Hedging Strategies Adopted by Airlines Organizations for Hedging their Foreign

Hedging Strategies Adopted by Airlines Organizations for Hedging their Foreign Dissertation example
Masters
Dissertation
Finance & Accounting
Pages 80 (20080 words)
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Hedging Strategies Adopted by Airlines Organizations for Hedging their Foreign Currency Risks Abstract The research aimed to assess the hedging strategies used by multinational organizations that have operations in diverse countries and hence are exposed to changes in exchange rates and interest rates…

Introduction

It was found that these organizations continue to use hedging strategies like foreign currency contracts, foreign currency swaps, foreign currency forwards and interest rate swaps. They also use a policy of matching receivables and payables and a mix of floating and fixed interest rates to provide stability across their diverse operations. There is also a visible change towards greater acceptance of methods like swaps and options that are available over the counter and which are more flexible and customizable. While Thomas Cook predominantly uses forward contracts, British Airlines and Easy Jet appear to increasingly favor swaps and options as a way to hedge their positions. The research also aimed to assess the financial health of the organizations and how hedging strategies suit the organization’s current position. It was found that the airline industry, being impacted adversely by the recent financial crisis, was vulnerable exceptionally due to the debt funding. Organizations like British Airlines and Easy Jet rely heavily on money market hedging which is a radical and risky strategy, and may further adversely affect their financial performance. This research is conducted using data and information that is available in the public domain and employs qualitative interpretation of the available findings. ...
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