Volume 29 Number 2 December 2004

Financial Risk Exposures in the Airline Industry: Evidence from Australia and New Zealand

Geoffrey F. Loudon

Abstract

Important financial risks facing the airline industry include interest rate, currency and fuel price risk. This paper estimates the exposure to these risks within the airline industry of Australia and New Zealand, using both linear and non-linear specifications, for a variety of horizon lengths. Evidence for exposure, both symmetric and asymmetric, tends to strengthen as the return horizon is lengthened. Exposure to these financial risks is largely unchanged by the terrorist attacks and the collapse of a major competitor in September 2001.

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Keywords

Financial Risk Exposure, Risk Management, Airline Industry

Contact Details Geoffrey F. Loudon Department of Accounting and Finance Macquarie University, NSW 2109. E-mail: gloudon@efs.mq.edu.au