Airlines utilize fuel hedging and fuel surcharges to mitigate jet fuel price risk. Hedgingreduces exposure to volatile fuel prices. By adding fuel surcharges to basic airfares, airlinestry to pass on the impact of higher fuel prices to their customers. There is a wealth ofliterature on why and how airlines hedge. Jet fuel surcharges have received much lessattention in academic research despite their widespread use in the airline industry. This paperprovides a closer look at the economic fundamentals of fuel surcharges and describes howairlines implement fuel surcharges with a focus on the practice of the major Europeannetwork carrier Lufthansa. In this regard our paper complements an often-cited paper byMorrell and Swan (2006) on the theory and practice of fuel hedging in aviation.
展开▼
