Research Paper on:
Is Shareholder Value Supported by Fuel Hedging in Airlines

Unformatted Sample Text from the Research Paper:
The basic idea is that by hedging; purchasing fuel options, usually futures or options so that the firm is able to buy a fixed amount fop fuel at a fixed  future date for a set price, there is the ability to create more stability and reduce the level of economic risk that an airline is exposed to. The traditional view  is that although oil prices fluctuate, that the general trend is upwards, to that hedging facilitates not only stability, but also the potential to pass on the risk of the  fluctuation of the seller of the contract (Howells and Bain. 2007). However, there are also costs involved in the practice of hedging, not only the risk  in terms of losing out where there are futures or forwards are purchased and there is a decline in the price of the fuel as well as the overheads that  are involved in the management of the hedging process and the impact that hedging may have on the accounts following the introduction of IAS 39. With these influences one may  be left wondering whether or not the hedging of fuel is in the interests of the shareholders? 1.1 Research Question The research questions to be addressed with the research is  to assess whether or not it is in the interests of the shareholders, assuming they are profit maximizers, for the airlines to continue with their hedging strategies. 1.2 Justification  The aviation induatry is one that has suffered due to a range of different macro environmental influences, declines in demand following 9/11  and SARs, increased competition as a result of liberalization in many different markets has placed a downward pressure on prices in an industry that is known for high overheads and