In this paper, we re-examined financial hedging theories in the context of corporate strategy in the global airline industry. Highly significant volatilities of input prices, interest and foreign exchange rates leave firms exposed to substantial risks that can result in financial distress, costs and failure, as witnessed in many markets since the global financial crisis in 2008. Our paper is an attempt to provide management with much needed guidance on this whether financial risk management in the form of holistic hedging can be a successful strategy as the extant literature on financial (foreign exchange, interest rate and fuel) hedging is inconclusive and for the airline context sparse in terms of robust empirical evidence.
Building on the theoretical notion that hedging strategies can, in principle, improve profitability and cash flows, we have evidenced that organizational risk taking through speculative hedging is not rewarded in the form of higher airline profit margins.
Collected and summarized from the source below by Tran Thi Tan https://db.vista.gov.vn:2095/science/article/pii/S1366554518307580