The Analysis Of Risk Control And Profit Strategy Of China's Aviation Industry

Aviation industry is an important part of the national economy,which reflects the level of economic and social modernization.The fluctuation of international oil price has a significant impact on China's economy,especially on aviation industry.Generally speaking,the main risks faced by airlines are fuel price risk,interest rate risk and foreign exchange risk.As the primary cost of airlines,fuel costs is significantly affected by fluctuations of international oil prices.In China,the aviation fuel cost accounts for one third of the average cost of airlines,which plays a significant role in the profitability of the air transport industry.Through the analysis in the impact of international oil price fluctuation on China Southern Airlines,we can pick up some risk control and profit strategies for aviation transportation industry.The content of this paper is divided into five parts.The chapter one is introduction.This chapter mainly elaborated the research background and the significance of the case analysis,analyzed the domestic and foreign research situation as well as research method and the insufficiency of this paper.The second chapter is case introduction,which reviewed the development of China's air transport industry and the basic information of China Southern Airlines.Several kinds of risks usually faced by airlines are listed.Then,we analyzed the derivative financial instruments applied by Southern Airlines to control the risks.Chapter three is case analysis,two parts are included in this chapter.One is the impact of the international oil price fluctuations on China Southern Airlines,which is the focus of this paper.The other is the effect of derivative financial instruments applied by Southern Airlines.The result of Options contracts,foreign currency options contracts and interest rate swap contracts were described in detail.A simple linear regression model was established to test the relevance between Brent Oil fluctuation,operation cost and operation income.We found that there was a significant correlation between the Brent oil price and fuel costs of China Southern Airlines.Chapter four are suggestions about risk control and profit strategy,based on the application of financial derivatives.The requirement of fuel price risk hedging was also discussed in it.The last chapter is conclusion and prospect.Case analysis,comparative analysis,chart analysis and empirical analysis methods are adopted in this paper.It was found that the fluctuation of fuel price has an important influence on the financial condition of Southern Airlines.Hedging instruments can be applied to control the fuel prices risk,interest rate risk and foreign exchange risk.When using these financial derivatives for risk control,airlines must clear the purpose of the transaction,choose the appropriate type of financial derivatives,control the total amount of assets and strengthen the internal control system and improve the construction of afterwards supervision.