Research On The Effect Of Exchange Rate Fluctuation Upon Airline’s Management And Countermeasures

With the advancement of the process of economic globalization and the reform of the RMB exchange rate system,the prospect of unilateral appreciation of the RMB has been broken and the large fluctuations in the exchange rate of the RMB have had an increasingly significant impact on the management of domestic companies.In 2015,all A-share listed companies(except financial companies)incurred a total exchange loss of 57.3 billion yuan,which had a significant effect on their business performance.Under the background of economic globalization,how to take reasonable measures to deal with the risk of exchange rate fluctuation has become a focus that companies are increasingly concerned about,and it is worth exploring and researching.From the perspective of industry,the air transport industry is typically extroverted.In 2015,its exchange loss was as high as RMB 19.4 billion,accounting for 33.86%of all A-share listed companies.In 2016,the exchange loss of the entire industry was reduced,but that of the four major aviation companies still amounted to RMB 12.9 billion.Therefore,the aviation industry has become a hard-hit area affected by the fluctuation of RMB exchange rate.At present,about 30%of the aircrafts controlled by domestic airlines are introduced through financial leasing,resulting in high foreign currency liabilities.At the same time,its internal mechanism such as international business model,high asset-liability ratio and so on makes it more sensitive to exchange rate fluctuations.Therefore,this paper focuses on the air transport industry and mainly analyzes the effects of exchange rate fluctuations on airline operation and management.In addition to relying on the typical tool of financial statements to analyze the transmission mechanism of exchange rate fluctuations,this paper thoroughly probes into the deep transmission mechanism of airline’s intrinsic attribute to exchange rate fluctuations,such as procurement model,financial leasing scale,asset-liability ratio,foreign currency liability scale,international airline revenue and so on.It makes the research on risk no longer confined to the level of conversion risk.At the same time,this paper has introduced an empirical analysis on domestic airlines and has examined the relationship between their certain special attributes of airlines and high exchange gains and losses.Based on the understanding of transmission mechanism of exchange rate fluctuations to the airline’s operation and management,this paper thoroughly analyzes the case of China Southern Airlines and draws on the successful experience of foreign airlines to design the overall thinking and key of risk management for domestic airlines under the background of exchange rate fluctuations.In order to promote airline exchange rate risk management,this paper puts forward proposals such as "ratification of expenditures according to revenues",the rational use of financial derivatives,the establishment of a systematic and sustainable risk management concept,and the improvement of supporting measures such as management foundations.It also advocates that airline companies should combine their long-term development with the risk management of exchange rate fluctuations when focusing on the factors affecting the fluctuation of exchange rate and it also places greater emphasis on the company’s strategic planning,optimization of governance structures,and establishment of supporting infrastructure.Risk management and the overall business management of the company should never be separated,only in this way can the benefits of governance be maximized.