Serena Washington is an international financier and founder and CEO of ArchDuke Capital Partners, LLC of New York City. Washington received her Master Degree from Embry-Riddle Aeronautical University and her Bachelor Degree from Harvard University. After serving a 10 year career in the U.S. Army as a Helicopter Pilot and Military Intelligence Officer, Captain Washington now finances energy, private equity and commercial real estate projects. Supervisors: James Dumville
Highlights:
• A major variable cost in airline operations is aviation fuel.
• Fuel price increase... more Highlights: • A major variable cost in airline operations is aviation fuel. • Fuel price increases provide considerable risk to airline profitability. • Hedging fuel costs mitigates this risk. • Hence, hedging should increase corporate value. • This research provides statistical support that hedging does indeed increase corporate value.
Abstract: This paper examines whether fuel hedging increases the value of US airline companies as captured by their associated stock prices. Airline companies hedge fuel in order to reduce exposure to rising fuel prices, but does this add value to the firm? Using a sample of seven major US airline companies over the period from 2005 – 2011, this study discovers that fuel-hedging activities are positively correlated to firm value. It was hypothesized that airline companies that hedge fuel will see less of a negative impact to their stock price when fuel prices surge and will have less exposure to losses during oil price spikes. After closer statistical examination of this data, the particular relationship can be confirmed. Additionally, multiple and single variable regression analysis suggests that the combined fuel related costs and hedging activities show a good predictive ability to firm value. It thus confirms that hedging fuel derivatives causes a stabilizing and positive effect on a company’s value.
Highlights:
• A major variable cost in airline operations is aviation fuel.
• Fuel price increase... more Highlights: • A major variable cost in airline operations is aviation fuel. • Fuel price increases provide considerable risk to airline profitability. • Hedging fuel costs mitigates this risk. • Hence, hedging should increase corporate value. • This research provides statistical support that hedging does indeed increase corporate value.
Abstract: This paper examines whether fuel hedging increases the value of US airline companies as captured by their associated stock prices. Airline companies hedge fuel in order to reduce exposure to rising fuel prices, but does this add value to the firm? Using a sample of seven major US airline companies over the period from 2005 – 2011, this study discovers that fuel-hedging activities are positively correlated to firm value. It was hypothesized that airline companies that hedge fuel will see less of a negative impact to their stock price when fuel prices surge and will have less exposure to losses during oil price spikes. After closer statistical examination of this data, the particular relationship can be confirmed. Additionally, multiple and single variable regression analysis suggests that the combined fuel related costs and hedging activities show a good predictive ability to firm value. It thus confirms that hedging fuel derivatives causes a stabilizing and positive effect on a company’s value.
Uploads
Papers by Serena Washington
• A major variable cost in airline operations is aviation fuel.
• Fuel price increases provide considerable risk to airline profitability.
• Hedging fuel costs mitigates this risk.
• Hence, hedging should increase corporate value.
• This research provides statistical support that hedging does indeed increase corporate value.
Abstract:
This paper examines whether fuel hedging increases the value of US airline companies as captured by their associated stock prices. Airline companies hedge fuel in order to reduce exposure to rising fuel prices, but does this add value to the firm? Using a sample of seven major US airline companies over the period from 2005 – 2011, this study discovers that fuel-hedging activities are positively correlated to firm value. It was hypothesized that airline companies that hedge fuel will see less of a negative impact to their stock price when fuel prices surge and will have less exposure to losses during oil price spikes. After closer statistical examination of this data, the particular relationship can be confirmed. Additionally, multiple and single variable regression analysis suggests that the combined fuel related costs and hedging activities show a good predictive ability to firm value. It thus confirms that hedging fuel derivatives causes a stabilizing and positive effect on a company’s value.
Key Words: aviation fuel hedging, hedging risk mediation
• A major variable cost in airline operations is aviation fuel.
• Fuel price increases provide considerable risk to airline profitability.
• Hedging fuel costs mitigates this risk.
• Hence, hedging should increase corporate value.
• This research provides statistical support that hedging does indeed increase corporate value.
Abstract:
This paper examines whether fuel hedging increases the value of US airline companies as captured by their associated stock prices. Airline companies hedge fuel in order to reduce exposure to rising fuel prices, but does this add value to the firm? Using a sample of seven major US airline companies over the period from 2005 – 2011, this study discovers that fuel-hedging activities are positively correlated to firm value. It was hypothesized that airline companies that hedge fuel will see less of a negative impact to their stock price when fuel prices surge and will have less exposure to losses during oil price spikes. After closer statistical examination of this data, the particular relationship can be confirmed. Additionally, multiple and single variable regression analysis suggests that the combined fuel related costs and hedging activities show a good predictive ability to firm value. It thus confirms that hedging fuel derivatives causes a stabilizing and positive effect on a company’s value.
Key Words: aviation fuel hedging, hedging risk mediation