Impact Of Oil Hedging On Airline Costs

In 2008,coincides with the financial tsunami,people panic and prices of major commodity decline sharply in local and global markets.The oil prices are no exception.Before 2008,China Eastern Airlines Co.,Ltd.,as part of the representative of the domestic airlines,gradually carried out fuel hedging business.In 2008,the sharp decline in oil prices,Brent oil spot prices from the high above $ 140 per barrel fell to only $ 30 per barrel within six months.Fuel hedging business of Chinese Airlines,represented by China Eastern Airlines Co.,Ltd.,and also suffered a huge loss due to the sharp fluctuations in oil prices.After this,for various reasons,even in the face of fluctuations in the international oil prices,local airlines did not continue to awaken oil hedging transactions.Based on the case analysis and the form of literature search,this paper puts forward the paper that China Eastern Airlines in the fuel hedging transaction on the basis of reviewing the actual situation of fuel hedging of China Eastern Airlines.In the case of China Eastern Airlines,for example,analyzed whether the fuel hedging,whether the appropriate fuel hedging on the cost of the impact of airlines,and the domestic airline fuel hedging business put forward Suggest.According to the analysis of the paper,the fuel hedging business is conducive to the stability of the airline fuel costs and the smoothness of the profits,the domestic airlines should maintain the awareness of fuel price risk,re-participate in the oil hedging business.But at the same time,airlines should participate in the fuel hedging transactions before they should first understand the essence of futures and options market and the nature of hedging business,combined with their own position in the industrial chain,the establishment of a reasonable system and process,find suitable hedging strategy,through the operation of the airline strictly enforce the use of financial derivatives to manage the risk of business.