主题｜Topic：Airline Fuel Hedging and Sunk-Cost Fallacy
时间｜Time：11月15号（周五）｜Nov. 15th (Friday), 2:00-5:15PM
地点｜Venue：文澴楼709会议室｜Meeting Room 709，WENHUAN
主讲｜Speaker
石龙，美国俄克拉荷马大学经济学博士，西安交通大学金禾经济研究中心助理教授。研究兴趣包括产业组织，应用计量经济学与应用微观经济学，现阶段研究集中于民航企业的竞争与决策。
研究领域｜Research Interests
产业组织、应用计量经济学与应用微观经济学
摘要｜Abstract
Fuel cost takes about a third of US airlines' total operational cost. To control risks associated with fluctuating jet fuel price, most major airlines participated in fuel hedging. While hedging contracts vary in various aspects, they share a common feature: When executed, they lead to a lump sum amount of financial gain or loss regardless of airlines' operational strategies. Different from typical hedging literature in corporate finance that focuses on the impact of hedging on airlines' value and performance, we study how airlines adjust their strategic decisions, such as pricing and aircraft choice, to the result of hedging. We find that airlines lower the average fare by 0.2% - 0.3% when hedging gain reduces their accounting fuel cost by 1%. The result of our event study also shows that airlines make dramatic adjustments in price when incurring remarkable hedging gain and loss. We have checked whether airlines intentionally make these adjustments to smooth their profits and find it very unlikely to be the explanation. Finally, we find that airlines use less efficient aircrafts, in particular, older aircraft models, when they earn money through hedging. To our knowledge, this is the very first formal empirical test of sunk cost fallacy in firms' operational decisions.
