonstrates how asset specificity and financial hedging frictions can justify VI.

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Fuel Hedging, Operational Hedging and Risk Exposure – Evidence from the Global Airline Industry

Cited by 2 publications

References 61 publications

Policy uncertainty, derivatives use, and firm-level FDI

Policy uncertainty, derivatives use, and firm-level FDI

Vertical integration as an input price hedge: The case of Delta Air Lines and trainer refinery

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