Research Paper on:
Hedging and Airline Profitability - Introduction, Problem, Purpose and Methodology

Unformatted Sample Text from the Research Paper:
was the labour (Morrison et al, 2010; Yilmaz, 2008). This has changed; in recent years oil prices have increased which has inevitably increased aviation fuel prices, as aviation fuel prices  tend to reflect the movement in crude oil prices (Morrison et al, 2010). This has lead to a position where the fuel prices are likely to be higher than labour  costs for most airlines, making it the single most costly input required by the airline industry (Yilmaz, 2008). In January 2000 the average price paid for aviation fuel was  $0.72 per gallon, by July 2008 the average price was $3.82 per gallon (Morrison et al, 2010). In a four year period alone between July 2004 and 2008 there was  a 244% price increase, with the price increase in one year between July 2007 and 2008 being 82% (Morrison et al, 2010). July 2008 was the peak of the oil  price, while it has since reduced, the actual price remains volatile, and the price of oil is expected to increase (Schaufele and Bhadra, 2008). Gibson (2009) has estimated that for  every $1 increase in the price of a barrel of oil there will be an additional $425 million per annum in US airline operating costs. Increasing costs can  have a significant impact on the profitability of a firm; this has been particularly true for the airlines, where there is a high level of competition and sensitivity to price  changes has limited the ability to increase passenger fares to recoup costs (Schaufele and Bhadra, 2008). Therefore, the airline industry, which has high fixed costs, has been coming under increased  financial pressure as oil prices have increased (Morrison et al, 2010; Schaufele and Bhadra, 2008; Yilmaz, 2008). If airlines cannot increases prices to cover for the increased costs the