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Essay / Research Paper Abstract
This 4 page paper is an introduction for a project to assess whether or not there is a positive correlation between airlines which undertake fuel hedging and profit levels. The introduction provides justification for the research to take place and identifies qualitative and quantitative research questions. The bibliography cites 8 sources.
Page Count:
4 pages (~225 words per page)
File: TS65_TEhedgeintro.doc
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Unformatted sample text from the term paper:
impact on the profitability of a firm. This is important at all time, but when an industry a firm is facing difficulties it becomes even more important. The airline
industry is one that has faced a large number of challenges that have threatened the profitability of the firms competing. The industry is known to be one with high overheads
and low profit margins (Nellis and Parker, 2006). The pressures have been seen in the 21st century; following the decline in demand for fights following the 2001 terrorist attacks along
with pressures of increasing fuel prices the level of bankruptcies in the industry increased; at one point in the US more than 51% of the airline capacity was operated by
airlines operating in chapter 11 bankruptcy (Adams and Reed, 2005). With these difficulties it is understandable that airlines will want to control their costs. Two major costs are labor
and fuel, labor costs are relatively stable and can be forecast and controlled, fuel costs are more difficult due to the reliance on the underlying cost of oil (Carter et
al., 2003). Aviation fuel is more difficult, it is a major cost for airlines, the overall percentage of those costs may vary, Morrell and Swann (2006) estimates fuel accounts
for 15% of an airlines costs, noting it is not only a major cost, but also one of the most volatile costs. Even a few dollars change on the cost
of fuel can have a significant impact on costs, this may be appreciated when the volume of fuel needed for each flight is assessed; a Boeing 747 will use an
average of a gallon of fuel every second, this equates to 36,000 gallons for a ten hour flight (Slaughter, 2008). The cost of fuel has increased significantly since the
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