Moreover, the journal Cost, risk-taking and value in the airline industry by Paul A and Laux has pointed out the empirical measurements that is taken into account to shape the price inputs of the airline industry. The price is determined by the oil and fuel cost that adds substantial risk to the finance. The journal also mentioned that the corporate tax codes and financial distress cost have been greater than the profit downside. However, Kizildag et al. (2010, p.89) counter-argued that the study has focused on all the cost and the financial proceedings but somehow did not identify the risk associated with the unfortunate events that can arise any time. The resources that can be used to minimize the risk factors are not observed in the study.
In addition to this, the journal Risk Management Practices in the airline industry by Sharon Fernando has disclosed the capital market theories and identified the underinvestment problems, taxes, financial distress and the management incentives leading to the industry to engage in hedging activities. The journal further apprehended the risk exposure and the risk assessment practices associated with the airline industry. In contrary to this, Loudon (2011, p.315) opined that the study did not identify the unpredictable risk that can lead to a devastating financial loss in the airline industry. Risk linked with the human variables and the decision making process have not been observed.
The risk management system used in the airline industry are associated with brand reputation, deregulation, debt funding and competition, employee relation, fuel price and currency fluctuation, key supplier risk, safety & security, global economic slowdown and Government intervention. The risk associated with the brand reputation is involved with the market value and recognition of the brand. Any incident or series of events that can hamper the image of the brand will affect the leadership of the airline industry. According to Davidson et al. (2010, p.162) the obstacle created in the brand value of the airline name will eventually affect the customer choice and profitability of the company. The high rise in competition is making the airlines meet all the criteria of the customer making them realize the planned benefits and other executive risks. Relaxing the restrictions brings a negative impact over the margins created by the industry. The competitor firms allow mergers and acquisition that bring a potential threat to the market position and revenue of the airline brand. The ongoing financial operation depends on the financial condition of the market and other financial requirements that is attractive to the lenders. The substantial debt must be refinanced and repaid.
In addition to this, the airline industry spends almost millions for the fuel and oil. The impact on the operation is affected through the price of the oil and petroleum products. The purchase scale of the oil and petroleum can generate profit and loss of the industry. Moreover, the revenue depends on the financial structure of the market on which the industry operates. Lee and Jang (2015, p.440) stated that the deterioration in the global economy further affects the financial position of the industry. The adversity falls on the material of purchase inducing a threat to the revenue earned by the company.