Research On Airline Jet Fuel Hedging Based On Price Risk Management

Faced with the sharp rise and fall of oil prices,jet fuel price risk management is destined to become the most critical issue that cannot be avoided in airline business activities.Hedging is an indispensable means for airlines to avoid the risk of fluctuations in jet fuel prices.Correct jet fuel hedging behavior is a positive and effective risk management strategy,which can not only lock in the aviation fuel cost of airlines,but also reduce the financing cost to a certain extent.Due to the short history of hedging by Chinese airlines,especially after the huge losses of Air China,China Eastern Airlines and China Southern Airlines in 2008,Chinese airlines are shy about the hedging of aviation fuel.Take a small tentative step.However,in March 2022,the oil price rose to 6082 yuan/barrel,which is 3.3 times the lowest oil price in 2020,and twice the average oil price.Airlines are overwhelmed.Therefore,this thesis hopes that through the research on aviation oil hedging,it will help the airlines.Restarting jet fuel hedging provides theoretical support and reduces the burden on airlines.The article theoretically analyzes the current international theories and methods of pricing risk and price fluctuations,and summarizes and analyzes the current hedging situation in my country.Secondly,based on the efficient market hypothesis,risk-utility relationship theory,value-at-risk theory and hedging related theory,the linear method HP-Granger and other nonlinear methods HP-MS-VAR model are used in crude oil futures,fuel oil futures and hedging.After analysis and comparison among the three heating oil futures,crude oil futures are determined as the optimal hedging target;then,the optimal hedging ratio model is deduced by using the von Neumann risk utility(VNM)function,and the relationship between airline risk preference and airline risk preference is studied.The relationship between the optimal hedging ratio;finally,the above model is used to analyze the relationship of risk,benefit and utility of hedging between Eastern Airlines and Southwest Airlines.The results show that from the perspective of price risk management,hedging reduces risk and also reduces returns,which may improve or reduce utility,depending on risk,return and risk preference.Therefore,the starting point and destination of jet fuel hedging to enhance its effectiveness.