Research Paper on:
Airline Fuel Hedging in Small to Medium Enterprises

Unformatted Sample Text from the Research Paper:
increased without impacting products or services. This is true in virtually all industries and organizations, from the smallest manufacturing firm, to large multi-national industries upon which the world economy relies,  such as the air travel industry. One excellent example of a trend indicating the need for airlines to engage in creative methods to leverage resources towards a competitive advantage is  the rise in popularity of fuel price hedging, which was once an instrument used only by the largest and most influential corporations, but is today almost obligatory. This paper will  explore some of the existing literature on this trend and its relationship to airline profitability. This paragraph helps the student begin to explore the practice of airline hedging in depth,  offering both a definition and a host of examples of its implementation. Fuel hedging within the airline industry refers to a practice designed to optimize the efficiency of financial expenditures  by in effect "betting on" the likelihood that the cost of fuel (tied with the cost of oil, of course) will continue to rise over the next year or six-month  period (Menzies, 2006). This is achieved by purchasing call options on fuel a year or six months in advance, so that the organization can ensure that they continue to purchase  fuel at the current rate, even if the actual market value of the commodity rises during that period (Menzies, 2006). The practice generally works because the cost of fuel nearly  always rises, but there is always the possibility that the cost of fuel will in fact decrease, in which case organizations would be obligated to purchase fuel at the agreed  upon rate, which would then actually be higher than actual market value (Menzies, 2006). Despite the risks inherent in fuel hedging, it has become a standard practice for the vast