Jet Fuel Price Variations and Market Value: A Focus on Low-Cost and Regular Airline Companies

Abstract

Abstract. We analyze the relationship between dynamics to stock prices and jet fuel prices, conditional on financial and company-specific variables, in the airline sector. In particular, our contribution to the literature is in the comparison between regular and low-cost airline companies. We run a set of fixed-effect regressions where the dependent variable, the stock daily return of the airline company (observed between 2008 and 2014) is regressed over three sets of explanatory variables (financial, company-specific and time variables). While large and small companies provide similar results, we find that the company price return -among different variables -correlates only with the jet fuel return and the stock market return. Our work also suggests that there is a difference between regular and low-cost companies. We speculate that this possibly arises because low-cost companies stock-pile in a more efficient way, which depends less on current jet fuel price. Our evidence then sheds light on the efficiency of the low-cost model and may suggest to export part of its practice among regular airline companies.

Assessment of the Impact of Hard Commodity Prices Changes on Inflation in European Union Countries

“…Kyrtsou and Labys (2006), in their study, presented the relationship between inflation and commodities as nonlinear and chaotic which was expanded upon by Krichene (2008) who stated that low-interest rates nowadays compared to the period of the 1970s and 1980s, when interest rates were high, can explain why the relation between inflation and commodity prices could be named as weak. Verheyen (2010) and Gaudenzi and Bucciol (2016) emphasized the fact that producers who encounter lower interest rates can deal with higher commodity prices more easily. In other words, in some industrial countries, low inflation could be another reason for a minor influence of commodity price fluctuation on economic performance (De Gregorio, Landerretche, and Neilson, 2007).…”

Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19

“…Therefore, more empirical evidence is needed on evaluating the influence of industry-level value determinants for airlines. Study Mohanty et al ( 2014 ), Bernile et al ( 2012 ), Detzen et al ( 2012 ), Davidson and Worrell ( 1993 ), Bosch et al ( 1998 ), Domke-Damonte ( 2000 ), Cheng and McDonald ( 1996 ), Cheng et al ( 2021 ), Akyildirim et al ( 2021 ), Mollick and Amin, ( 2021 ), Trifonov, ( 2021 ), Wang and Gao ( 2020 ), Thorbecke ( 2019 ), Sheng et al ( 2019 ), Ho et al ( 2013 ), Wassmer and Meschi ( 2011 ), Chen and Chen ( 2010 ), Alves and Barbot ( 2010 ), Cheng et al ( 2009 ), Benaroch et al ( 2007 ), Gong et al ( 2008 ), Flouris and Swidler ( 2004 ), Kiesel et al ( 2017 ), Gaudenzi and Bucciol ( 2016 ), Czerny and Zhang ( 2015 ), Kwoka and Gu ( 2015 ), Park et al ( 2003 ), Ho et al ( 2021 ), Yun and Yoon ( 2019 ), Venkataraman and Ramachandran ( 2016 ), Murphy et al ( 2013 ), Hunsader and Dickens ( 2011 ), Murphy ( 2006 ), Park et al ( 2003 ), de-Fusco and Fuess, ( 1991 ), Beneish and Moore ( 1994 ), Shepherd ( 1991 ), Allroggen et al ( 2015 ). Topic area Firm-level value influencers Impact variable Business model (low-cost & full-service); airline’s distribution capability and retailing platforms to set offers to customers, firm demand for hedging, aeronautical charges, vertical differentiation strategy (which involves bear the cost to upgrade a base product to a premium version), cash compensation for chief executive ...…”

“…Mohanty et al ( 2014 ), Bernile et al ( 2012 ), Detzen et al ( 2012 ), Davidson and Worrell ( 1993 ), Bosch et al ( 1998 ), Domke-Damonte ( 2000 ), Cheng and McDonald ( 1996 ), Cheng et al ( 2021 ), Akyildirim et al ( 2021 ), Mollick and Amin, ( 2021 ), Trifonov, ( 2021 ), Wang and Gao ( 2020 ), Thorbecke ( 2019 ), Sheng et al ( 2019 ), Ho et al ( 2013 ), Wassmer and Meschi ( 2011 ), Chen and Chen ( 2010 ), Alves and Barbot ( 2010 ), Cheng et al ( 2009 ), Benaroch et al ( 2007 ), Gong et al ( 2008 ), Flouris and Swidler ( 2004 ), Kiesel et al ( 2017 ), Gaudenzi and Bucciol ( 2016 ), Czerny and Zhang ( 2015 ), Kwoka and Gu ( 2015 ), Park et al ( 2003 ), Ho et al ( 2021 ), Yun and Yoon ( 2019 ), Venkataraman and Ramachandran ( 2016 ), Murphy et al ( 2013 ), Hunsader and Dickens ( 2011 ), Murphy ( 2006 ), Park et al ( 2003 ), de-Fusco and Fuess, ( 1991 ), Beneish and Moore ( 1994 ), Shepherd ( 1991 ), Allroggen et al ( 2015 ).…”

“…Mohanty et al (2014),Bernile et al (2012),Detzen et al (2012),Davidson and Worrell (1993),Bosch et al (1998), Domke-Damonte (2000,Cheng and McDonald (1996),Cheng et al (2021), Akyildirim et al (2021,Mollick and Amin, (2021), Trifonov, (2021),Wang and Gao (2020),Thorbecke (2019),Sheng et al (2019),Ho et al (2013),Wassmer and Meschi (2011), Chen and Chen (2010),Alves and Barbot (2010),Cheng et al (2009), Benaroch et al (2007,Gong et al (2008),Flouris and Swidler (2004),Kiesel et al (2017),Gaudenzi and Bucciol (2016),Czerny and Zhang (2015),…”