Airline Hedging Using Derivatives

Abstract

In volatile economic environment, it is imperative for the airlines to implement appropriate derivative hedging strategies. In non-volatile economic environment, there seems to be different views that support non-implementation and implementation of derivative hedging strategies within the non-dominant school of thought as it can be inferred from Carter et al. 2004. Risk management should take into account everything that affects the financial positions of the airlines from initial stage to the final stage with proper monitoring in between. While designing a derivative hedging strategy, the risk manager should take into account all these factors and implement the best possible derivative hedging strategy.