The Impact of Operational and Financial Hedging to Airline Operating Performance
Sitauli Dewikristi Siallagan(a) & Ruslan Prijadi(a)

(a) Department of Management, Faculty of Economics and Business, Universitas Indonesia, Kampus UI Depok 16424, West Java, Indonesia

Abstract

Airline is a low profit margin and high competition industry. One of the major cost in the airline industry is jet-fuel cost. Like most of commodities, jet-fuel price is highly volatile which encourages companies to engage in hedging activities. This paper examines the impact of operational and financial hedging to airline operating performance. We perform an empirical study by using the airline data from 2013 to 2017. To test the impact of hedging in airline operating performance, we regress the operating cost to revenue ratio, operational hedging, financial hedging and other control variables. This study found that financial derivative hedge can reduce the dollar needed to generate airline revenue, while the operational hedging increase it.

Keywords: Airline, Airline performance, Fuel Hedging, Operational Hedging, Financial Hedging

Topic: Management

Link: https://ifory.id/abstract-plain/ADQH34L7bnpE

Web Format | Corresponding Author (Sitauli Dewikristi Siallagan)