For a variety of reasons, the U.S. airline industry is a natural sample to analyze the relation between corporate risk exposure, hedging policy, and firm value. First, we find that airline exposures to fuel prices are higher when fuel prices are high or when they are rising. Second, we analyze...

Purpose – The purpose of this paper is to develop a simple model illustrating the benefits of operating a diverse fleet of aircraft. Design/methodology/approach – The paper is theoretical. It describes how real options are beneficial to the firm in both capital budgeting and risk management....