The link between jet fuel prices, carbon credits and airline firm value

Murphy, Finbarr; Li, Na; Murphy, Bernard; Cummins, Mark

doi:10.21314/jem.2013.090

Cited by 6 publications

(5 citation statements)

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“…A number of studies deal with the historical and projected development of aircraft fuel efficiency (Babikian et al 2002;Lee et al 2001;Lee, 2010;Peeters et al, 2005;Zou et al, 2014), the impact of fuel prices on airline operations and finances (Adrangi et al 2014;GAO, 2014;Kahn and Nickelsburg, 2016;Murphy et al, 2013;Swidan et al, 2019), airline profitability (Berry and Jia, 2010;Borenstein, 2011), fleet scheduling and optimization (Naumann and Suhl, 2013;Rosskopf et al 2014), and the impact of a carbon price on firm 1 "From 2027, all international flights will be subject to offsetting requirements. However, flights to and from Least Developed Countries (LDCs), Small Island Developing States (SIDS), Landlocked Developing Countries (LLDCs), and states which represent less than 0.5% of international revenue tonne-kilometer (RTK) will be exempt from offsetting requirements, unless these States participate on a voluntary basis."…”

Section: Introductionmentioning

confidence: 99%

“…However, flights to and from Least Developed Countries (LDCs), Small Island Developing States (SIDS), Landlocked Developing Countries (LLDCs), and states which represent less than 0.5% of international revenue tonne-kilometer (RTK) will be exempt from offsetting requirements, unless these States participate on a voluntary basis." (IATA, 2019) value (Vespermann and Wittmer, 2011;Scheelhaase et al, 2010, Murphy et al, 2013, Anger and Koehler, 2010. Also, a few studies estimate cost or production functions for relatively small numbers of airlines (e.g.…”

Section: Introductionmentioning

confidence: 99%

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Flying More Efficiently: Joint Impacts of Fuel Prices, Capital Costs and Fleet Size on Airline Fleet Fuel Economy

Csereklyei

Stern

2020

Ecological Economics

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We investigate the factors that affect airlines' choice of fleet fuel economy using aircraftlevel data for 1267 airlines in 174 countries. Larger and newer aircraft are usually more fuelefficient. Controlling for the effect of aircraft size and age, we find that the technically achievable fleet fuel economy improves with the size of airlines and the price of fuel and worsens with higher capital costs. The elasticity of fuel economy with respect to the price of fuel is between -0.07 and -0.13. We find evidence for regional differences in fleet fuel economy that are attributable to the adoption of distinct groups of technologies.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Flying More Efficiently: Joint Impacts of Fuel Prices, Capital Costs and Fleet Size on Airline Fleet Fuel Economy

Csereklyei

Stern

2020

Ecological Economics

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“…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 ...…”

Section: Assessment Of the Selected Publicationsmentioning

confidence: 99%

“…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 ).…”

Section: Assessment Of the Selected Publicationsmentioning

confidence: 99%

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

Abdi

Càmara‐Turull

2023

Humanit Soc Sci Commun

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To date, there has been limited research undertaken into firm value determinants in the air transport industry, one of the most essential sectors for global business. In view of this, in this study, we review and synthesise the literature that focuses on the value of firms in this sector and discuss conceptually and empirically the determinants influencing airlines’ stock values. Our main objective is to widen our understanding of the current state of research on the firm value of air transport companies. Using the systematic literature review (SLR) approach, we classify 173 papers published from 1984 to 2021. We find considerable changes in academic interest in the topic over the time period analysed, especially as a consequence of crisis-induced market crashes. In addition, we classify the main research themes relating to airlines’ market value, identify gaps, and introduce potential future research avenues in this area. Among the themes identified, the adjustment in the industry-level factors such as alliances, market structure and competition were the most common source of fluctuations in airlines’ stock value. However, we find shifting to sustainability initiatives and its consequence for stakeholders’ value as one of the most discussed topics in this context. The trend has gained attention since early 2020 due to the emergence of the Covid-19 pandemic as companies are looking for green and sustainable ways to protect the value in crisis time. Our findings assist transportation researchers and executives in addressing major value drivers of airline firms.

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“…Fuel burn is also a significant source of greenhouse gas emissions. Here again, there is literature that looks at the effect of energy prices and exchange-traded allowance units of carbon dioxide on airline profitability (Murphy, Li, Murphy, & Cummins, 2013). Today, with concerns about global warming, regulatory pressure on airlines to evaluate alternatives and discussions about the pricing of carbon emissions, it is important to consider viable alternatives to jet fuel.…”

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confidence: 99%

Decision Support System for Selecting Sustainable Alternatives to Conventional Jet Fuel: Impact of Emissions, Production Costs and Carbon Pricing

Chandran¹,

Anandarajan²

2020

JMS

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The United States Environmental Protection Agency (EPA) in June 2015, took a step toward regulating carbon emissions from airlines, following an assessment that airlines contribute to climate change. On July 25, 2016, the final endangerment finding (Note 1) under section 231(a) (2) (A) of the Clean Air Act for aviation emissions was issued by the EPA. The European Union had issued a similar finding previously and had proposed implementing an emission trading scheme in which the airlines would be required to participate in a cap and trade scheme for emissions from jet fuel. Traditional jet fuel is derived from petroleum, whose price is volatile and depends on geopolitical stability. Fuel burn is a significant cost for airlines and affects their profitability and value. Fuel burn is also a significant source of greenhouse gas emissions. An investigation of alternatives to jet fuel and switching from conventional jet fuel based on varying emission profiles, production costs and varying carbon prices is therefore timely. We use a simple decision support system to examine the link between the life-cycle greenhouse gas emissions of a range of fuels, economic costs of production and varying carbon prices. This analysis should be of interest to regulators, traders, risk managers and executives in the airline industry as well as practitioners of sustainability management.

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The link between jet fuel prices, carbon credits and airline firm value

Cited by 6 publications

References 0 publications

Flying More Efficiently: Joint Impacts of Fuel Prices, Capital Costs and Fleet Size on Airline Fleet Fuel Economy

Flying More Efficiently: Joint Impacts of Fuel Prices, Capital Costs and Fleet Size on Airline Fleet Fuel Economy

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

Decision Support System for Selecting Sustainable Alternatives to Conventional Jet Fuel: Impact of Emissions, Production Costs and Carbon Pricing

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