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Essay / Research Paper Abstract
This 4 page paper presents an introduction, a problem statement and a purpose statement for research to assess whether the practice of fuel hedging is beneficial to airline shareholders. The bibliography cites 7 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEairhedge2.rtf
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Unformatted sample text from the term paper:
and therefore although they are providing a service, their principle purpose is to satisfy the needs of the shareholders by providing them with a profit. This may be in the
form of dividends, or may be through an increase in company equity or the capital value of the share in order to provide a capital gain. Capital gains are
measures with the stock price, are the principle measure and where firms do not make dividend payments there may be higher levels of capital growth expected (Howells and Bain, 2007;
McTaggart, 1994). The way a firm meets this need will depend on a number of factors, firms are constrained by their articles of incorporation (Gower and Davis, 2008) as well
as the generally accepted ethical and moral codes that investors and markets expect firms to abide with (Chyssides and Kaler, 1998). Airlines will be expected to maintain a balance
with profitability and issues such as safety, as well as to undertake action to protect their assets, such as taking out commercial insurance. These will have a function in help
to protect profit levels by reducing or mitigating the impact of a negative event, although it does not reduce the responsibility of the firm to the relevant stakeholders (Chyssides and
Kaler, 1998). When looking at the way airlines in particular operate protecting assets is only part of the way that an airline has the potential to protect profits,
profits are directly impacted by input costs, a major cost is aviation fuel. It may be argued that hedging fuel costs is a sensible move, effectually taking out a form
of insurance against the cost of increases. However, hedging has an associated cost, the purchase of the derivative contract and as such, if this is not needed, or does not
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