Oil futures are used for investment and value preservation, and are even more important for airlines. They are like insurance for airlines. When oil prices rise, they can avoid risks and reduce the operating costs of the company. When oil prices fall, we can expand corporate profits by not holding oil positions. It can only be said that this airline executive has little financial knowledge.

Enterprises realize risk procurement through hedging, which can keep production and operation costs or expected profits relatively stable, thereby enhancing the enterprise's ability to withstand market price risks. Extended information

The basic practice of hedging is for an enterprise to buy or sell oil commodity futures contracts with a quantity equal to that of the spot market but in the opposite direction, with a view to hedging or closing the position at some point in the future. Compensation is used to offset the actual price risks caused by price changes in the spot market.

Of course, due to the objective existence of the difference between spot prices and futures prices, hedging cannot completely eliminate risks, but replaces a larger risk with a smaller risk, using the spot price. and futures price differential risk substitute for spot price change risk.

Baidu Encyclopedia-Oil Futures