This thesis examines the fuel hedging strategies and their performance in the airline industry. Hedging allows an airline to establish a semi-fixed cost for fuel prices in the future. Unexpected increases in fuel costs can easily move an airline into bankruptcy while a decrease in fuel prices can create massive profits. With fuel prices that can vary 70% in several months, many airlines hedge fuel costs in order to cap a massive expense for the company. It is extremely difficult for airlines, or anyone, to predict what fuel prices will do next week, yet alone next quarter.
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