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JOURNAL OF ACCOUNTING AND FINANCE
Operational and Financial Hedging: Friend or Foe?
Evidence from the U.S. Airline Industry
Author(s): Stephen D. Treanor, David A. Carter, Daniel A. Rogers, Betty J. Simkins
Citation: Stephen D. Treanor, David A. Carter, Daniel A. Rogers, Betty J. Simkins, (2013) "Operational and Financial Hedging: Friend or Foe? Evidence from the U.S. Airline Industry," Journal of Accounting and Finance, Vol. 13, Iss. 6, pp. 64 - 91
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This paper analyzes three operational hedges that are at the disposal of an airline to determine if
operational and financial hedges are complements or substitutes. The operational hedges studied are:
fleet composition, fleet fuel efficiency, and whether the fleet is leased. We find that with respect to fleet
composition airlines are more likely to use financial derivatives. However, we do not find a statistically
significant relation between fleet fuel efficiency or leased fleet and financial hedging. Consistent with
prior research, we find the use of financial derivatives increases firm value. However, surprisingly, the
use of operational hedges actually decreases the value of the firm.
