What is Delta Hedging?

That is, hedging is a means of trading, which helps companies avoid the risks brought by spot price fluctuations by locking in costs and profits. If operated strictly in accordance with specifications, hedging itself will not bring huge profits or losses. Hedging gates refer to the collective huge losses of China's five major airlines: Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, and Shanghai Airlines, and the main loss business is non-mainstream fuel hedging business. Chang Qing, director of the Futures and Financial Derivatives Research Center of China Agricultural University, believes that these airlines did not carry out hedging business in accordance with the hedging law. They were characterized as part of hedging, and most of them were speculation.

Hedge gate

Hedging-Loss In 2008, the global financial crisis had a huge impact on the real economies of various countries. Of course, the aviation industry is no exception. Passenger flow has plummeted and oil prices have fluctuated. However, from the announcements of several airlines, we found that the bulk of the losses came from fuel hedging that was not the main business. So, what kind of experiences have overseas aviation companies also experienced in 2008?

In 2008, among the losses of Eastern Airlines' 13.928 billion yuan, the loss of fuel hedging business was 6.401 billion yuan, accounting for 46%; while Air China's fuel hedging business loss reached 7.472 billion yuan, accounting for the total loss 82% of 9.149 billion yuan.

As of April 30, 2009, none of the five major airlines of Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, and Shanghai Airlines reported annual profit, with a total loss of 30.597 billion yuan. The previous report issued by the International Air Transport Association showed that global airlines suffered losses in 2008. The total amount is about 54 billion yuan, which means that of the more than 230 airlines worldwide, China's top five airlines accounted for 56% of the total loss.

In order to understand the profit and loss status of overseas airlines in 2008, the annual reports of eight large airlines in North America, Europe, Asia, and Australia were analyzed, and it was found that all eight airlines had carried out aviation fuel hedging operations, of which the United States of America Sail

Air Hedge, British Airways, Qantas and Singapore Airlines have all made profits in their hedging businesses. Although Lufthansa suffered a loss of 160 million euros in its hedging business, its main business profit was 1.383 billion euros, and the company was profitable overall.

Of the eight large airlines, only three had losses in their hedging business and main business, namely Delta Airlines, Austrian Airlines and Cathay Pacific in Hong Kong. According to the annual report, in 2008, Delta's total loss was US $ 896.4 million, of which the main air transportation business lost US $ 8.314, accounting for 92.75%, and the hedging business lost US $ 65 million, accounting for 7.25%; Hong Kong Cathay Pacific The total loss was HK $ 8.76 billion, of which the main business loss was HK $ 7.929 billion, accounting for 90.51%, the hedging business loss was HK $ 831 million, accounting for 9.48%; Austrian Airlines lost a total of 420 million euros, of which the main business loss was 3.121 Million euros, accounting for 74.3%, and hedging business losses of 47 million euros, accounting for 11.19%.

Shanghai Airlines attributes the reasons for its 2008 loss to three aspects:

First, the company's fuel cost is high, which puts great pressure on the company's operations;

Second, the aviation market is sluggish due to snow disasters, earthquakes, Olympic security measures, and the global economic downturn;

Third, the company suffered losses from fuel hedging. Shanghai Airlines Secretary Xu Junmin told reporters yesterday that the company had lost money for two consecutive years after taking into account the losses in 2008. According to the regulations of the Shanghai Stock Exchange, the company's stock will be subject to special treatment (ST). This will have a great impact on the company, its credit rating will be downgraded, and its reputation will be damaged.

Zeng Xu, an analyst of the aviation industry of Guojin Securities, believes that in addition to common reasons such as the sharp decline in passenger travel demand, the Shanghai Airlines performance of Shanghai Cargo Airlines fell sharply in addition to common reasons such as the sharp decline in passenger travel demand. . In 2007, due to the sharp slowdown in exports, the performance of the cargo aviation industry fell more than that of passenger transportation. In addition, Shanghai Airlines well-known travel brand Shanghai Airlines Holidays was affected by the slowdown in the tourism industry and indirectly affected the performance of Shanghai Airlines.

Although Shanghai Airlines announced hedging losses and pre-loss results, its stock price rose too much on May 18, 2009, with an opening price of 5 yuan and closing at 5.55 yuan, an increase of 7.56% throughout the day. Shanghai Airlines is also the only stock among the five major airline stocks that rose on the day.

In this regard, Zeng Xu, an analyst at Guojin Securities, currently the ordinary technical analysis is no longer applicable to the stock of Shanghai Airlines. The performance of Shanghai Airlines stocks has no relationship with the company's performance. The market is concerned about the subject of mergers and reorganizations related to Shanghai Airlines. He believes that the news that Shanghai Airlines has made another loss will make the Shanghai municipal government determined to promote the restructuring and integration of the Shanghai aviation industry from the government's perspective.

Real hedging does not generate profit and loss. I understand some of the hedging conditions of foreign airlines, and some companies also have some losses. This is because these airlines have not strictly implemented hedging operations. From China Aviation Oil to CITIC Pacific, to Air China and China Eastern Airlines, many large Chinese companies have defeated Waterloo in financial derivatives business. This issue has also attracted great attention from the relevant departments of the State Council, and a series of strict regulatory measures have recently been introduced intensively.

On March 24, 2009, the SASAC issued the Notice on Strengthening the Supervision of Financial Derivative Business of Central Enterprises, requiring central enterprises to use financial derivative instruments prudently, strictly adhere to the principle of hedging, effectively monitor risks, and not engage in any form of Speculative trading.

On April 13, the Ministry of Finance issued "Several Opinions on Strengthening Financial Management of Enterprises in the Current Response to the Financial Crisis", which explicitly proposed "effectively strengthening the management of corporate financial derivative investment." Require enterprises to prudently engage in financial derivative investments such as hedging; health

The company's internal financial derivatives investment control system, improve management and decision-making procedures, and eliminate financial derivatives speculation.

Li Wei, deputy director of the SASAC, emphasized that in 2009, the SASAC will conduct a bottom-up survey of the overall situation of investment and finance in central enterprises, and put forward four conditions that state-owned enterprises must have to engage in derivatives business.

Changqing analysis, one is to approve, that is, you must be approved by the SASAC for hedging; the second purpose is to be clear, that is to say what is hedging; the third is to understand, that is, to have a professional Talent; fourth, control risk, I think it's very good.

In Changqing's view, strengthening supervision of state-owned enterprises' financial derivatives business is by no means a ban on hedging business. The key is to strictly separate hedging from speculative transactions.

So many people want to do hedging. Why do you ask? He wants to make money, which is wrong. The essential difference between hedging and speculation is here.

Buffett has a famous saying: "I never make a market that I don't understand." The lessons of several domestic airlines confirm Buffett's statement from another angle. Although a market that he is not familiar with looks beautiful, the best scenery is also the most dangerous place.

The relevant regulations recently issued by the SASAC and the Ministry of Finance have strengthened the supervision system for state-owned enterprises to engage in financial derivative transactions. Government departments have strengthened their vigilance and raised the level of relevant risk prevention. This will protect the safety of state-owned assets and improve business efficiency. It is of positive significance to ensure the health and stability of China's economy.

We have also seen the successful case of Southwest Airlines because of strict implementation of hedging. Of course, for such a simple and effective financial instrument that we can use skillfully, we must not use it for our own purposes.

Now it seems that in addition to establishing a strict and transparent supervision system in one hand, our other hand must accelerate the cultivation of our own capabilities, advanced concepts, advanced methods and advanced management. The Trinity is indispensable. Only when our competitiveness in the financial sector becomes as strong as the manufacturing industry can the wheels of the Chinese economy remain balanced and can run faster and more stable.

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