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Fuel hedging and the airline industry

Define fuel hedging. Explain how it is helpful to the airline industry.

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Fuel hedging is the practice, often employed by airline companies, of making advance purchases of fuel at a fixed price for future delivery to protect against the shock of anticipated rises in price.

The study of Carter, et. al (2003) investigated jet fuel hedging behavior of firms in the US airline industry during 1994-2000 to examine whether such hedging is a source ...

Solution Summary

This solution looks at the usefulness of fuel hedging to the airline industry.