Fuel Hedging in the Airline Industry: The Case of Southwest Airlines
Fuel Hedging in the Airline Industry: The Case of Southwest Airlines ArXiv ID: ssrn-578663 “View on arXiv” Authors: Unknown Abstract Set in June 2001, the case places the student in the role of Scott Topping, Director of Corporate Finance at Southwest Airlines. Scott is responsible for the a Keywords: Corporate Finance Strategy, Hedging (Fuel), Risk Management, Financial Derivatives, Airline Economics, Equity (Transportation Sector) Complexity vs Empirical Score Math Complexity: 1.0/10 Empirical Rigor: 3.0/10 Quadrant: Philosophers Why: The paper is a qualitative case study focused on corporate finance decision-making with minimal mathematical modeling, and while it includes some financial data and volatility metrics, it lacks backtesting or implementation details. flowchart TD A["Research Goal: <br>Should SWA use fuel hedging?"] --> B["Data Inputs: <br>1. Historical Oil Prices<br>2. Futures/Options Prices<br>3. SWA Fuel Consumption"] B --> C["Methodology: <br>Valuation of Hedging Strategies"] C --> D["Computational Process: <br>Monte Carlo Simulation<br>of Oil Price Scenarios"] D --> E{"Key Findings/Outcomes"} E --> F["SWA Hedging reduced volatility<br>and saved costs vs. peers"] E --> G["Risk Management Framework<br>justifies active hedging policy"] E --> H["Recommendation: <br>Maintain/Expand Hedging Program"]