Jet fuel hedging, operational fuel efficiency improvement and carbon tax
Rong Hu,
Yi-bin Xiao and
Changmin Jiang
Transportation Research Part B: Methodological, 2018, vol. 116, issue C, 103-123
Abstract:
To investigate airlines’ incentives in operational fuel efficiency improvement, it might be important to consider financial hedge as its substitute. In this paper, we build a simple theoretical model to compare the implications of fuel financial hedge and operational fuel efficiency improvement on airlines’ expected profit. We find that financial hedge is more efficient in reducing airlines’ profit volatility/risk exposure, while operational improvement will generate a higher expected profit level when its effectiveness is sufficiently high. With market competition, operational improvement will be less prevalent. Furthermore, a fuel/carbon tax makes financial hedge less attractive and operational improvement more attractive.
Keywords: Operational improvement; Financial hedge; Fuel; Carbon tax (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0191261517310755
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:transb:v:116:y:2018:i:c:p:103-123
Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01
DOI: 10.1016/j.trb.2018.07.012
Access Statistics for this article
Transportation Research Part B: Methodological is currently edited by Fred Mannering
More articles in Transportation Research Part B: Methodological from Elsevier
Bibliographic data for series maintained by Catherine Liu ().