Assume that you were approached by the CFO of USC Airlines, an established hypothetical airline, in your capacity as a Risk Analyst who is familiar with Derivative products.

The CFO is debating the effectiveness and business viability of hedging jet fuel and is seeking your advice. Her opinion is mainly driven by an international report that shows that not all airlines hedge jet fuel.

Question 1: (250 words)

The CFO is concerned about the strategic decisions of competing airlines. Airline fuel is a significant operating expense to airlines in general and may have significant price volatility. At the same time hedging using futures might be quite costly.

Given the statement above. Discuss whether hedging is beneficial for USC Airlines.