Does Fuel Hedging Make Economic Sense ? The Case of the US Airline Industry

  title={Does Fuel Hedging Make Economic Sense ? The Case of the US Airline Industry},
  author={David A. Carter and Daniel Rogers and Betty J. Simkins},
Does hedging add value to the firm, and if so, is the source of the added value consistent with hedging theory? We investigate jet fuel hedging behavior of firms in the US airline industry during 1994-2000 to examine whether such hedging is a source of value for these companies. We illustrate that the investment climate in the airline industry conforms well to the theoretic framework of Froot, Scharfstein, and Stein (1993). In general, airline industry investment opportunities correlate… CONTINUE READING

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